Nowhere to Hide…Bond Mutual Funds vs. Bond ETFs…BOND Hemorrhaging Continues…and more!

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MoneyBeat:  – Investors can run, but they can’t hide. – People looking for safe, simple investments generating regular income are facing an ugly reality: There aren’t any. Investors can run, but they can’t hide.

IndexUniverse: – Bond mutual funds: Worse than bond ETFs. – There’s been a lot of talk recently about the fact that bond ETFs can trade to large discounts during periods of market distress. All the stories beg a deeper, more detailed discussion.

IndexUniverse: – PIMCO’s BOND Asset-losing streak continues apace. – The Pimco Total Return ETF (NYSEArca: BOND) has continued to see steady net asset outflows since the fund broke its impressive asset-gathering streak with its first monthly redemptions ever in May.

Learn Bonds: – Why are Lending Club yields starting to head down? – Lending Club is the leader in the peer-to-peer lending space, where individual borrowers can ask “strangers” to fund loans. Ironically, there are plenty of “strangers” willing to lend money. Lending Club is having trouble with with getting more borrowers.

CFO: – Corporate bond selloff may be overblown. – Institutional investor appetite for corporate credit will bounce back, says one asset manager, leading spreads to tighten some once again.

Barron’s: – Default rate in U.S. falls to 2.9% in second quarter – Moody’s. – While their bond funds were getting battered by interest-rate riskin the second quarter, at least investors didn’t need to worry much about credit risk, as junk-rated companies continued to default at a rate well below historical averages. Moody’s Investors Service reports today that the U.S. speculative-grade default rate slipped to 2.9% in the second quarter from 3.0% in the first and 3.3% a year ago.

The Atlantic: – A reminder to all investors: Bonds are not safe. – The June upheaval in the bond market shows what we should have known all along: There is no such thing as safety.

Washington Post: – Changing tax exemption for municipal bonds faces stiff opposition. – Federal policymakers looking for ways to raise revenue while reforming policies that they see as subsidizing the affluent are eyeing proposals to limit the tax exemption for interest paid by municipal bonds.

Trustnet: – Why giant bond funds are in the firing line. – Jeff Keen of the Waverton Global Bond fund says that even he is having trouble trading in the fixed income markets, and his portfolio is only $104m in size.

FT: – Dilemmas for long-term investors. – Long-term investors are wary of bonds and equities as forecasts show low returns over the next few decades. Long’s John Authers talks to Jim McCaughan, CEO of Principal Global investors, about how pension funds are placing money in new asset classes.

Cate Long: – Who is earning tax-exempt interest from muni bonds? – 55 million taxpayers claimed taxable interest and 28 million claimed ordinary dividends, compared to the nearly 6 million that claimed tax-exempt interest. My question is, if the municipal bond exemption were capped, would increased yields attract any of the 55 million taxpayers who earn taxable interest? Or is the universe of municipal investors already capped at its current size?

FundWeb: – Hopes are high for bond yields. – M&G’s Stefan Isaacs believes the healthy correction in bonds has removed the froth and brought back pricing in line with economic fundamentals, with value re-emerging.

Reuters: – Bonds are not safe. – The old stock market cliché “sell in May, and go away” had so far proved untrue this year. Instead, it is the bond market — so often perceived as steady, low risk and dependable — that has bitten investors.

Bloomberg: – U.S. junk-bond covenant quality rises to 2013 high, Moody’s says. – The strength of U.S. speculative-grade bond covenants written into the terms of debt agreements to protect investors rose in June to a six-month high, according to Moody’s Investors Service.

Investment News: – Vanguard sees first net outflows in 20 years. – Investors pulled $9.7 billion out of Vanguard bond funds last month, according to spokeswoman Katie Henderson, which just outpaced the $9.6 billion that went into stock and money market funds, leaving the company with $100 million in withdrawals. It is the first month of net withdrawals for Vanguard since December 1994.


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Simon G

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