Last week’s top bond market stories from Learn Bonds and around the web.
Learn Bonds: – Revolutionizing the fixed-income funds industry. – Kurt Shrout looks at how the fixed income industry needs to evolve over the next few years in order to shield investors from increased interest rate risk.
Learn Bonds: – Chesapeake energy’s love-hate relationship with bondholders. – Chesapeake Energy is fighting bondholders one minute, whilst offering a new three-part, $2.3 billion bond offering the next. So are Chesapeake’s new bonds worth a look?
Learn Bonds: – Ford’s newest in long line of bonds. – Charles Margolis takes an in depth look at several new bonds issued by Ford Motor Company in the last few months.
Learn Bonds: – Confiscating bank deposits – The latest European bailout. – Bank deposits, especially those that are accompanied by deposit insurance, are generally regarded by everyday people as being risk-free. If you put your money in a savings or checking account at a bank, you do so under the assumption that you will be able to access and spend that money, in whole, when the money is needed. What happened in Europe over the weekend challenges that assumption.
Learn Bonds: – A strange tale: Muni bonds become shares of the largest airline. – Municipal bondholders that purchased debt to finance airport expansions may become shareholders of the world’s largest airlines. They have been caught in a drama involving two airlines, one bankrupt (American Airlines) and one not (US Airways). The story looks to have a happy ending for bondholders, with the bonds trading above their issue price in many cases.
Moneywatch: – Municipal bonds are looking better and better. – Historically, AAA-rated municipal bonds have traded at a discount to Treasuries. However, the recent financial crisis has changed that, and you may want to give munis another look for your portfolio.
WSJ: – Fed sees signs of improvement, maintains bond buys. – The Fed’s latest policy statement is out and it doesn’t look like much of a bombshell, continuing all major current policies and making only minor revisions to the language from the previous statement. The WSJ highlights some of the changes compared to January’s statement.
ETF Trends: – Junk bond ETF yields may fall below 5% amid scramble for income. – Yields in junk bond ETFs are threatening to fall below 5% for the first time ever as strong demand for speculative-grade corporate debt in a low-rate environment keeps pushing yields down
Barron’s: – Pre-FOMC Playbook: Key dates for bond investors. – When will the Fed start slowing its monthly bond purchases and begin thinking seriously about raising short term interest rates? Key dates for your diary.
FT: – BoJ strategy set to move US bond yields. – Bank of japan Governor Mr Kuroda says that the BoJ must buy long-term assets to push down yields across the curve. As Marc Ostwald, strategist at Monument Securities, observes, this strategy might also have implications for the US 30-year note.
Institutional Investor: – Is emerging market debt undervalued? – With no obvious explanation for emerging market’s debts recent stumble, investors may be looking at an attractive entry point.
iShares: – 4 reasons for declining risk in emerging market bonds. – Several factors make the Emerging Market (EM) asset class more attractive than it was just five years ago. Competitive yields, improving fundamentals and cheap currencies have helped to make this a more attractive investment. But perhaps the biggest story in emerging market debt has been an improvement in credit quality – both in an absolute sense and, perhaps more interestingly, relative to bonds from developed markets.
David Merkel: – A Bond deal requiring caution. – David takes a closer look at bonds being offered by Harbinger Group. Since he used to manage their bond money, he should know a thing or two about them. So it would be foolish to ignore his advice.
Barron’s: – Rising rates pose little threat to junk bonds. – Rising rates are typically a concern for high-quality, low-coupon bonds, such as investment-grade corporates. Historically rising rates are less of a problem for junk bonds, because their higher yield insulates them more from movements in underlying interest rates, but at a time of record-low junk bond yields some junk bond fund managers have begun to worry more about the impact of rising rates.
Bloomberg: – Puerto Rico on junk precipice gets investor ho-hum. – Puerto Rico, on the brink of being cut to speculative grade, is rallying the most in a year as investors bet that the 11-week-old administration of Governor Alejandro Garcia Padilla will mend the commonwealth’s finances.
Reuters: – Republican leader offers hope for US muni bond exemption. – One of the most powerful members of the U.S. Congress, House Majority Leader Eric Cantor, signaled his support for maintaining the tax exemption for interest paid by municipal bonds, offering reassurance to the state and local governments that use the debt to finance infrastructure and other projects.
Morningstar: – Lifting the hood on bond-fund NAVs. – Determining the net asset value (NAV) of holdings that trade infrequently requires use of a special system. So what is it and how is it calculated?
Bankrate: – Hold or fold older US savings bonds? – Dr Don Taylor answers the following question. I have 99 $100 EE savings bonds issued from May 1993 to November 2000. Bonds from 1993 through mid-1995 pay an interest rate of 4 percent, while the later bonds are indicated at below 1 percent. Can the 4 percent rate increase or decrease if I allow those bonds to reach final maturity? I’m not sure what my options are for possibly reinvesting them or even if it is worth it. Would I be better off cashing them out at final maturity?
Jon Lott: – J.C. Penney bonds may be a value now. – It seems as if everyone is stomping on J.C. Penney (JCP) and Ron Johnson which suggests to me it might be time to look at the bonds and determine if there might be value.
WSJ: – Treasury scrutinizes a shortage of notes. – The US Treasury Department is probing whether traders in the $11 trillion Treasury market hoarded securities to drive up the price of 10-year notes, one of the world’s most-used benchmarks.
Barron’s: – The cruelest month for munis. – Bond shoppers having a hard time finding bargains ought to keep an eye on the muni market this month. March has been the worst-performing month for municipal bonds for years, producing positive returns only five times since 1990.
Morgan Stanley: – Municipal bonds monthly. – After successfully navigating the year-end fiscal cliff and acquiring a tailwind of higher income tax rates, the municipal market faces the reversal of favorable technicals. After three months of heavy bond redemptions that coincided with tepid supply, March, April and May typically bring less investable cash and heavier supply. These factors may present an opportunity for more compelling yields…a process that may already be underway.