Top 14 Bond Market Stories for May 2nd, 2012

Random Roger: How to Minimize Fixed Income Portfolio Risk  – An Explanation of spreading things across many different segments of the bond market as a way to reduce certain types of risks. Risk can’t be eliminated of course but the potential impact can be minimized somewhat.

The Financial Lexicon: My Most Recent Fixed Income Purchases – Looks like he likes energy: Peabody Energy, Chesapeake Energy, CONSOL Energy, Ball Corp., and Bank of America. He also says: …it should be noted that my corporate bond portfolio currently consists of 39 different companies and more than 39 different CUSIPs. Only 10 of those companies have at least one non-investment grade rating.

MarketSci Blog: EconomPic’s Seasonality StrategyThis is a test of EconomPic’s seasonality strategy, a variation on “sell in May and go away”: go long the S&P 500 the 6 months from November through April, otherwise go long government/investment grade bonds.

Fidelity: High Yield Lives up to Its Name – Few intersting points from the article:

  • the benchmark index for high-yield bonds still runs in the mid-6% range and the mid-5% range for higher-quality BB-rated bonds.
  • Recently the default rate was 2.8% for all high-yield bonds in the U.S., and near zero for BB-rated bonds—well below the historical average.
  • When interest rates move higher, bond prices tend to fall. In high-yield bonds, though, the wide spread with government issues may act as a cushion.

Hannah Arendt Center: Pension Crisis Primer (h/t Cate Long) –  According to government numbers, the shortfall is $800 billion…. many private economists estimate the shortfall at around $4 Trillion. Big difference is different assumptions made on returns on investment between the two groups.

Fidelity: 100 Year Bonds on the Horizon? – Great chart in this article comparing the maturity profiles of different major economies debt.  US is listed at 5 years which is the lowest of the group compared to the UK which was the highest at 14.7 years.

Fox Business: Chesapeake Bonds TumbleThe price of its 9.5% coupon bonds due 2015 dropped $2.94 per $100 of face-value to $106.375. Before the story of McClendon’s (Co Founder and CEO)  financial dealings broke on April 18, the bonds traded at $113.500.

Index Universe: PIMCO’s BOND Makes Top 10 ETF’s List for April Inflows Bill Gross’ Pimco Total Return ETF (NYSEArca: BOND) was the 10th-most-popular ETF last month…While net flows in April, led by bond funds, were positive to the tune of $3.37 billion, weaker stock prices helped pull total U.S-listed ETF assets down 1 percent to $1.198 trillion.

Bond Buyer: Data Shows Changes in Muni Buying PatternsWhile individual investors — the primary owners of municipal debt — have generally increased their holdings in the last 10 years, some institutional investors have trimmed their holdings and others have been aggressive buyers.

@RochesterFunds Tweets: Illinois successfully issued its largest ever tax-exempt issue Tuesday, $1.8 billion of GO refunding bonds. In fact, it was oversubscribed.

WSJ: Bond Market is Creating a New Galaxy for Trading The result {of new regulations} has been a collapse in the amount of bonds held in Wall Street’s cellars. Dealers’ inventories of corporate bonds nearly halved in the past 12 months, according to Tabb Group, to around $47 billion, their lowest level in a decade and some 22% below the crisis-time nadir. Trading costs have spiked as a result and the lure of juicy revenues and the need to replenish lost liquidity is prompting other players to try to fill the void.

The Nest: 5 Reasons to Stay in Municipal Bonds – 1. Tax Advantages, 2. Lower Default Risk, 3. Stability, 4. Diversification, 5. Flexibility.  

Peter Tchir: May Fixed Income Allocation Breakdown – They give a breakdown of their thinking on each of the following allocations in the article:
Treasuries 0%, TIPS 5-10%, T Bills 35 to 40%, High Yield Bonds 15%, Leveraged Loans 15%, Investment Grade 0%, US Financials 5%, Munis 10%, Emerging Markets 5%, Other Sovereign Debt 0%, RMBS/CMBS 5%.

WSJ: New Bond Issues Find a Home as Risk RalliesCorporate-bond deals are coming out of the woodwork to take advantage of investor demand and borrow at rates that are again near all-time lows. At least $3.125 billion of high-grade debt found a home Tuesday, starting May off on the right foot after a mostly-quiet April.

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David Waring

David Waring was the founder of LearnBonds.com and has been a major contributor to the extensive library of investing news and information available on the site. Until the launch of Learnbonds.com in late 2011 there was no single site on the internet catering exclusively to the individual bond investor. This was true even though more individuals own stocks than bonds. Learn Bonds was launched to fill that gap.

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