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This Week’s Top Bond Market Stories – August 3rd Edition

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Learn Bonds: – Bond fund ladders: Using them to prepare for higher interest rates. – If you’ve spent any time studying the bond market you’ve likely heard of bond ladders. If not the concept is pretty simple. You buy individual bonds with maturity dates that are spaced out over a number of years. When the bonds with the shortest maturities mature, you roll them over into the longest maturity you have chosen for your ladder. Here’s how to create a well diversified bond ladder using mutual bond funds.

Learn Bonds: – HHMI: Top yielding Aaa rated 10-year bonds. – Charles Margolis takes a closer look at Howard Hughes Medical Institute’s new $1.2B 10-year taxable corporate bonds dated July 22.

Learn Bonds: – 10 intermediate-term bonds yielding over 4%. – Financial Lexicon focuses on a list of 10 intermediate-term corporate bonds with yields-to-worst and current yields of at least 4%, maturities of less than 10 years, credit ratings no lower than Ba3/BB-, and prices under 100 cents-on-the-dollar.

Learn Bonds: – Some thoughts on timing your corporate bond purchases. – Timing your corporate bond purchases correctly is crucial if you want to avoid getting hit by the Fed rate hike cycle.

Reuters: – Pimco Total Return fund suffers $7.5 bln outflow in July. – Bill Gross’s Pimco Total Return Fund, the world’s largest mutual fund, suffered an outflow of $7.5 billion in July after investors pulled a record sum from the fund in June, data from Morningstar showed on Friday.

MuniNetGuide: – Puerto Rico to test post-Detroit muni market. – the Commonwealth of Puerto Rico will be returning to the market for the first time this year with what is generally perceived as its strongest credit, the Puerto Rico Electric Power Authority (PREPA). Next week’s $600 million PREPA deal will also be the first major issue since the Padilla Administration took over and should be a good test of investor tolerance for marginal credits in the wake of the Detroit fiasco.

Financial News: – Bond slump saddles big banks. – The recent market turmoil exposed a new weakness in the balance sheets of large banks: they hold so many bonds that they can’t avoid trouble when interest rates rise.

Forbes: – Are bonds too risky for your portfolio? – With interest rates on the rise, we’ve recently been getting a lot of questions as to whether it really makes sense to invest in bonds right now. A lot of experts are even talking about a bond bubble. After all, bonds lose value when interest rates go up and even if interest rates stay level, you’re essentially locking yourself into a pretty low rate of return for the duration of the bond.

Money News: – Financial Advisers: Stick to investment-grade corporate bonds over junk bonds. – Money is flowing back into high-yield bond mutual funds and exchange-traded funds (ETFs) this month after a selloff in June. But financial advisers tell The Wall Street Journal that investors would be better off sticking with the safety of investment-grade corporate bonds.

Times Dispatch: – Detroit may help — and not hurt — muni-bond investors. – Money has been marching steadily out of municipal bond funds for about two months now, but with the recent news of Detroit’s bankruptcy claim, a lot of individual investors have wondered whether they should join the parade.

Bloomberg: – Stocks beat bonds by most since January. – Global stocks rose in July, beating bonds and the dollar by the most since at least January, while commodities had the best returns in 11 months as corporate profits topped analysts’ estimates and investors reversed bets on when the Federal Reserve will reduce stimulus.

MoneyBeat: – Why aren’t stocks and bonds moving in opposite directions? – It was once one of the basics of building a portfolio: Stocks and bonds tend to move in the opposite direction. But that relationship has broken down in recent months.

MoneyBeat: – Bill Gross bounces back after spring swoon. – Bond king Bill Gross’s fund bounced back this month following the debt markets’ spring swoon.

Indexuniverse: – Why you should buy munis now. – David Kotok, chief investment officer of Cumberland Advisors, is looking right past the Detroit bankruptcy and Meredith Whitney’s warning about the dangers of municipal bonds and sees tremendous opportunities in the muni market. With total assets under management of more than $2 billion, the firm casts a long shadow.

Barron’s: – Muni market poised for ‘extended period of outperformance’. – BMO Capital Markets today looks at the state of the municipal bond market more than three months into its slump, and decides it’s high time for a recovery already. From BMO’s Justin Hoogendoorn and Brett Adlard.

MoneyBeat: – Investors remain wary of emerging-market bonds. – Investors mostly stayed away from emerging-market debt in July, despite a modest recovery for the assets during the month.

The Inflation Trader: – Is a bond rally due? – As we head into a very busy week of economic data, the bond market remains drippy with the 10-year yield up to 2.59%. But my message today is actually one of good cheer. The worst of the bond sell-off was now more than three weeks ago, without a further low being established. In my experience, convexity-inspired sell-offs typically end not with a sharp rebound, but with a sideways trade as “trapped” long positions gradually work their way out and buyers start to nibble. But it remains a buyer’s market for several weeks, at least. We are getting far enough along in that process that I suspect we have a rally due.

Business Insider: – Hedge funds are buying up Detroit bonds so fast there’s a waiting list. – When Detroit filed for bankruptcy two weeks ago, Wall Street asked the obvious question — how can we make money off this? That didn’t take long to answer.

Bloomberg: – Junk bond fever building as high grade trails. – Investors are pumping money into junk bonds globally at the fastest pace ever while tempering their enthusiasm for higher-rated debt, demonstrating a preference for yield over stability.

ETF Trends: – Bill Gross bullish on TIPS, ETFs as Fed aims for higher inflation. – Treasury inflation protected securities, along with related exchange traded funds, languish as inflationary pressures remain muted, but bond guru Bill Gross has kept his bullish outlook.

 

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