Investors continued to abandon Pimco’s Total Return fund last month, pulling a whopping $27.5 billion from the bond giants flagship fund during October.
Half of those redemptions occurred in the first five trading days of October and they then “slowed sharply,” according to a statement from the Newport Beach, California-based firm yesterday.
To see a list of high yielding CDs go here.
Octobers redemptions followed $23.5 billion in withdrawals from the fund in September and cut the fund’s assets under management to $170.9 billion as of Oct. 31, according to figures just released by Pimco, which is keen to point out that the fund remains the largest actively managed bond fund in the world.
Pimco says fund withdrawals peaked on Sept. 26, the day Gross left the firm, and slowed throughout October, with “nearly half” of the month’s total outflow occurring in the first five trading days of October.
“The liquidity profile of the Fund remains high and, as always, the Fund is being managed consistent with the firm’s market outlook and alpha strategies while meeting diminishing redemptions,” the firm said in a statement. “In addition, the Fund has maintained its desired portfolio structure with appropriate risk exposures as the fixed income markets remain liquid and well-functioning.”
Todays Other Top Stories
Learn Bonds: – Quantitative easing has ended, what’s the effect on bonds? – While the forward consequences of an end to QE are a bit hazy, a light at the end of the post-financial-crisis tunnel seems to finally be emerging. Though a tightening bias on behalf of the Fed would not necessarily be a positive development for bond investors, it probably is not reason for panic either. In the end, a higher rate environment could signal a return to economic normalcy which in and of itself would be a societal positive, given recent travails.
Reuters: – Muni bonds lose favor in repo market after new capital rules-study. – Rules excluding municipal bonds from assets that banks can use to meet capital requirements have led to a sharp decline in their use in the repo market, with buyers asking for more collateral in muni bond transactions, according to an analysis by Markit.
Income Investing: – Muni bonds could lose money in 2015 – Citi. – It’s that time of year when analysts start looking ahead to next year, and Citi‘s muni analysts don’t like what they see coming in 2015. Namely: losses. Munis have been killing it this year, but Citi thinks the likelihood of rising Treasury yields, combined with elevated muni-to-Treasury yield ratios today, spells trouble.
Bloomberg: – Voters approve at least $16 billion of munis, led by water. – U.S. voters approved at least $16 billion of municipal bond measures, led by borrowing for drought-fighting steps in California and school technology in New York. Thirteen of the 15 largest initiatives passed.
Reuters: – U.S. voters decide fate of $44.7 billion in state bond measure. – Voters in several U.S. states determined the fate of an estimated $44.7 billion in borrowing and other budget measures on Tuesday as investors in the $3.7 trillion municipal bond market focused on large offerings in California and New York.
ETF Trends: – Muni Bond ETFs: Considerations & factors to watch. – Municipal bond exchange traded funds have been among the best performing fixed-income assets this year. For those who are thinking about a shift over to munis now, there are some factors to considers.
ETF Trends: – Muni Nation: The best defense is a good offense. – With October having come to a close and municipal bond performance up 8.32% year-to-date as of October 31, as measured by the Barclays Municipal Bond Index, investors may be tempted to close the books and wait out the end of the year. With volatile equity markets, uncertainty surrounding the timing of the Federal Reserve’s decision to allow rates to rise again, and headlines trumpeting conflict and disease, it might indeed be tempting to do nothing.
FT: – U.S. investors try to read between the lines. – Bond and equity markets are telling different stories. The obvious bond market story is of slow growth, stagnant inflation, and a Federal Reserve unlikely to raise rates as far or fast as once thought. There is an alternative narrative.
MarketWatch: – Why U.S. Treasuries struggle with the FOMC and GDP growth. – Treasury markets have been a buffer for global investors in 2014. Concerns over international growth and geopolitical risks have seen long-term Treasuries benefit significantly.
Reuters: – U.S. yields rise on ADP jobs data, stock gains. – U.S. Treasury debt yields rose on Wednesday as payroll processor ADP reported solid U.S. private-sector job growth in October and a higher open in U.S. stocks reduced the safe haven appeal of government debt.
Bloomberg: – U.S. to trim two-, three-year auctions as deficits shrink. – The U.S. is cutting the size of two-and three-year Treasury note sales, bringing longer-term debt issuance this quarter to the lowest level since 2008, as a stronger economy shrinks the budget deficit.
Moneybeat: – Apple isn’t the only company borrowing on the cheap. – For its first non-dollar bond sale Tuesday, Apple Inc. was able to issue some of the cheapest euro-denominated bonds ever. Moneybeat decided to take a look at what other corporations have generated the lowest borrowing rates in both dollars and euros. Unsurprisingly, the lowest cost debt has been issued in the past several years, as central banks around the globe have held down interest rates.
Reuters: – Global high-grade corporate bond supply to fall in 2015-BofA. – Global issuance of investment-grade corporate bonds is expected to fall next year on higher interest rates following what has shaped up as record volume for the sector in 2014, according to Bank of America Merrill Lynch analysts.
High Yield Bonds
NY Times: – A recent surge of leveraged loans rattles regulators. – In recent months, the Federal Reserve and the Officer of the Comptroller of the Currency have intervened to tamp down the market. Leveraged loans are made to companies with low credit ratings that could suffer high losses in a downturn. As a result, the regulators have tried to stop the banks they regulate from arranging certain types of leveraged loan deals.
Bloomberg: – Warburg’s Canbriam turns to junk as energy falls. – Warburg Pincus LLC’s Canbriam Energy Inc. is turning to the high-yield bond market to fund growth as a slump in commodities sours demand for the debt of energy companies and clouds the prospects of a share sale.
Emerging Markets Daily: – Moody’s: Junk bond issuance drops in Latin America. – Even as Latin American companies have issued more bonds in 2014, far fewer are junk. In a report published today, Moody’s says that while the total new issuance volume of corporate bonds for Latin American non-financial companies rose 2% so far this year, the issuance of high yield debt during the first nine months of 2014 has dropped 25% compared to the same period last year.
Forbes: – Bond buyer’s survival guide. – If you have an investment account of any size you have probably heard from the broker about buying individual bonds. The problem with buying bonds one at a time is that you need $100,000 trades to have any chance of getting a decent price and you need 50 issues to diversify your credit risk. If you are investing $5 million and can devote 40 hours a week to reading indenture statements, maybe buy some bonds. If not, you really should be in a bond fund.
Daily Wealth: – What plunging oil prices mean for your income investments. – Inflation wasn’t a worry last month… and it’s even less of a worry this month. This is great for you as an income investor. It means some of world’s biggest, safest yields are still available to you, if you buy now.
Morningstar: – Is your short-term bond fund more risky than you thought? – Investors might be surprised by the low-quality profiles of some sizable funds.
Forbes: – Glory to the new bond king. – Bill Gross’ spectacular fall from the top of the bond market has put tens of billions in play at a time when minuscule yields demand a fixed-income superstar. A brilliant, battle-scarred billionaire, Jeffrey Gundlach, stands ready to be coronated.
Investorplace: – 3 best high-yield REITs to own today. – Now that the threat of higher interest rates is off the table, a number of dividend stocks are rebounding nicely — particularly the real estate investment trusts.
What Investment: – The three warning signs your bond fund is taking on too much risk. – Stephen Rodger, head of credit investments at Baillie Gifford, has argued that some bond funds are putting their investors at undue risk by hunting for higher yields. Rodger said there were three warning signs that investors should be concerned about.
WSJ: – Pimco sees $48 billion in outflows after Gross departure. – Investors pulled a net $48 billion from Pacific Investment Management Co.’s mutual funds in October following the departure of star manager Bill Gross, the fund research firm Morningstar said Wednesday.
Gundlach on PIMCO: “I don’t buy for a second that they will all work together and with no conflict.”
— David Schawel (@DavidSchawel) November 5, 2014
It’s funny that bonds are all either “investment grade” or “junk.” Shouldn’t there be an intermediate term? “So-so bonds”?
— Josh Barro (@jbarro) November 4, 2014
Covered Bonds Fall Short in Pimco’s Prophesy for QE,BNP see ECB buying €400bln of Sovereign Bonds before year end
— Steve Collins (@TradeDesk_Steve) November 5, 2014
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