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Not All Bonds Are Bad…Reaping Wisdom on Junk…Has Junk Topped Out… and more!

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CNBC: – Bearish like Buffett? Some bonds may still be king. – Several renowned investors may have made the case to be more bearish on bonds recently, but one analyst has told CNBC that investors should not shun bonds because they still offer a good insurance policy.

WSJ: – Reaping wisdom on ‘junk’. – In 1977, a band of Los Angeles-based traders led by Michael Milken helped Texas International, an oil company, raise the first “junk” bond. The small issue—$30 million—opened a chapter in the history of finance. From then on, companies with less-than-pristine balance sheets were able to tap capital markets, while investors had the option of betting on securities with higher risks, and potentially higher returns, than traditional corporate bonds. Last week, one of those traders, Leon Black, returned to L.A. and surveyed the landscape 36 years on.

Investing.com: – Is this the top for equities and junk bonds? – Could today finally be the top in US equities and junk bonds? The following charts show that they are both at trendline resistance after terminal patterns, and the British Pound appears to have entered wave 3 of a downward thrust from a four-year triangle vs. the US dollar.

Learn Bonds: – How dangerous are U.S. Treasury notes and bonds? – A lot has been written and said about how much money U.S. Treasury note and bond investors will lose when interest rates rise in the years to come, as they are expected but not guaranteed to do. However, I have yet to see or hear anything about the risk involved in waiting to exit a Treasuries position or speculating on Treasuries to increase in value in the short-term. On Friday (5/3/13), the yields for the 5-year note, the 10-year note, and the 30-year bond increased by 8.3, 12.1, and 13.8 basis points respectively. This was a very small taste of the risk involved.

Investment News: – Whitney still sticks in muni bonds’ craw. – The municipal bond market continues to view outspoken analyst Meredith Whitney as an unwelcome guest at a private party. As much as the industry would like to see her focus her attention and sensational comments elsewhere, she refuses to leave the muni market alone.

WSJ: – Muni bonds deserve a tax break. –  State and local governments are crucial for achieving the president Obama’s goals to attract private investment in partnership with government for upgrading the nation’s infrastructure. . Three-quarters of all U.S. public infrastructure projects are built by state and local governments, and tax-exempt municipal bonds are the primary means to finance them. Unfortunately, the president’s budget includes a provision to limit the tax-exempt status of these bonds.

Reuters: – Moody’s: muni defaults have increased since financial crisis. – Moody’s Investor Service said on Tuesday that the number of municipal bond defaults have increased since the financial crisis but it added that defaults remain few in number.

Bloomberg: – Florida bonds prone to default proving most-wanted. – Bonds sold to finance Florida housing developments are being issued at the fastest rate in six years as investors seek extra yield from the municipal debt even as 85 percent of such securities have defaulted since 2008.

ETF Trends: – Junk bond ETFs still cruising as yields plumb fresh all-time lows. – Junk bond ETFs such as iShares iBoxx $High Yield Corporate Bond and SPDR Barclays High Yield Bond continue to ramp higher with the market’s average yield threatening to fall below 5% for the first time ever.

Business Record: – What’s ahead for the bond market? – Jim McCaughan, CEO of Principal Global Investors, said in an interview Friday with Bloomberg that Treasury investments are “vulnerable in a longer-term view, maybe one year out,” noting that 10-year Treasury bonds are currently at 1.7 percent. “I would say on my most-likely economic scenario that they’re headed for maybe as high as 3 percent on a two-year view,” McCaughan said. “That doesn’t sound like a lot, but it is a lot. That for a 10-year portfolio is something approaching a 15 percent drawdown, at a time when equities are doing quite well.”

About.com: – April 2013 and year-to-date bond market returns. – The financial markets have a way of confounding the consensus expectation, and that proved to be the case again during April. A weak first quarter for the bond market seemed to confirm the prevailing sentiment that bonds were due for a subpar year in 2013. Bond prices turned sharply higher in April, however, bringing the year-to-date returns of most sectors into positive territory.

MuniNet Guide: – The Oracle dumps on bonds … and other cautionary tales. – In the wake of strong employment data, long Treasuries have gravitated back to their natural habitat, around the 3.00% level. The bond bears came out of hiding again, including one Warren Buffett, the “Oracle of Omaha”. Mr. Buffett declared bonds a poor investment on CNBC, artificially propped up as they are by the Fed’s quantitative easing efforts.

Barron’s: – BlackRock still bullish on junk bonds. – Junk bonds keep pushing deeper into uncharted bull and/or bubble territory, but BlackRock still sees much to like. BlackRock is out with a notably upbeat note on the high-yield market today, saying the low absolute yields and high prices of high yield bonds are mostly the result of record-low interest rates, and that on a relative basis high yield is very attractive versus Treasuries, particularly given low expected default rates.

Reuters: – Investors raised U.S. bond bets after payrolls data. – More investors increased their US Treasuries holdings in the latest week as they bought cheaper bonds following Friday’s market sell-off due to stronger-than-expected data on U.S. payrolls in April, according to a survey released on Tuesday.

Investors Chronicle: – Apple’s bond of bonds. – No one could ever accuse Apple of doing anything by halves. Rather in the spirit of its notoriously hyperbolic product launches, the ubiquitous technology company managed to get away with the largest single bond issue in corporate history – a cool $17bn (£11bn) – in order to fund a $60bn share buyback. The immediate response from many analysts, after a low, impressed-sounding whistle, was “shame it isn’t a new iPhone”. More seriously, the question of whether such a bond is worth holding is not quite as straightforward as Apple’s premium AA+ credit rating suggests.

Ploutos: – Equity/Fixed income momentum – May 2013. – This article discusses the historic return profile of momentum strategies between fixed income and equity classes, and gives an overview of the reasons behind last month’s relative performance and a look forward to relative returns in May.

Indexuniverse: – Arrow plans high-yield bond ETFs. – Arrow Investments this week put into registration with regulators a high-yield bond fund that would follow on the budding success the firm has had with its Arrow Dow Jones Global Yield ETF (NYSEArca: GYLD). The proposed Arrow Global Enhanced High Yield Bond ETF will track the Global Enhanced HY Bond Issuers Index, and comprise below-investment-grade global corporate debt denominated in either U.S. dollars, euros, Canadian dollars or British pounds.

Business Insider: – Meredith Whitney actually thinks much of the muni bond market is safe for investors. – Meredith Whitney has softened her tone regarding muni bonds. The analyst who famously predicted disaster for the entire market on national TV now she says that new governors have been elected and states have begun reforming.

https://twitter.com/PIMCO/status/331770316231680003

https://twitter.com/PIMCO/status/331517009701519360

https://twitter.com/Fixedology/status/331836230268493825

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