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This Week’s Top Bond Market Stories – December 20th Edition

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Learn Bonds: – Russian economic trouble may be reaching a crescendo. – Russia is in corner right now (and not just because of sanctions). Investing in a non-diverse economy which is centrally-planned and manipulated can have significant risks. Such economies are like the little girl with the curl. When they are good they are very, very good, but when they are bad they are horrid.

Learn Bonds: – A holiday shopping list of year end tax planning tips. – While holiday shopping, travel plans, and family get together’s tend to preoccupy most peoples’ minds during December, the last month of the year is a particularly good time to pay attention to investment taxation. Here is my holiday shopping list of year end tax planning tips.

Learn Bonds: – The current term structure of interest rates. – Over the past year, a lot of attention has been paid to the decline in longer-term bonds. Today, I would like to look at what has happened to the term structure of interest rates during this period of decline.

Learn Bonds: – Bond funds are holding cash: Should investors follow suit? – The Fed is expected to increase rates in 2015 and that might result in both increased volatility in the bond markets, along with plenty of uncertainty. Managers of bond funds who are preparing for these changes now prefer to hold cash. Interestingly, it is also a trend that’s been in place since the financial crisis. The question is should you follow suit?

To see a list of high yielding CDs go here.

 

Municipal Bonds

Bernardi Securities: – Diminished or impaired – A historical perspective of Illinois pension legislation and funding. – In part two of our Illinois Public Pension Compendium we take a closer look at the State’s pension funding history over nearly a century.

Benzinga: – Don’t overlook municipal bonds. – While the U.S. Treasury trade may be getting very long in the tooth, there is another area within fixed income that may be able to hold up better when interest rates start to increase. The municipal bond market offers lower yields than corporate bonds, but carries tax advantages that potentially appeal to those in high tax brackets.

The Experts: – The case for short-term muni bonds. – Short-term municipal bonds are typically less volatile than longer-term bonds, especially during times of rising interest rates. With the end of the Federal Reserve’s quantitative easing (QE) program in 2014, investors are now nervously awaiting the first interest-rate hike. Typically, rising interest rates affect both yields and prices, but by sticking to short-term municipal bonds, the impact is not quite as dramatic as one might imagine.

ETF Trends: – Muni bonds, ETFs near cheapest level to Treasuries this year. – With volatility fueling demand for safe-haven assets, municipal bonds and related exchange traded funds are trading around their cheapest relative to Treasuries this year.

Columbia Management: – Why pay a premium for municipal bonds? – Although paying a premium for a bond at the time of the purchase may seem counter-intuitive, premium bonds can be advantageous due to the high coupon rates and lower durations they provide relative to discount bonds.

 

Bond Market

The Telegraph: – Why gloomy prophecies for bonds look to be wrong again. – That 30-year bond bull market is certainly very long in the tooth. But there’s no more reason to expect it to expire messily this year than there was 12 months ago.

FT: – U.S. bonds and shares send conflicting signals. – (Subscription) Low yields on Treasuries and a strong performance by equities cloud the economic outlook.

Pragmatic Capitalism: – Are bonds really less risky than equities? – It’s practically an investing axiom that government bonds are much less volatile than equities. But that depends on how you look at it. In fact, our research suggests that income streams from stocks are actually much less volatile than those of government bonds.

FT: – Investors bulk buy bond default insurance options. – Big investors have been buying hundreds of billions of dollars worth of exotic credit derivatives to protect themselves against the possibility that growing numbers of corporate bond issuers will default.

 

Treasury Bonds

Reuters: – Bond investor Gross of Janus Capital says TIPS look ‘great’. – Bill Gross, the closely-watched bond investor, said Monday that Treasury inflation-protected securities looked “great” and that high-yield corporate bonds were not a great bet at the moment.

CNBC: – Jim Cramer – Why the Fed should sell its bonds. – As oil floods the market faster each day, one thing that Jim Cramer thinks there is just too little of is U.S. bonds. A spoonful of U.S. bonds is just what the world needs right now.

Morningstar: – Treasury bonds post biggest one-day selloff in three months. – Treasury bonds posted the biggest one-day selloff in three months on Wednesday as comments from Federal Reserve Chairwoman Janet Yellen renewed some concerns that the central bank may raise interest rates sooner than many investors anticipate.

Morningstar: – Treasury bonds post biggest one-day selloff in three months. – Treasury bonds posted the biggest one-day selloff in three months on Wednesday as comments from Federal Reserve Chairwoman Janet Yellen renewed some concerns that the central bank may raise interest rates sooner than many investors anticipate.

 

High-Yield Bonds

ETF Trends: – Junk bond ETFs dodge sell-off in fund industry. – Investors hightailed out of speculative-grade debt this week, yanking almost $1.9 billion from junk bond funds as the rout in the energy market deepened. However, high-yield bond exchange traded fund investors seem less pessimistic.

Benzinga: – Opportunity In Junk Bond ETFs. – In the current market environment, anyone who has avoided exposure to the havoc that is the energy sector is certainly breathing a sigh of relief. Investors in the high-yield bond market that chose “fallen angels” as opposed the broader market are also feeling relieved. Fallen angels corporate bonds are bonds that were investment grade at one point, but have since fallen to below investment grade.

Bloomberg: – Junk bond investors heading for first global loss in five years. – Junk bond investors worldwide are poised to forfeit all the gains they’ve accumulated this year as a sell-off triggered by plunging oil prices pushes the debt toward its first loss since the financial crisis.

Bloomberg: – Junk-bond risk gauge extends rally on Fed rate pledge. – Investors embraced junk debt for the first time in more than a week with gains in energy prices boosting the sector as the Federal Reserve pledged to show patience with its timing of raising interest rates.

Forbes: – Looking ahead to the year that interest rates will finally rise. – Ultra low fixed income yields favor equities over fixed income. Despite today’s high valuations, the strong U.S. equity bull market continues through mid-2015.

 

Emerging Markets

Bloomberg: – Bulgarian bonds fall to lowest in month after S&P rating cut. – Bulgaria’s Eurobonds fell for a fifth day after Standard & Poor’s lowered the country’s credit rating to junk, citing risks to the budget from a weakness in the banking system and deflation.

Reuters: – Pimco’s emerging market bond funds post record 2014 outflow. – Pimco posted a record total outflow of $5.8 billion from its emerging market funds in the first 11 months of 2014, according to Morningstar data released on Wednesday.

CNBC: – Why a stronger dollar may not bite EM bonds. – Emerging markets may be buffeted by a stronger U.S. dollar and lower commodity prices, but the segment’s bonds still look like a good bet, analysts said.

WSJ: – A Pimco emerging-market fund hit by Russian-debt bet. – (Subscription) A Pacific Investment Management Co. emerging-market bond fund has stumbled over a large bet on bonds issued by Russian corporations amid a record-setting plunge in the rouble.

Businessweek: – The markets are predicting a Venezuelan default. – President Nicolás Maduro says there’s a foreign conspiracy at work against Venezuela. In a Dec. 13 speech on state television, he lashed out at the international credit-rating companies that assigned junk ratings to his country’s foreign currency bonds, accusing them of orchestrating “a vulgar, immoral financial blockade.”

 

Green Bonds

Financial Advisor: – Green bonds sell big in 2014 as finance bids to help climate. – A “green” bond market has taken root this year, with municipalities and corporations issuing new environmentally-focused bonds and money managers jumping in to buy them.

 

Catastrophe Bonds

Artemis: – Strong secondary cat bond trading in November due to impending maturities. – The month of November saw strong trading activity in the secondary market for insurance-linked securities (ILS) and catastrophe bonds as investors looked to capitalise on yields from short-dated cat bond notes which are soon to mature.

 

Investment Strategy

Motley Fool: – Retirement Investing: Is this the best option for almost everyone? – Not everyone loves the process of researching and investing in stocks as much as we Fools do. In fact, the majority of people probably have a lot of other things on their plate and are simply looking for someone to wade through the confusing world of finance for them.

AllianceBernstein: – Bond investors should watch out for the flavor of the month. – Rising rates and inflation aren’t the biggest risks high-yield bond investors face today. We think the larger concerns are concentration and crowding stemming from low liquidity.

Convergence Investments: – In search of income: High-yield bond CEFs. – High-yield bond closed-end funds have experienced a significant sell-off in the first half of December as the markets digest concerns about the falling cost of oil.

Financial Post: – Why it’s time to refocus on high-quality bonds. – Fixed-income investors need to refocus on quality, liquid assets and reevaluate their hefty exposure to high-yield corporate bonds, say strategists on both sides of the border.

Automated Trader: – 2015 will be a year of ‘tempered optimism’ says Investec Wealth & Investment. – 2015 is set to be a year of ‘tempered optimism’, according to Vision 20151, a new report on key trends and market developments for the year ahead from Investec Wealth & Investment.

 

Bond Funds

WSJ: – Amid crisis, Pimco steadies itself. – (Subscription) At Pacific Investment Management Co.’s holiday party at the Hyatt Regency Huntington Beach Resort and Spa on Dec. 6, more than 1,000 employees and their spouses admired the Pacific Ocean and mingled between stops at appetizer stations.

WSJ: – Foreign investors pile into bonds. – Foreign investors are snapping up Treasury bonds at the fastest clip in two years, propelling yields to fresh lows even as the U.S. economy gains steam.

Bloomberg: – The best and worst exchange-traded funds of 2014. – The ETFs that did best in 2014 were tied to lower interest rates, sinking oil prices and a surging U.S. dollar. To come up with this year’s ETF Awards, Bloomberg senior ETF analyst Eric Balchunas considered performance, how much cash a fund attracted and how well an ETF was able to capitalize on trends.

ETF.com: – Time for currency-hedged int’l bond ETFs. – This article is part of a regular series of thought leadership pieces from some of the more influential ETF asset managers in the money management industry. Today’s article is by Robert Leggett, senior portfolio advisor at Akron, Ohio-based ValMark Advisers, which markets the “TOPS” brand of asset allocation models.

Zacks: – 5 Diversified bond funds to add to your portfolio. – 5 top rated diversified bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all diversified bond funds.

 

Views expressed are those of the writers only. Past performance is no guarantee of future results. Trading comes with severe risk. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
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