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DoubleLine founder Jeffrey Gundlach is looking ahead, not to the next quarter, but the next decade. And what he sees makes interesting reading for fixed income investors. “A lot of things seem to be pointing to the year 2020 as an interesting time frame,” he told the Financial Times in an interview.
When someone like Gundlach says “interesting”, investors should take note. What is good for fixed income is rarely good for the economy as a whole, and Mr Gundlach has a whole list of interesting:
“A wall of high-yield debt that companies will need to refinance; soaring federal government deficits as baby-boomers drain social security and healthcare funds; ageing populations in China and other emerging markets; and the Federal Reserve’s Treasury holdings maturing, too.”
His conclusion? By 2020, the Fed may well be resurrecting quantitative easing, its palliative for troubled markets.
“It seems like one of the consequences of this zero interest rate policy is you’ve pushed out the problem of refinancing, of rolling over, but you’ve really compounded the magnitude of it and it seems to be focused around the 2020s.” He went on to say.
You can read Gundlach’s full interview here.
Todays Other Top Stories
LearnBonds: – Retirement planning for millennials – Asset classes. – A closer look at the different asset classes that make up a typical investment portfolio. Investment professionals build portfolios using a number of different asset classes to guard against uncertainties in the financial markets.
Lumina News: – Using municipal bonds as an investment vehicle. – The nation’s economic woes have affected all of us, but municipalities have been hit particularly hard, resulting in cash-strapped state and local governments across the country. Consequently, you might be wondering how this situation could affect an investment class you might be considering: municipal bonds.
MarketWatch: – Fitch takes various rating actions on enhanced municipal bonds and TOBs. – Fitch Ratings has taken various conforming rating actions on enhanced municipal bonds and tender option bonds (TOBs) corresponding to actions taken on their associated enhancement providers or underlying bonds.
MuniNetGuide: – Rhode Island follows New Jersey with controversial tobacco issue. – The deal of the week is without question the $607 million tobacco bond issue from the State of Rhode Island’s Tobacco Settlement Financing Corporation. Proceeds will go to: (1) refund all the outstanding Series 2002 bonds and part of the Series 2007, (2) tender for some of the Series 2007 notes and (3) generate an upfront cash payment of about $20 million to the State.
Bloomberg: – Studio that revived Tupac buries Florida taxpayers. – The crowd of 80,000 revelers went wild as a lifelike hologram of rapper Tupac Shakur took the stage at the 2012 Coachella Music Festival. Six months later, the Florida visual-effects firm that resurrected the deceased musician in the California desert would itself be dead.
ProRepublica: – How Wall Street Tobacco deals left states with billions in toxic debt. – Politicians wanted upfront cash from a legal victory over Big Tobacco, and bankers happily obliged. The price? A handful of states promised to repay $64 billion on just $3 billion advanced.
Market Realist: – The must-know basics of fixed income investing. – Let’s review the basics. A lot of investors evaluate fixed income sectors by looking at the level of yield they might receive for a given level of risk. We continue to explore how investors consider interest rate risk and portfolio positioning in the current environment.
Zacks: – Bond prices rise as chaos rules in Europe and Russia. – Tensions are almost boiling over in the Ukrainian conflict with Russia. It was revealed that Russian troops and vehicles have begun to amass on the Eastern border with Ukraine. Moreover, the recent sanctions against Russia by the U.S. and their European allies, caused President Putin to order his government to prepare retaliatory measures against the U.S. and their European counterparts.
MarketWatch: – Why did investors give U.S. debt markets the thumbs down? – In an eventful and interesting week, both bond (BND) and stock (IVV) market investors got important feedback from markets and policymakers. The most important takeaway was that volatility was back with a vengeance.
Institutional Investor: – What happens when bond investors want their money back? – With Wall Street shying away from fixed-income trading, bond managers are positioning their portfolios for an inevitable liquidity crisis.
Forbes: – High yield bonds: After tumultuous July, ETFs stabilize. – Most of the high-yield ETFs have stabilized this week, settling into a new context after an approximate 3% decline in July. For example, the largest, HYG, yesterday was essentially steady, closing at $92.55 per share, for a gain of 0.6% since Friday, a decline of 0.7% week over week, and a decline of 2.8% since the end of June, trade data show.
CNBC: – U.S. bonds hold gains as safe-haven bids counter sunny claims data. – U.S. Treasury bonds recommenced their upward swing on Thursday, as the confirmation of Russia’s retaliatory sanctions kept market risk-aversion at a high in spite of a surprise drop in jobless claims.
WSJ: – U.S. Government bonds rally; Yields test 2014 lows. – U.S. Treasury prices rallied Wednesday as concerns over global growth and abandoned corporate-deal pursuits sent investors into haven assets.
High Yield Bonds
IFR Asia: – Market chop puts U.S. high-yield deals on hold. – Plans for a late summer issuance spree in the high-yield market have been derailed this week, with at least two deals postponed as a burst of volatility has pushed borrowers to the sidelines.
Kiplinger: – The managers of a top bond fund turn bearish. – Loomis Sayles Bond has cut back dramatically on junk and emerging-markets bonds and has built up its position in safe Treasury issues.
Reuters: – European high-yield market overtakes US for first time. – Issuance of high-yield debt in Europe outstripped U.S. volumes for the first time in 2014, helped by European banks junior debt issuance, M&A financing and first-time borrowers, Fitch said in a report published on Thursday.
CNBC: – What everyone’s missing about high yield. – High-yield funds see massive outflows. What bonds are telling us, with Michael Contopoulos, BofA Merrill Lynch, CNBC’s Dominic Chu and the Futures Now Traders.
Market Realist: – Emerging market bonds: The pros and cons of investing. – Learn more about emerging market spreads and whether now is the right time to invest in EM bonds.
Bloomberg: – The disastrous bet against bonds bears just can’t refuse. – You’d think investors would sour on a bet against bonds that’s lost 25 percent in seven months. Turns out some people have a very high tolerance for pain.
ETF Trends: – ETF chart of the day: Core bonds. – We have spent a considerable amount of time discussing fixed income ETFs and how some segments have gotten bruised in the recent downdraft, and one actively managed product in the space stands out impressively lately, that being BOND (PIMCO Total Return, Expense Ratio 0.55%).
Zacks: – Zacks #1 Ranked diversified bond mutual funds. – 5 top rated diversified bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all diversified bond mutual funds, investors can click here to see the complete list of funds.
Gross: Russia/G7 trade war getting ugly – trade, airspace, etc. Eu headed for recession. Own Treasuries.
— PIMCO (@PIMCO) August 7, 2014
Feels like the market is moving towards an acceptance of this bull flattening we’ve seen in USTs YTD. Vocal bears in hibernation/capitulated — David Schawel (@DavidSchawel) August 7, 2014
Ukraine, Euro economic concerns drive 10-yr German Bund to record low 1.06%. Gap to 10-yr Treasury, 1.4%, near 15yr high.
— AnthonyValeri (@Anthony_Valeri) August 7, 2014