Gross Caught in TIPS Trap…Bond ETF Liquidity Risks…3 Reasons To Still Own Bonds…and more!

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Bloomberg: – Gross caught in TIPS trap Gundlach sidestepped in tumble. – PIMCO owns about 10 percent of the TIPS market, according to Morningstar Inc., Bill Gross’s success is tied in part to an asset class fellow bond manager Jeffrey Gundlach has avoided.

ETF Trends:  – Bond ETF liquidity risks: Facts vs. fiction. – After the financial crisis, investors and journalists are justifiably on guard for that next systemic risk lurking just under the surface that could throw markets into chaos again. The rapidly growing and much-hyped ETF market is an inviting target.

Business Insider: – Here are 3 reasons why you should still own bonds. – Amid concerns of a Fed taper, investors pulled a record $23.3 billion from bond funds in the week ending June 26. Bank of America’s Michael Hartnett dubbed it a ‘bond market liquidation’ in a note to clients.

Learn Bonds: – Was Bill Gross wrong about Treasuries? – With the recent record outflows from Pimco’s flagship Total Return fund, Marc Prosser looks at whether Bill Gross did call it wrong about Treasuries.

BusinessWeek: – How much pain will bond investors tolerate. – The bond market is at a tipping point. How much pain and volatility can investors tolerate before they liquidate wholesale amounts of the $1.26 trillion they’ve piled into bond funds over the past six years?

Forbes: – Muni bond manager’s journal: When less income is better. – This month I’d like to discuss why higher coupon municipal bonds favored by mutual fund portfolio managers are not always the right choice for individual investors holding bonds to maturity. Some municipal bonds pay higher coupons, though what investors should know is that sometimes the better long-term investment is to buy a 3% bond instead of a 5% bond, even when they have comparable credit ratings and maturities.

Nola.com: – Refinancing of state tobacco settlement bonds yields lower than expected savings. – A refinancing of Louisiana’s tobacco settlement bonds completed Tuesday netted the state $83 million in upfront cash to fund popular higher education scholarships. Administration officials hailed the refunding move as a good deal in the current market, but State Treasurer John Kennedy said the sale was premature.

MoneyNews: – Muni market may penalize Michigan for detroit bond treatment. – Michigan could soon face higher borrowing costs in the U.S. municipal bond market after Detroit’s emergency manager took controversial actions that may imperil the full repayment of debt across the state, market analysts said.

Bloomberg: – Mortgage bonds drop up to 22% in June as some 2013 gains erased. – U.S. home-loan bonds without government backing tumbled last month to leave several types of the debt trading at their lowest prices of the year.

Barron’s: – BlackRock shifts, now favors junk bonds over bank loans. – In its July fixed-income strategy report, BlackRock shifts its stance away from bank loans back toward recommending junk bonds instead, saying the latter were hit harder by the bond sell-off of the past two months and now look like better values.

FT: – U.S. corporate debt sales dry up. – The second half of the year has started with a whimper for the US corporate debt market as a sell-off in bond prices and record outflows from funds investing in fixed-income assets have spooked borrowers.

MarketWatch: – The ‘great bond massacre’ of 2013. – In 1994, the Federal Reserve set about raising Treasury yields from unusually low levels. As the economy was strengthening, the Fed saw fit to raise short-term rates from 3% to 3.25%. Thirty-year Treasury bonds were yielding 6.2% in January. By the end of the summer, the Fed had pushed yields up to 7.5%. In the process, hundreds of billions of dollars in Treasury bond value evaporated. As short-term yields increased, leveraged bondholders were forced to unload bonds to mitigate escalating losses on 30-year bonds. Prices dropped, yields climbed and money was lost. Could it happen again?

St Louis Today: – Don’t let rising rates scare you away from bonds. – Worries about an eventual end to the Federal Reserve’s ultra-easy monetary policy have pushed up interest rates over the past two months, and bond prices fall when rates rise. Instead of the steady gains they had come to expect, bond-fund investors are suffering short-term losses. The shock has prompted some investors to rethink their bond portfolios. They’re wondering if they should move exclusively into short-term bonds, which won’t suffer as much from rising rates, or perhaps dump bonds entirely. But that would be a mistake.

Bloomberg: – Rotation to stocks from bonds less than great. – Anyone who expects U.S. individual investors to push stocks higher by moving away from bonds may end up disappointed, according to Vadim Zlotnikov, Sanford C. Bernstein & Co.’s chief market strategist.

Investors Chronicle: – Best bond funds for difficult times. – Ben Bernanke has thrown a spanner in the works by hinting that he will slow the Feds quantitative easing programme, sparking selling across financial markets, and making bond prices fall and yields shoot up. But while rising yields may sound attractive to income investors, they mean falling prices so some capital losses will occur. For a number of investors there remains an obvious, if not original, answer: strategic bond funds.

Baron’s: – Another vote for junk bonds over leveraged loans. – Here’s another market observer who thinks junk-bond prices have fallen to the point that they’re now more attractive than leveraged loans. Peter Tchir of TF Market Advisors says choosing between leveraged loans or junk bonds now really comes down to your view of the economy.

MuniNetGuide: – After the deluge: Munis regroup before payroll data. – Is it just sheer exhaustion from last week’s extreme volatility? Or is it just the calm before the next bout of economic data-induced market convulsions? Perhaps market participants are already looking ahead to a weekend of backyard grilling? Whatever the reason, an eerie calm has settled on the fixed-income markets as we start this holiday-shortened week.

ETF Daily News: – Meredith Whitney: Finally right, but for all the wrong reasons. – Meredith Whitney will live in infamy after her call on municipal bonds. She took to 60 Minutes, claiming that billion-dollar defaults would be the new normal as American cities would soon file for bankruptcy. So far, her call couldn’t be more wrong. Housing prices are going up, property tax revenue is following, and we’ve yet to see municipal defaults worthy of mentioning. To be fair, Meredith Whitney was right – defaults have gone up, but not to the extent that she called for.


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