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This Week’s Top Bond Market Stories – August 31st Edition

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Learn Bonds: Would I rather buy a home or own $50,000 of bonds? – Learn Bonds Marc Prosser looks at the value of owning your own home as an investment and whether the housing market recovery be derailed by rising interest rates?

Learn Bonds: The new “new normal” and what it means for investors. – David Waring looks at the “new normal” what is it and how should you position your portfolio for it?

Learn Bonds: The Fed is not responsible for maintaining or increasing the value of your assets! – Yes, it is true that it can be prudent not to bet against the Fed. However, the operative word here is “bet.” Bet equals speculation. Speculation means that you are hoping to buy low and sell high or short-sell high and cover buy low. Anyone who invests in an asset or assets with values being boosted by Fed policies and convinces themselves that Fed policy will always come to their rescue deserves what they get when the Fed acts for the greater good of the economy and financial system in a manner which is not beneficial for your investments.

Learn Bonds: – Providing perspective on your bond “losses”. – There never seems to be a shortage of investment professionals willing to remind you how much money you will lose if bond yields rise. When combining the constant chorus of professionals telling everyday investors to sell bonds and buy stocks with the recent unrealized mark-to-market changes in your bond portfolio, you may be feeling a bit unsettled. Extreme volatility in financial markets has the tendency to cause people to second guess prior decisions they’ve made. For those individual bond investors feeling a bit uneasy due to the recent unrealized mark-to-market declines in their bond portfolios, consider asking yourself the following questions.

Learn Bonds: – Realty Income – Capture yield without buying the common stock. – During the recent rise in interest rates, the negative price performance of bonds and the common stocks of mortgage REITs and equity REITs has received a lot of attention. What’s received less attention, however, is the selloff that’s occurred in many preferred stocks.

FT: – Five tips for bond investors. – Bond investors have been hit by increased volatility in the sector since May when the US Federal Reserve announced plans to reduce its bond purchases. Since then investment grade bonds have been overshadowed by interest rate movements, currency fluctuations and the eroding effect of inflation.

Trustnet: – Making sense of the bond bubble: A beginner’s guide. – FE Trustnet looks at the reasons why fixed income is in such a state of flux at the moment and what investors can do to protect themselves from further strife.

The Street: – High yield bonds could be infected by emerging market miseries. – Junk bond funds have been one of the few fixed income instruments to remain in the black so far this year, but those meagre gains may be at risk. Continued defaults by emerging market (EM) issuers may impact the U.S. high yield market, according to Fitch Ratings.

Bernardi Securities: – Outperforming the madness of municipal bond fund herds. –  As we have learned over the last decade, only hindsight is 20/20 when it comes to pinpointing irrational valuations. The avoidance of herd-like situations is precisely why separately managed municipal bond portfolios offer an advantage to bond mutual funds or ETFs.

IndexUniverse: – The ‘new normal,’ and its consequential morphing. – In four quick years, the concept of the “new normal” has gone from being viewed as unlikely by most analysts and policymakers to becoming consensus. The popular application of the phrase now extends well beyond its original conceptualization that simply encompassed economic and financial prospects. It has also been used to describe medical procedures, unusual weather patterns and geopolitical shifts. It even gave rise to a television series.

Reuters: – P2P lending pulls in big investors – should you bite? –  Less than a decade ago, peer-to-peer lending came to the United States as an upstart enterprise – a service that would in a very personal way link would-be borrowers with individual lenders and bypass the banking industry.

Anthony Valeri – LPL Financial: – Just how bad was the bond market sell-off? – A look at how the current bond market sell-off compared to others of the past 20-years.

Abnormal Returns: – Words have consequences: bond edition. –  Tadas Viskanta on the need to be a more savvy consumer of financial media.

Benzinga: – Nifty new bond ETF has low duration, high yield. – These are trying times for bond bulls. Even when accounting for Tuesday’s nearly three percent slide, 10-year Treasury yields have surged 28.4 percent in the past 90 days. That means tens of billions in destroyed capital in bonds and scores of bond funds. Some investors are not waiting around for the carnage to get any worse.

FT: – Low corporate debt sales just a summer lull. – The US Federal Reserve has sent a shudder through the global corporate bond market. As yields on US Treasuries have risen ahead of a planned slowdown in Fed asset purchases, or “quantitative easing”, companies’ debt issuance has recently slowed significantly.

Reuters: – Don’t shun U.S. bonds, even in a dismal market. – The U.S. bond market is on track to suffer its worst year since 1981, but don’t go overboard in dumping bonds, experts say.

Morningstar: – How tapering will affect bonds. – Corporate bonds will struggle over the next month as investors attempt to anticipate the timing of the Federal Reserve tapering QE.

Morningstar: – Are rising rates a reason to shun all bond funds? – With all the talk of rising interest rates, bond bubbles, and a great rotation into stocks, investors may think it’s time to jump ship on all bond funds. However, various sectors of the bond market react differently during periods of rising rates. What’s more, while history can be a guide, the economic environment as rates rise is always unique.

FT: – Global corporate bond issuance at lowest level in five years. – Global corporate bond issuance has this month fallen to the lowest level in five years as market turmoil triggered by rising US Treasury yields persuades companies worldwide to shelve funding plans.

Income Investing: – Puerto Rico Munis: Tempting yields, troubling finances. – There’s a debt spiral in Puerto Rico that will not turn out well unless there is a dramatic turnaround in the economy,” says Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management in Minneapolis.

Bloomberg: – Investors dump Emerging Market bond funds. – Bloomberg’s Manus Cranny discusses emerging market bonds and the impact of Fed tapering talk.

 

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