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Inflation Doesn’t Spell Doom For Junk…Why Keep HYG in Your Portfolio…Investors Rebuke Low Yield… and more!

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Forbes: – Inflation doesn’t necessarily spell doom for high yield bonds. – With interest rates hovering near historic lows, many have begun to ask what will happen when rates inevitably start to rise. Investors are starting to look at the fixed-income allocation within their portfolios with a nervous eye. Of course when interest rates rise, bond prices generally decline. Because interest rates are so low, there is lots of room for them to rise.

Elisa Lemola: – Reasons why HYG is still worth keeping in your investment portfolio. – There has been a lot of pessimism lately about high-yield ETFs. Investors flocked to these funds once the Fed implemented its quantitative easing and zero-interest rate regime, in the hope that they could enjoy higher yields. Although they are also known pejoratively as ‘junk bond’ funds, due to the perceived lower quality of their bond holdings, many of these funds are actually safer investments than many stocks. In recent months, however, there have been rumblings about the possibility of the ETF bubble bursting. Under current market conditions, high-yield ETFs offer individual investors an invaluable opportunity to maximize interest revenue investment.

Anthony Valeri: – Bond market perspectives – Investors rebuke low yield. – Yields rose across the bond market in recent days, as investors rebuked the low-yield world. We view recent weakness as part of the checks and balances of healthy markets and still expect yields to be largely range-bound in 2013.

Learn Bonds: – No portfolio is complete without… –  For the past two years I have been reviewing mutual funds to invest in. I have formulated a set of criteria for specific mutual funds, and a set of parameters for how a new mutual fund should fit into an overall portfolio. Additionally I have set periods of time to change a mutual fund’s distributions from ‘reinvest’ to ‘cash distribution.’ Here are a few of the criteria, parameters and scheduling points.

FT: – Investors warned on dash for junk bonds. – The joke on Wall Street and in the City right now is that high-yield bonds ought to be renamed “the investment formerly known as high yield”, because they no longer offer any such thing. If the current mania continues, and if interest rates on these high-risk bonds stay at record low levels, the financial consequences could be felt much more widely.

Advisor.ca: – Choose auto sector bonds. – Nicholas Leach, vice president of global fixed income at CIBC Global Asset Management says there’s still a lot of value in the high-yield market and sees opportunities across a range of sectors, especially the North American automobile industry.

Business Insider: – There’s actually a shortage of government bonds. – Debt may be everywhere but there’s a scarcity of bonds. With governments awash with debt and furiously selling new securities to fund bloated budget deficits, the idea of a bond shortage on the marketplace may sound puzzling.

Barron’s: – Junk bonds could lose a year’s return by reverting to fair value – Fridson. – High-yield bond guru Martin Fridson is again sounding warnings about that market’s current state, calling it extremely overvalued and saying a reversion to fair value would wipe out a year’s return.

Ploutos: – High yield bond market sets new records. – With monetary accommodation from the Federal Reserve now always prefaced with the word “extraordinary,” it is not surprising that we are seeing new records throughout the fixed income universe. The speculative grade bond market set a new record last week with the yield-to-worst on the Barclays Capital High Yield Index yielding below five percent for the first time. With yields at new record lows, the index also hit a new record high dollar price of $107.36.

Bloomberg: – PIMCO avoids long-dated euro-region bonds on growth outlook. – Pacific Investment Management Co. is shunning long-dated European government securities because of the region’s growth outlook, according to Andrew Balls, head of European portfolio management at the firm.

ETF Trends: – High-yield bond ETFs fall amid outflows. – Yesterday we spoke about the price pressure that U.S. Treasury bonds, particularly longer dated issues, have seen in recent sessions and today we investigate the High Yield Corporate Bond space.

San Diego Source: – Rising rates may increase risk in bond market. – A warning last week by Ben Bernanke to Wall Street firms to not “reach for yield” also has a message for individual investors. The chairman of the Federal Reserve Board was addressing a tendency by some firms to take on excessive forms of risk in order to raise the yields offered on certain investments, as investors search for higher rates of return in a near-zero-interest-rate environment. At the same time, another government official was warning investors, especially in tax-exempt municipal bonds, to be careful in trying to seize higher cash flow.

Pensions & Investments: – High-yield bonds still dominate, but sector loses some ground. – High-yield bonds led the way in the top 10 overall fixed-income rankings for the year ended March 31, but not with the domination they displayed in prior quarters, according to Morningstar Inc.’s separate account/collective investment trust database.

Barron’s: – Junk bond investors not getting compensated for lousy covenant quality. – The broad quality of bond investor protections known as covenants remains at historically lousy levels according to a report out today from Moody’s Investors Service.

https://twitter.com/PIMCO/status/334676545388036098

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