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MuniNetGuide: – The real risk in munis. – State finances overall are benefiting from rebounding revenues and pension and OPEB funding issues are being addressed at statehouses around the country. The record-setting stock market has also restored asset values in many of these pension plans, thus providing some short-term funding pressure relief. Unfortunately, even as credit concerns abate for the current economic cycle, there are still more potential ways to lose money in munis than from actual default.
Reuters: – Low default rate, growing risk receptivity. – The trailing 12-month U.S. high yield default rate remains modest – 1.8% through April – extending a three-year run at well below the long-term average annual rate of 4.6%, according to a new Fitch Ratings report. But history shows that the default rate can remain low even as credit quality deteriorates.
Reuters: – Moody’s says Puerto Rico road bonds may be downgraded. – Moody’s Investors Service said on Wednesday it may reduce its A2 rating on $86.1 million worth of Puerto Rico Highways Authority GARVEE bonds because the Caribbean island tapped a reserve fund to pay debt service on the securities.
Learn Bonds: – The US bond market may be much different than you think it is. – The U.S. bond market may be much different than you think it is. When you get your information piecemeal, and you never consume a good overview, things tend to seem much different than they actually are. Specifically, in this article, I will focus on amounts outstanding by debt type, versus trading volumes by debt type, debt holders by debt type, and other aspects.
David Merkel: – Look at the rate of change in risky interest rates for the future prospects of stock and bond markets. – Investors should look out for a sustained rise in in high-yield bond yields. When yields cross their 10-month moving average, it is time to be gone from risk assets.
Quartz: – Aloca falls prey to commodities downturn. – Moody’s Ratings agency cut its rating on bonds issued by Alcoa from Baa3 to Ba1 today, which qualifies the company’s debt as “junk” in the fixed income world. One of the world’s largest aluminum producers, Alcoa has been plagued by falling aluminum prices and sluggish demand for building materials.
Business Insider: – Why the US treasury market has been getting smashed. – U.S. Treasury bonds are the biggest safe-haven investment on the globe. Treasuries are how the U.S. borrows money, and since the U.S. has its own currency, the prospect of a default on those bonds is viewed as a virtual impossibility.
US News: – When to use I-bonds for your retirement savings. – I bonds are inflation-protected savings bonds issued by the U.S. government. This option is one of the safest ways to invest because it is guaranteed by the U.S. government to never lose value. Here’s why many people use I bonds to supplement their retirement savings.
Evariste Lefeuvre: – It’s time to listen to the junk bond market again. – How many times will the high yield bond market send early signals without being heard? This chart shows the monthly returns of both the S&P 500 and the US high yield credit market. If history has been a guide, US stocks should have fallen by 2% over the last month. Should we ignore the message sent by the high yield credit market again?
Anthony Valeri: – Economic data and Treasury yields have disconnected. – Tapering fears have recently caused a disconnect between yields and data.
TheStreet: – Buffett’s flawed advice on bonds. – Among the folksy guidance at the Berkshire Hathaway Annual Carnival, er, Meeting, earlier this month was Warren Buffett’s proclamation that bonds “are terrible investments now.” With apologies to oracles everywhere, I personally believe that’s a reckless declaration for someone who holds such public sway.
WSJ: – Mortgage bonds rest in bed. – A weeklong selling spree in the mortgage-bond market got a reprieve Wednesday, but only after prices fell to their lowest levels in more than a year as investors grappled with rising interest rates.
CFO: – A Junk-bond bubble? – U.S. businesses with the most cash are holding more than $425 billion overseas as they tap the bond market to help sidestep a corporate tax rate that Apple’s Tim Cook says handicaps American competitiveness.
What Investment: – Apple bonds, don’t forget the company almost went bust. – An analyst has expressed scepticism over the enthusiasm for Apple’s bonds, after the tech giant tempted investors to hand it more than $17 billion last month.
Reuters: – High yield deals seen going forward, but outflow risks may rise with rates. – As Treasuries sold off in recent days, the higher quality segment of the high-yield market has taken a hit, but bankers indicate that most borrowers won’t let this affect their plans to come to market.
Indexuniverse: – State Street launches, TIPS payout ETFs. – State Street Global Advisors launched two ETFs that cater to very different investor needs—one of them a short-dated TIPS fund that looks to offer protection against inflation, and the other a global dividend ETF that sets out to find high-yielding companies worldwide.
Reuters: – Preparing clients for looming bond risk. – Brokers who fail to warn their clients about the risks of bond investing may find themselves facing regulatory ire and legal actions in the future, compliance experts say.
Investors.com: – Obama plan to tax muni bonds would destroy state, city finances. – Buried in the Obama administration’s budget is a proposal that would destroy state and municipal finances. Overturning a provision that has been central to the Revenue Code since 1913, it would impose for the first time a federal tax on municipal bond income. The result would be irreparable harm to the market for tax-exempt bonds and higher taxes for everyone.
Barron’s: High grade corporate bond returns now negative for 2013. – the year-to-date average investment-grade corporate bond return turned negative (-0.08%) after reaching as high as +2.10% early this month, according to Bank of America Merrill Lynch, which says the selloff “highlights just how data-sensitive our markets have become following the Fed’s discussions last week about the potential for tapering.
Barron’s: – Junk bonds having a bad week (down 0.96%) amid broader pullback. – Maybe 5 is the new 7. Used to be that the junk-bond market reliably backed up whenever average yields fell below 7%. That all seems like ages ago now, with the high-yield market’s average yield falling below 6% for the first time ever in January and then below 5% earlier this month.
WSJ: – Morgan Stanley downsizes fixed income unit. – Morgan Stanley has told investors that its underperforming fixed-income unit will have to be a lot smaller than rivals’ businesses in order to earn decent profits.
Two in a row! Good demand at today's 7yr auction helping to reverse Trsy declines. Focus now shifts to next week's employment report.
— AnthonyValeri (@Anthony_Valeri) May 30, 2013
Janney: 10-year MMD AAA yield rose 8 basis points to 2.07% for a combined 17 basis point increase in two sessions #muniland yields rising!
— Cate Long (@cate_long) May 30, 2013