This Week’s Top Bond Market Stories – August 17th Edition

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Learn Bonds: – Bill Gross vs. Jeffrey Gundlach: 2013 edition. – 2013 has been a wild year so far for bond investors. While its easy to make money in bonds when interest rates are falling, the true test of a bond fund manager is if they are able to earn a return for their investors, when interest rates rise sharply. Let’s have a look at how two of the world’s best known bond managers, PIMCO’s Bill Gross and DoubleLine Capital’s Jeffrey Gundlach, have performed so far in 2013.

Learn Bonds: – Why high yield savings accounts are now a better deal than CDs. – If interest rates rise over the next 2 years, a savings account gives you much more flexibility to take advantage of the higher rates.

Learn Bonds: – Consider storing your money in this REIT’s preferreds. – In recent years, income-focused investors have been turning to REITs in search of decent yields. Within the REIT universe, there is plenty of attention given to the common shares of equity- and mortgage-REITs, and not enough attention given to the preferred shares. In this article, I would like to introduce you to the preferred shares of Public Storage, the world’s largest owner and operator of self-storage facilities.

Learn Bonds: – Bond Wars – Defend yourself with these 5 weapons. – In his August 2013 Investment Outlook, “Bond Wars,” Bill Gross shares with investors five “weapons” he collectively categorizes as “carry.” Carry, as Gross explained, is “another word for yield.” But, as he continued, it “often comes in forms less obvious than a fixed semi-annual interest payment.” In what other forms does carry come?

MarketWatch: – Marty Fridson says junk bonds are overvalued again. – Investors have been ferociously diving back into high-yield bonds over the past month and a half, bidding up prices to a point where they are overvalued, says Marty Fridson, a high-yield bond guru who runs the research shop FridsonVision LLC.

FT: – Fitch and Fed warn on risks from ETFs. –  Parts of the booming market for exchange traded funds risk worsening broader market sell-offs or triggering crashes, according to two studies released this week.

Vanguard: – For retirees, low yields may mean the future ain’t what it used to be. – After decades spent trying to save up enough for retirement, many new retirees face a very different concern: How much to spend? The question is especially challenging now that bonds, a traditional staple of retirement portfolios, are providing historically low levels of income. Thankfully, you may have more tools in your retirement toolbox than you thought.

Vanguard: – Bond investing in a rising interest rate environment. – Brian Scott, a senior investment analyst in Vanguard’s Investment Strategy Group, discusses concerns about the bond market and explains why Vanguard believes bonds can play a crucial diversification role in your portfolio, even in the event of a significant downturn.

Anthony Valeri: – Foreign buyer intrigue. – Foreign demand for U.S. bonds has been weak in 2013 and played a role in the recent bond market weakness.

FT: – Municipal bond insurers look to benefit from Detroit bankruptcy. – Bond insurers exposed to billions of dollars of Detroit debt expect to emerge as long-term winners from the largest municipal bankruptcy in US history.

FT Adviser: – Short-term bonds can help balance portfolios. – With bond yields at historic lows and interest rates only going one way in the future, you would be forgiven for asking why I am talking about bonds at all.

Barron’s: – JCP Bonds worth 66% of face value, with just 84 years to maturity. – Pity the investors who bought the so-called century bonds – which mature 100 years from their date of issue – that JCP sold back in 1997, when it was a robust investment-grade retailer with an eight-decade track record and seemingly steady prospects ahead. Fast-forward sixteen years, one disastrous CEO tenure by former Apple exec Ron Johnson, and this week’s board resignation of activist hedge-fund investor Bill Ackman, and JCP is in deep trouble.

Dallas Business Journal: – JCPenney century bond struggles in junk status. – More than 17 years ago, Plano-based J.C. Penney Co. Inc. issued a rare 100-year bond and the $500 million offering had Penney standing out from the elite crowd as the only retailer.

MoneyBeat: – Fund manager bets bond market will bounce back. – One of the biggest global bond fund managers, Western Asset Management Co., has become a buyer of U.S. fixed-income assets since the recent bond market rout as many investors continue to worry about rising interest rates.

Barron’s: – Closed-end fund discounts are abnormal versus history. –  In just a few months, the market for yield-rich closed-end funds has turned from persistent premiums to decent-sized discounts.

MuniNetGuide: – Odd-lot muni traders get some love. – After last week’s relatively subdued activity level, the Treasury market is gearing up once again for a slew of key economic releases this week. If the recent strength of the dollar is any indication, the market is looking for much firmer economic growth in Q3 versus what turned out to be a rather lackluster Q2.

MoneyBeat: – Pimco’s Bill Gross boosts U.S. government-related holdings in July. – The Pimco Total Return fund run by high-profile manager Bill Gross boosted U.S. government-related holdings in July to 39% from 38% a month earlier, according to data released on Pimco’s website Friday afternoon.

PIMCO: – Bill Gross – Bonds can still deliver in a rising rate environment. – Podcast from Bill Gross who explains how bonds can still deliver when rates rise.

Bond Vigilantes: – Great rotation, no signs yet. – Great rotation? No signs yet. Mutual fund flows into equities and bonds remain highly correlated.


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Simon G

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