Investors should avoid buying municipal bonds from Puerto Rico, that’s the message from the president and CEO of Lebenthal Holdings.
“Run fast away from Puerto Rico,” Alexandra Lebenthal told CNBC in a “Squawk Box” interview on Wednesday. “Puerto Rico Electric Power Authority has been the big issue that people have been focusing on for a long, long time.” The big uncertainty is whether the authority will be able to make its January payment, she said.
“One little light of hope is the price of oil going down could be helpful,” she said, “but it’s a bad situation.” CNBC has reached out to the utility, which did not immediately comment.
Earlier this year, there were concerns that tough times in Puerto Rico might destabilize the entire municipal bond market. “That has proven to be untrue,” Lebenthal said. On the flip side, she said she likes municipal bonds from states such as Virginia and Maryland.
When deciding on whether to buy muni bonds, the Lebenthal CEO said, investors should consider the tax implications. “It’s your tax bracket and it’s what state you live in,” she said, “because remember, you are going to have to pay state taxes if you own bonds in a state in which you don’t live.”
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FT: – Will FOMC changes offer bonds more succour? – US government bonds are ending the year on the back foot. Treasury yields have been rising for a week since Federal Reserve chairwoman Janet Yellen suggested that the US central bank could raise its key overnight lending rate as soon as April.
U.S. News: – Have bonds lost their safety? – The Barclays U.S. 10+ Year Corporate Bond Index has returned an average of 7.17 percent annually over the past 10 years. These returns have helped retirees earn a steady “paycheck,” with less concern about the volatile market. However, the days of putting the bulk of your money into bonds or bond funds and leaving your portfolio on autopilot are over. As the Federal Reserve begins to normalize their monetary policy, by raising rates, bond investors could lose a lot of their nest egg.
WSJ: – Bad day for bonds may be just noise. – As the Dow Jones Industrial Average was soaring to new heights Tuesday, U.S. Treasurys had their worst day in more than a year.
WSJ: – U.S. Government bonds pull back in thin trading. – U.S. Treasury bonds pulled back for a second straight session on Wednesday as investors cashed in some chips from the strong rally this year.
Market Realist: – Why Treasury yields increased. – Yields on U.S. Treasuries increased across the curve in the week ending December 19. They were mainly affected by the FOMC’s (Federal Open Market Committee) statement. The FOMC decided to be patient. The biggest increase was seen in the two-year to seven-year segment. Yields increased by double digits. The yields for the benchmark ten-year Treasury notes, or T-notes, increased by seven basis points from a week ago. It ended at 2.17%.
High Yield Bonds
WSJ: – Oil, Fed spur global bond split. – High-yield bonds in the U.S. and Europe are parting ways after years of moving virtually in lockstep.
Bloomberg: – Russia on verge of junk as S&P puts rating on negative watch. – Russia may lose its investment-grade credit rating for the first time in a decade after Standard & Poor’s said it’s considering a cut amid the country’s worst economic crisis since the 1998 debt default.
Business Insider: – Russia begins a $100 billion debt bailout as its bonds face ‘junk’ rating. – Russia has begun bailing out the debt of its private and state-run companies and banks, which is denominated in dollars, according to Reuters.
Toma Hentea: – Momentum and rebalancing of retirement income portfolios. – Robust investment portfolios can be constructed with just two ETFs: one representing the total stock market and another representing the total bond market.
Investment News: – Closed-end funds can offer opportunities, but they come with risks. – Not nearly as popular as open-end mutual funds, they provide advantages for long-term investors who can stomach some volatility.
FT Adviser: – Investors must deal with divergence: Blackrock. – Good value is increasingly difficult to find and it’s unclear how the impact of central bank actions will be felt, or indeed when those actions will be, says Blackrock’s global chief investment strategist Ewen Cameron Watt.
Reuters: – U.S. based bond funds post $9.4 bln outflows in latest week. – Investors in U.S.-based mutual funds pulled $9.4 billion out of bond funds in the week ended Dec. 17 on profit-taking following gains in bonds this year, data from the Investment Company Institute showed on Tuesday.
ETF Daily News: – Bond ETFs to generate income for your portfolio. – Though investors have been continuously shifting their exposure to the equity world in the second half of the year thanks to a steadily improving U.S. economy, the fixed income world is also in great shape as a result of global market turmoil.
ETF Daily News: – Best and worst bond ETFs of 2014. – The U.S. stock markets delivered a somewhat muted performance this year (at least when compared to 2013) with the S&P returning about 12% YTD gains. Amid such a situation, it would be interesting to note which ETFs were the leaders and laggards in the bond space during 2014.
CNBC: – 10 rookie ETFs that raked in the 2014 cash. – It’s tough to launch new ETFs and find success. That’s been the case for years, and 2014 was no exception.
Bonds starting to respond to economic data. A new paradigm?
— Ed Bradford (@Fullcarry) December 24, 2014
Macro tourists now as long the long bond as they were short in Jan. Not sure what consensus opinion is but consensus positioning is long
— Peter Tchir (@TFMkts) December 24, 2014
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