To get the Best of the Bond Market delivered to your email daily click here.
Bond prices eased on Tuesday following the release of a couple of decent readings on domestic economic data, as investors eagerly await the conclusion of this weeks U.S. Federal Reserve policymakers’ meeting.
Consumer confidence jumped in October, with the Conference Board reporting that its consumer confidence index rose to 94.5 in this month from 89.0 in September. While the Richmond Fed’s manufacturing index rose to 20 in October from 14 in September.
To see a list of high yielding CDs go here.
The data sent the 10-year Treasuries down 6/32 in price to yield 2.278%, according to Tradeweb data, down from an intraday high 2.296% around mid-morning shortly after the confidence reading came out. The 30-year bond is down 13/32 to yield 3.054%, and the 2-year note is marginally lower in price, yielding 0.390%.
Lynn Franco, director of economic indicators said “A more favorable assessment of the current job market and business conditions contributed to the improvement in consumers’ view of the present situation. Looking ahead, consumers have regained confidence in the short-term outlook for the economy and labor market, and are more optimistic about their future earnings potential. With the holiday season around the corner, this boost in confidence should be a welcome sign for retailers.”
The upbeat data comes as the Federal Reserve sits down for this months crucial two day policy meeting, at which it looks certain to end its monthly bond-buying program. But the big question is: Will they be retiring the policy for good?
Todays Other Top Stories
Learn Bonds: – General Obligation bonds – What muni investors should know. – Saying that municipal G.O.s are “secured” by taxing power is like saying that unsecured corporate bonds are secured by revenues and unlimited pricing power. Although it has been mostly true in the past that municipalities could simply raise taxes on their captive tax base, municipalities such as Detroit have proved that municipal tax bases are less captive than in the past.
Bloomberg: – Royals stadium bonds seen winning from World Series: Muni credit. – Taxpayers of Jackson County,Missouri, stand to come out winners even if the hometown Kansas City Royals see their dream of a World Series championship end tonight.
AllianceBernstein: – Gauging the spook factor for municipal bond investors. – The muni market seems to be returning to normal after major outflows last summer, though several potential hot-button issues could still spook investors. We don’t think these represent major risks to market returns or properly positioned portfolios.
WSJ: – Time to sell munis? – (Subscription) Tax-Free bonds have rallied this year. Michael Aneiro from Barron’s explains how investors should respond.
ETF Trends: – Elections season could shake up muni ETFs. – The municipal bond market, along with related exchange traded funds, have been steadily strengthening as austerity across local governments keeps supply low, but midterm elections could affect the munis market ahead.
About.com: – Did quantitative easing work? – The U.S. Federal Reserve is poised to wrap up the third round of its quantitative easing program, known as “QE”, following its October 28-29 meeting. The goal of quantitative easing, which ran in three separate segments between November, 2008 and October, 2014, was to spur economic growth during the years following the 2008 financial crisis. The Fed accomplished this by buying bonds in the open market, thereby depressing yields and keeping borrowing costs low.* With the program now wrapped up, the key question is: “Did quantitative easing work?”
FT: – Funds buckle up for redemption surge. – (Subscription) Extolled for their liquidity and haven status, a renewed rush into government bonds this past month has come at the expense of money flowing into equities as investors wait for calmer conditions and greater clarity over the global economy and central bank policy.
Reuters: – High-grade week off to US$5.3bn start. – Monday was a day of extremes for the high grade market, with one issuer having to pull its deal while another amassed US$9bn of orders for a debut transaction.
Bloomberg: – Swaps beating bonds signal corporate debt rally to endure. – For those looking for signs that October’s rebound in corporate bonds can continue, look no further than the credit-default swaps market.
Bloomberg: – Tradeweb to start trading investment grade U.S. corporate bonds. – Tradeweb Markets LLC will start trading investment grade U.S. corporate bonds tomorrow, Chief Executive Officer Lee Olesky told reporters during a presentation today.
High Yield Bonds
Housing Wire: – Massive subprime mortgage bond portfolio ready to trade. – The year’s largest portfolio of pre-bust non-agency debt is set to trade this week. Investors looking to get their hands on vintage subprime, Alt-A fixed-rate, or Alt-A adjustable rate bonds will have plenty of opportunities when $4.6 billion in vintage debt hits the market Tuesday.
GARP: – Junk-bond market stressed by Fed stress test as banks dump debt. – When the Federal Reserve examines the trading books of the world’s largest banks, regulators may find surprisingly little exposure to one risky market: junk bonds.
Bloomberg: – Junk-bond buying seen boosted by economy, Moody’s says. – Investors will continue buying junk debt as the U.S. economy improves even after the Federal Reserve ends its asset purchases that have forced corporate bond yields lower, according to Moody’s Investors Service.
Saturna Capital: – Red sky in the morn’, junk bond investors be warn’d. – Now is a particularly risky time to invest in high-yield bonds. Here we offer some of our suggestions for seeking income and yield with less risk.
Businessweek: – Billionaire’s distressed junk bonds post biggest returns. – Billionaire Alvaro Saieh SMU SA is delivering the biggest gains to junk-bond investors in emerging markets after the distressed supermarket chain reached a deal with banks to postpone a loan payment.
FE Trustnet: – Are emerging market bond funds undervalued after the sell-off? – Investors dropped risk assets last month as markets corrected, but some commentators believe this has left emerging market debt looking attractive.
Emerging Markets Daily: – How emerging markets bonds & U.S. munis collide. – Municipal bonds are attractive and they are mispriced as investors continue to chase riskier yields — including those of emerging market bonds.
Wealth Management: – Time to hedge your bond bets? – Something’s afoot with interest rates. At least that’s what option market makers are telling us. Take a look at the expense trend for calls and puts on 10-year Treasury futures.
Bruce Miller: – The pure income portfolio: The core, the alternatives and the poison, part I. – A pure income portfolio will contain “core” and possibly “Alternative” Income Securities. “Core” Income Securities are “Core” because they are individual companies that can be fully analyzed. “Core” income generally provides the most stable income over the retirement years.
MarketWatch: – Can you stomach risk in your investments? Here’s how to know. – Trying to gauge your tolerance for risk in the face of sharp market swings? Your answers to the following questions can help.
Investment Week: – Morgan Stanley: Average balanced fund return may halve over next decade. – Returns on a typical 60/40 US equity and fixed income portfolio over the next decade may be half those seen over the previous 50 years, according to Morgan Stanley strategists.
Income Investing: – BlackRock latest to cut fees on bond funds. – BlackRock Inc. and other asset managers are cutting fees on bond mutual funds, moves seemingly intended to lure investor cash that’s in migration from Pacific Investment Management Co. after Bill Gross’ departure.
Investors.com: – REITs roar back as investors hunt for yield. – Here are three nontraditional, high-yielding options that do well when interest rates are low. And as Gundlach was quoted as saying, it seems unlikely the Fed will be raising rates any time soon.
ETF Trends: – Active vs. passive with bond ETFs. – The active management vs. passive management continues to rage on with the exponential growth of exchange traded funds, most of which are passively managed, adding fuel to the fire.
ETF Trends: – Treasury bond ETFs find further support from pensions. – Pension funds could increase their long-term developed market bond allocations to meet liabilities, potentially dampening the negative effects of rising rates on long-term U.S. Treasury bond exchange traded funds.
ETF Trends: – Room for growth in ETF bond market. – Even with impressive asset gains for those ETFs and others, the bond ETFs still represent a small percentage of the overall U.S. ETF market, but that is changing. U.S. fixed income ETF assets under management currently reside at $270 billion, according to BlackRock data, a figure that has risen nearly five-fold since 2008.
`Muni bond trading is like trading stamps or collectibles,’ — from a piece I wrote in 1996.
— Joe Mysak (@JoeMysak) October 28, 2014
Rich Bernstein- yields on high yield US munis selling at 1-1/4 points, 125 basis points over Iraq bond yields. This is not Iraq!
— Consuelo Mack (@ConsueloMack) October 28, 2014