How to Maximize Bond Returns w YTM…Bill Gross Q&A…Whale Trade Comeback…and more!

Bond Squawk: – Key to maximizing bond returns with yield to maturity. – When looking at bonds many investors tend to focus a lot on just the coupon, or the amount of interest that they will be earning during the life of the bond.  While vital, it is important to realize that there should be more emphasis placed on the bond’s price as it may provide better clarity on your return on investment.

PIMCO: – Q&A with Bill Gross. – As long term headwinds blow against the US economy, investors need to prepare for lower returns and adopt new ways of thinking about their portfolio strategies.

Bloomberg: – Whale’s trade in comeback as junk fervor fades. – Nine months after the JPMorgan Chase & Co. trader known as the London Whale amassed credit- derivatives bets that sparked $6 billion in losses for the bank, rivals from Bank of America Corp. (BAC) to Morgan Stanley are recommending one of his main strategies.

Learn Bonds: – New video series on how to invest in peer to peer loans  Learn everything you need to know about P2P investing in this great new video series. You’ll learn about the differences with bond investing and the relationship between ratings & returns and much more.

Bloomberg: – Gross may shift PIMCO to lower risk profile in 2013. Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest bond fund, said the investment company may reduce its risk profile in 2013 after posting higher-than-average returns this year.

ETF Trends: – Investment-grade bonds may cool after ETF hauls in $7 billion. – The iShares iBoxx Investment Grade Corporate Bond (NYSEArca: LQD) is second on the list of top-selling ETFs in 2012 with inflows of more than $7 billion as investors look beyond low-yielding Treasuries for any kind of steady income.

FT: Companies rush to setup ultra short bond funds – Fund management groups are stepping up their attempts to lure conservative investors away from the $2.7tn money market fund industry, offering a rash of new vehicles that will buy only short-maturity bonds.

Detroit News: – State laying groundwork for managed bankruptcy for Detroit. – Even as the state Treasury prepares to begin another financial review of Detroit’s books, a plan is being solidified in the governor’s office that would guide Michigan’s largest city through what is being called a managed bankruptcy.

Bloomberg: – Tax-cap plan threatens $200 billion muni losses. – The value of the $3.7 trillion municipal-bond market may drop by $200 billion, or about 5 percent, under President Barack Obama’s plan to limit income-tax deductions to 28 percent, according to Citigroup Inc.

WSJ: – Danger lurks inside the bond boom. Investors have been flocking to buy bonds issued by top-rated companies, putting them on pace for a record year of debt raising in the US But some of the biggest fund managers warn that dangers are lurking in what were once seen as the safest investments.

FT: – Mohamed A. El-Erian – Congress risks derailing positive job trends. – America’s employment situation has steadily improved in the course of 2012. This progress, while very important, is unlikely to constitute as yet the critical mass required to fundamentally alter the underlying dynamics of the economy. As such, more needs to be done by policymakers and politicians in Washington.

Santa Barbara Independent: – Ticking time bomb – School districts gambling with risky bonds? – The latest in the long list of creative financial instruments to gobsmack the public since the Great Recession struck in 2008 is a municipal bond called a capital appreciation bond (CAB), which gained attention recently with reports that the Poway school district in San Diego County has saddled its taxpayers with almost a billion dollars in future debt by issuing them.

Financial Advisor: – Tax-sheltered municipal bond ETFs ahead of the fiscal cliff.As part of a well-rounded fixed-income portfolio, municipal bond exchange-traded funds have helped diversify bond allocations. However, this time around, the focus has been on the tax-exempt status found in munis and its safe-haven status ahead of the “fiscal cliff” tax hikes.

Bloomberg: – Intel leads decline in bond sales from highest since September. Corporate bond sales in the U.S. declined from the highest level since September this week as relative yields tightened.

Financial Advisor: – Boston fixed-income manager uses sustainability model to mitigate risk. A Boston-based fixed-income manager with $17.5 billion in assets under management has developed a new method that it believes is critical to reducing risk in its portfolios.

Charles Margolis: – R.R. Donnelley: high-yield junk bonds.Those of you looking for high yeild might want to consider bonds from R.R. Donnelley. However Moody’s recently downgraded their bonds to junk status and rates their long term outlook as negative. A negative outlook and junk rating, for any company, Fortune 500 or not, is worrisome. Therefore it is important to consider allocation size, in the event the company fails.

Baron’s: – Top-rated corporate bonds grow increasingly risky. – Bond investors keep shifting into riskier assets, particularly high-yield corporate bonds, for the pickup in yield, taking comfort that the Fed is providing enough of an economic backstop to keep default rates low. But the place where risks seem to be growing the most is in high-rated corporate bonds.

WSJ: – Citigroup antes up in bond deal. The house always wins, even in the municipal-bond market. A small group of casinos, including Trump Taj Mahal and Bally’s, emerged as the only winners from a bond issued by Atlantic City, NJ, this week.

Cate Long: – California moves toward open source ratings for city bonds. – The “default probability model” (which is what most credit rating agencies use as a model) was created by former Moody’s executive Marc Joffe of Public Sector Credit Solutions. Here is what the California State Treasurer is hoping that it will do.

WSJ: – Bond snags for small towns. The swelling floodwaters caused by Hurricane Sandy prevented Ship Bottom on New Jersey’s Long Beach Island from paying $34,000 in interest due Nov. 1. The issue raises questions about the antiquated methods smaller boroughs use to pay bond holders, which can also result in larger investors avoiding smaller issuers altogether.


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Simon G

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