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Gary Dorsch: – ‘Dangerous divergences’ between bonds and stocks. – Already, the ratio between the value of the Dow Industrials and 10-year T-note futures has reached the 116-level, – doubling from the 58-level – where it bottomed out in March ’09, and is within striking distance of its 2007 high. A last gasp rally in the U.S. stock market could be the catalyst that triggers a sharp sell-off in T-notes.
Forbes: – The Madoff of munis. – Rita Crundwell stole $53.7 million from Dixon Ill. over a 21 year period. Her crime highlights the lackadaisical auditing standards of most municipalities, which are much less stringent than their corporate counterparts.
Financial News: – Junk bonds: Buyer beware. – Treat the recent rise in Treasury yields and subsequent drop in junk bond prices as a warning. Owners of junk bonds could easily incur principal losses in the future and the higher and faster the rate increase, the greater the loss.
Learn Bonds: – Higher dividend stocks still seem rather pricey. – One of the things that happened in response to interest rates becoming so low was that higher dividend stocks became even pricier. Even though prices seem to have come down recently, higher dividend stocks are, it seems, still a poor investment relative to other stocks.
Indexuniverse: – PIMCO’s BOND losing assets for the first time. – The Pimco Total Return ETF (NYSEArca: BOND) broke its impressive asset- gathering streak with its first monthly outflows ever in May. Those losses have been compounded by BOND bleeding $119 million in the first five days of June.
Advanced Trading: – Overhauling corporate bond trading. – With major dealers shrinking their inventories of corporate bonds, buy side institutions are seeking ways to find liquidity over alternative trading platforms that are emerging to solve the liquidity shortfall.
Morningstar: – If stocks are bad, why are junk bonds good? – Equities may have higher prices, but investors are still choosing to put money into junk bond funds instead. John Rekenthaler looks at why.
Investment Week: – The sell-off starts? Bonds suffer fourth-worst month in 20 years. – Concerns over a potential end to US quantitative easing saw global fixed income markets slump in May, but further sudden sell-offs may be less likely.
Bloomberg: – Illinois’s Quinn recalls lawmakers as debt-rating cut. – Illinois Governor Pat Quinn called lawmakers back for a special session on June 19 less than two hours after Moody’s Investors Service cut the state’s credit rating, citing an unresolved pension crisis.
Professional Pensions: – Has the shift to bonds gone too far? – Some traders are saying the swing into bonds has gone too far and many institutional investors are at risk of generating very low returns going forward unless they make very large moves back into equities in the near-term.
The Times: – Market jitters spell bad news for bonds. – Are the bond bears about to have their honey? That is the question that has been troubling the City this week after falling bond prices triggered losses for fixed income funds.
Reuters: – Wells Fargo buying more bonds as rates rise. – Wells Fargo & Co is looking to buy bonds at a faster rate than before to benefit from higher potential returns from investments as U.S. interest rates rise, a top executive said on Wednesday.
Matt Erickson: – The Treasury run: Part III. – In the past year we have seen Treasury prices achieve all-time highs, but since this time they have been gradually unwinding. Recent comments by the Federal Reserve have led some to speculate that the Fed may be putting an end to their massive stimulus program sooner than many expected. This will have a profound impact on interest rates in our economy, consumption, the prices of current bonds, and the global economy at large.
Market Realist: – More weakness in high yield market negative sign for companies that need debt funding. –Higher corporate credit yields means more expensive borrowing rates for companies, therefore, higher yields are generally negative for companies, especially those with high funding needs, which includes many upstream energy producers. Such needs might include expensive capital expenditure programs, acquisitions, and refinancing of debt coming due. Inversely, lower yields benefit companies as they result in lower borrowing costs.
Huffington Post: – Meredith Whitney’s bad prediction. – Wall Street analysts make bad calls all the time, but among the worst made at least in recent history has to be Meredith Whitney’s prediction back in 2010 that the municipal-bond market was set for an epic implosion. Whitney’s sin is that she isn’t intellectually honest enough simply to say she screwed up. Instead she and her defenders offer up absurd explanations to defend an indefensible market call that caused average investors to lose lots of money even if it got Whitney a book deal in the process.
Investing.com: – High bond yields are hitting these sectors. – As we all know, the bond yields on the 10- and 30-Year U.S. Treasury Notes have spiked higher recently. That recent spike has affected many leading stocks and sectors that take advantage of the easy money policies by the Federal Reserve. Easy money means cheap money to many companies.
Citywire: – Bond funds lose money, how bad could it get? – Bond funds lost money last month amid the uncertainty over the US Federal Reserve’s stimulus policies. Has the tide finally turned?
Bloomberg: – Billionaire Morse’s Florida dirt bonds not tax exempt. – The Internal Revenue Service ruled that bonds sold by a Florida community-development district that has issued $426 million of debt aren’t tax-exempt, a decision that may have implications for hundreds of similar entities.
— Peter Tchir (@TFMkts) June 6, 2013