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FT: – Fed likely to signal tapering move is close. – Ben Bernanke is likely to signal that the U.S. Federal Reserve is close to tapering down its $85bn-a-month in asset purchases when he holds a press conference on Wednesday, but balance that by saying subsequent moves depend on what happens to the economy.
FT: – Markets Insight: QE addiction may be hard to kick. – Financial markets are focusing on the potential exit from the expansionary fiscal and monetary measures, low or zero interest rates and quantitative easing that policy makers have relied on to engineer a recovery. The difficulty of an exit is complicated by the size of the intervention as well as the fact that economic activity and financial markets are heavily reliant on these support measures.
Independent: – There’s still life in the bond market. – It’s been a 30-year party for bond investors, but there are fears the hangover is about to kick in. Even bond fund managers admit that perhaps it’s time for investors to grab their coats.
Learn Bonds: – 12 bonds with attractive yields and maturities. – Financial Lexicon goes in search of individual corporate bonds that meet the following criteria: triple-B to double-B ratings, less than 10 years to maturity, trading below par, and having what I view as enticing yields and moderate credit risk.
FT: – What the bond market is telling the Fed. – The Fed is unlikely to have been particularly troubled by the bout of market volatility seen lately. Much of it has come in foreign markets, which are not the Fed’s responsibility. Meanwhile, in the US itself, the reversal of the “reach for yield” is precisely what the Fed has been wanting to see for several months.
MarketWatch: – Was that the bottom in bonds? – With big up and down swings which have been uncharacteristic of honey-badger stock-market movement this year. Clearly the Fed has grown worried that its “confuse and conquer” strategy is creating unintended ripple effects across the globe.
Your Wealth Effect: – 5 findings in the bond market active vs passive debate. – Some people become enamored with a manager or style (active vs. passive) and choose to keep their money invested in that style/manager year after year regardless of comparable results. Others choose to revisit their decisions on a regular basis. This is where the debate usually starts about how best to invest. I’ve read plenty of articles about which is a better way to invest in the stock market, passive vs. active, but I haven’t come across analysis about the bond market so I ran the reports myself.
UT San Diego: – As interest rates rise, are bonds still safe? – The first rule of investing is, “don’t lose money.” This basic imperative is sometimes overlooked in the clamor for earnings among small investors who are counting on gains to fund their retirements. Traditionally, financial advisers have pushed clients to keep some portion of their savings in bond funds, where outright losses from defaults have been relatively rare, and three decades of falling interest rates have delivered healthy returns.
Michael Allen: – Warning: Bond bears might be from the twilight zone. – There is a lot of loose talk about a bond market bubble that is based on Twilight Zone thinking, but a more extensive study of historical relationships reveals four important facts that bond bears may not have noticed.
Bond Buyer: – Detroit default shines a light on bond insurers. – Detroit’s threat to default on up to $2 billion of bond debt will shine a light on a beleaguered sector of the municipal market — monoline bond insurers that wrap nearly all the city’s bonds.
ETF Trends: – Muni bond ETFs: For what it’s worth. – We seem to have reached a tipping point where investors and traders are intent upon stealing the Fed’s thunder and have begun to drive interest rates higher on their own. In my view, bearish talk and sentiment have led to the selling of mutual fund shares, which has led to the selling of cash bonds, pushing prices lower and yields higher.
FT Adviser: – Yield wars: Bonds vs equities. – The dividend yields on many dividend paying companies within the FTSE 100 currently yield more than that company’s respective current bond, fuelling the switch from bonds to equities among investors. But is this the right move?
FT Adviser: – Is it time to turn to ‘strategic’ bond funds? – Managers argue strategic funds are really about outsourcing asset allocation – and warn against generalising sector.
Trustnet: – Why you can’t afford to turn your back on bonds. – Jenna Voigt looks at whether there is any point retaining an exposure to fixed income in the current low-yield environment.
Bloomberg: – Detroit recovery plan threatens muni-market underpinnings. – Emergency Manager Kevyn Orr’s plan to suspend payments on $2 billion of Detroit’s debt threatens a basic tenet of the $3.7 trillion municipal market: that states and cities will raise taxes as high as needed to avoid default.
Bloomberg: – Burlington’s quest for fast internet slows credit rating. – Burlington, Vermont’s most-populous city, is on the verge of losing its investment-grade bond ranking with a municipally backed project to bring high-speed Internet service siphoning taxpayers’ funds and prompting a property-tax increase.
Reuters: – Banks eye sovereign bond reductions. – European governments look set to lose the backing of their biggest group of creditors, with some of the region’s banks likely to trim the EUR 1.72trn they own in low-yielding government debt in coming quarters, in a bid to boost profitability.
Frances Aylor: – Bonds: Getting kicked off the playground. – Most financial advisors have typically recommended that investors allocate a certain percentage of their portfolio to bonds. Depending on your age, risk tolerance, and income needs, that percentage may range from 25% to 40% or even higher. Historically, bonds have not only supplied steady income to a portfolio, but have also reduced overall risk levels. Those recommendations are now changing. Many advisors are suggesting limiting exposure to bonds, especially longer term ones, and some are advocating getting out of bonds altogether. Why the change in opinion?
Gundlach loading up on long duration call protected MBS pools in May, actions back up his stated beliefs on rates
— David Schawel (@DavidSchawel) June 17, 2013