To get the Best of the Bond Market delivered to your email daily click here.
Yahoo Finance: – Bond bull market isn’t dead yet, according to Gary Shilling. – With yields rising and investors fleeing bond funds in droves of late, it’s becoming conventional wisdom that the bull market in bonds is over. But, to cite Mark Twain, reports of the death of the bond bull market have been “greatly exaggerated,” according to Gary Shilling, president of A. Gary Shilling & Co., and author of The Age of Deleveraging.
Fortune: Bernanke won’t blow up bond market. – The last of the economy’s Band-Aids are coming off. The question is how much it will hurt.
Interactive Investor: – Bonds at a tipping point. – Volatility in government bond markets has risen sharply following Federal Reserve chairman Ben Bernanke’s May testimony to Congress. Having fallen as low as 1.6% shortly before Bernanke spoke, 10-year US government bond yields are now trading at around 2.2%, levels not seen since the first half of 2012.
Learn Bonds: – Hey Bernanke, what are you so afraid of? – What are Bernanke and the Fed afraid of? I think most of Wall Street know the answer to this question. Bernanke and the Fed are well aware that a massive distortion in asset prices has occurred as a result of QE and that if the Fed stops QE, asset prices across various parts of the financial markets are likely to fall.
Cate Long: – Is there such a thing as a ‘fair’ markup in muniland? – It’s well known in muniland that retail investors, who buy smaller lots of bonds than institutional buyers, get hit with high markups. The rule is that dealers must deal “fairly” with investors. Translation: Markups to customers cannot exceed 5 percent. So if a dealer sells a bond worth $5,000, he may not charge the client more than a $250 markup. However, there is no regulatory requirement for the dealer to tell the client how much the bond has been marked up; just that it was marked up.
FT: – Fasten your seatbelts for a turbulent QE exit. – A few weeks ago I had the pleasure of dining with two former luminaries of American economic policy. Unsurprisingly, the issue of quantitative easing provoked heated debate – not so much over the question of whether QE had been a correct policy to implement (they both backed its introduction), but whether the Federal Reserve could ever find a smooth exit.
Tom Brakke: – A quick look at how the bond market has performed over the past thirty years. – It was thirty years ago today . . . when I started my investment career. The middle panel shows the relative returns of the long bond versus stocks. You can walk through three decades of history in that one chart: The dislocations of 1987, the stock boom that ended in 1999, and the financial crisis. Each of the periods returned to the zero line and after all of that time the two assets finished in a dead heat.
Advisor.ca: – Lots of promise in high yield bonds. – The Great Rotation, where investors flee from bonds to equities, is not likely to happen, agree Dan Bastasic and Ben Cheng, portfolio managers with IA Clarington Investments. Both indicated there will be inevitable movement toward equities as the North American economy recovers, but it won’t be in one swoop. Plus, while investors should ease off of unstable government securities, they can replace them with corporate bonds.
BusinessWeek: – Wall Street REIT success gives investors hangover part II. – Investors in companies buying mortgage bonds are discovering that coming late to the party can still leave them with the biggest hangover.
Citywire: – How are fund pickers tapping high yield? – With bond yields in general at extreme lows, high income is a crucial driver of total returns. We think high yield spreads over government bonds, when adjusted for volatility and default risk, over compensate investors for the extra risk taken on.
Bloomberg: – Bernanke faith in housing seen in mortgage bonds. – Mortgage rates in the U.S., already increasing at the fastest pace in a decade, are poised to rise even further after Federal Reserve Chairman Ben S. Bernanke said the central bank is ready to slow its purchases of Treasuries and bonds backed by housing loans.
WSJ: – Federal Reserve eyes end of bond buying, spooking markets. –Federal Reserve Chairman Ben Bernanke said the central bank could start winding down its $85 billion-a-month bond-buying program later this year and end it altogether by mid-2014, setting up a high-stakes test to see if the economy and financial markets can begin to stand on their own.
Bloomberg: – Tim Pynchon set to start high-yield muni funds at Oppenheimer. – Oppenheimer Asset Management Inc. this year will begin buying riskier debt used to finance institutions such as prisons and nursing homes, said Tim Pynchon, who will manage the high-yield municipal funds.
ETF Trends: – Rising rates, sequestration hit Build America Bond ETFs. – It is not just U.S. junk bonds or emerging markets sovereign debt that have suffered at the hands of bond bubble chatter. Add Build America Bonds to that list as multiple factors explain the stunning retrenchment in Build America Bond ETFs over the past month.
Money Marketing: – Santander multi-managers consider bonds. – Santander’s multi-manager team is turning its eye to the bond market for investment opportunities as it reassesses its position on equities.
Michael Dever: – Why past performance of a conventional (60-40) portfolio is not indicative of future performance. – For the past 31 years, a conventionally-diversified portfolio consisting of 60% stocks and 40% bonds has provided investors with satisfying returns of +10.80% annually. Unfortunately for investors, the 60-40 results of the past 30 years aren’t likely to repeat in the near future. Here’s why not.