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BusinessWeek: – Gross sticks with high-quality debt after Treasury selloff. – Pacific Investment Management Co.’s Bill Gross, whose flagship fund suffered its first withdrawals since 2011 in May amid a selloff in Treasuries, said he is sticking to high-quality bonds as market risks are rising.
Fiscal Times: – Bill Gross: Should you still bet on the bond king? – Bill Gross didn’t set out to be a guru, but nevertheless, a number of well timed investment decisions have propelled him into the limelight, to the point where many investors hang on his every word. Thats all well and good until things go wrong. Gross’s flagship fund, the Pimco Total Return Fund, recently placed its biggest bet on Treasuries in three years. That was just in time for the May selloff in bonds that took yields back above 2 percent, Morningstar calculates that investors pulled some $1.3 billion from the Pimco fund in response to its poor performance. So has the bond king lost his crown?
FT: – Long term looks bad for portfolio returns. – Sometimes the long run is easier to forecast than the short. Over the next decade, the odds are that returns on both bonds and stocks will be very poor. The outlook is as bad as it has been in a century.
Learn Bonds: – Jeff Gundlach: 3 Reasons interest rates won’t head much higher. – With the rate on the 10 year Treasury up around 50 basis points over the last month, many prominent bond investors (including PIMCO’s Bill Gross) have called an end to the decades long bond bull market. Judging by his presentation earlier this week entitled “What in the World is Going on?” bond guru Jeff Gundlach may not agree. Here are 3 reasons he thinks interest rates aren’t headed much higher from here.
Investment News: – Bond investors get a glimpse of what’s coming — and it ain’t pretty. – If advisers weren’t already spooked enough by the threat of rising interest rates, May served as a scary reminder of just how widespread the carnage could be. It’s caused some to start looking for alternatives and others to prep their clients for the inevitable pains of staying with pure bonds.
FT: – Record outflows from US junk bond funds. – Investors have pulled a record amount out of US junk bond funds in the past week, beating a speedy retreat from what has been one of the hottest areas of the fixed income market in the past year.
WSJ: – As bond prices fall, strategies shift. – A sharp fall in bond prices has sent investors scurrying to protect themselves amid fears that rising interest rates will put an end to decades of strong returns. The U-turn is forcing some companies to accelerate fundraising plans to take advantage of investor demand while it lasts.
FT: – Welcome return of bond volatility. – Long a benign indicator, the temperature gauge of the US bond market is flashing on the dashboards of investors; volatility is back and it should be welcomed not feared.
Oblivious Investor: – Is Dave Ramsey’s bad investment advice catching up with him? – People have been trying to draw attention to the poor quality of Dave Ramsey’s investment advice for years. But, for the most part, Ramsey has gotten a free pass on the matter. Because of Ramsey’s admirable success with helping so many people get out of debt, many people don’t particularly care that his investment advice is rather lacking.
Washington Post: – Buying bonds at today’s ultra-low rates isn’t safe. – What do you call a supposedly safe investment in which a five-week hiccup can wipe out more than a year of income? Answer: a bond mutual fund.
Bloomberg: – Investors pull record $12.5 billion from bonds, Citigroup says. – Investors withdrew a record $12.5 billion from bond funds in the week to June 5, Citigroup Inc. said, citing EPFR Global data.
MarketWatch: – Junk bonds sell off even more than Treasurys, but they may still be a buy. – It wasn’t too long ago that junk bond yields were continually setting record lows. The Barclays U.S. High Yield Index dropped below 5% for the first time ever on May 7. But it quickly made a U-turn, climbing nearly 100 basis points over the next month to yield 5.91% on Tuesday. So, where does that leave investors?
Fortune: – Ultra-low interest rates are making bonds unsafe. – Sooner or later, interest rates are going to rise sharply from current levels. And that’ll hurt.
FT Adviser: – Taking stock or backing bonds. – Alex Robertson, client portfolio manager of Royal London Asset Management, says while there is generally less risk in owning bonds relative to shares, the returns that bondholders can expect tend to be generally lower.
Money Beat: – Ratings lag boosts bets on risky junk bonds. – Investing in lower-rated bonds is not for the faint-hearted, though it is tempting now that returns on higher-rated debt are so slim. But one investor reckons he has found a delay in the way some bonds are rated that could make it safer to take a punt on debt at the riskier end of the scale.
Money Beat: – Junk bond funds see record outflows. – Bond funds saw waves of outflows in the week ended Wednesday, with funds dedicated to low-grade, or “junk,” debt seeing record withdrawals, according to fund tracker Lipper.
Bloomberg: – Stockton no domino as California debt extends rally: Muni credit. – Twelve months ago, the city council of Stockton, California, voted to file for bankruptcy, making it the biggest U.S. city to seek court protection. After Mammoth Lakes filed less than a month later and San Bernardino officials voted to go that route, the extra yield on California issuers reached a six-month high of 1.06 percentage points on bets more localities would follow suit, data compiled by Bloomberg show.
Cate Long: – Medicaid: The state budget crusher. – Medicaid expansion costs are projected to grow 6-8 percent annually for states, while state revenues are projected to grow only 5 percent on average. This means that Medicaid will continue to be a budget-crusher for states. This, more than political ideology, is more likely the reason that many states have not embraced Medicaid expansion.
Reuters: – Detroit to offer creditors less than 10 percent of what city owes -report. – Detroit Emergency Manager Kevyn Orr plans to deliver grim news to the city’s creditors next week: Take less than 10 percent of what the city owes or risk losing it all in a bankruptcy proceeding, the Detroit Free Press reported on Friday.
IndexUniverse: – Apple debt pops up in sundry bond ETFs. – Apple raised $17 billion in a record corporate bond sale on April 30, and those bonds are now starting to show up in fixed-income ETF portfolios ranging from broad aggregate strategies to focused corporate funds.
Bond market still showing QE tapering jitters after trend-like jobs report. Intermediate to long Treasury yields up by 0.03% to 0.05%.
— AnthonyValeri (@Anthony_Valeri) June 7, 2013
10yr real yields back in positive territory…. 2.37bps for the taking!
— David Schawel (@DavidSchawel) June 7, 2013