This Week’s Top Bond Market Stories – June 8th Edition


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Learn Bonds: – DoubleLine opens floating rate fund to the public: Bringing attention to bank loans as an asset class. – DoubleLine has announced that it will be opening its Floating Rate Fund to investment by the public on July 1st. Learn Bonds last week spoke with Bonnie Baha and Robert Cohen, the portfolio managers of the DoubleLine Floating Rate Fund, for an exclusive interview about the fund and the asset class in which the fund invests.

Learn Bonds:  – Jeff Gundlach: 3 Reasons interest rates won’t head much higher. – With the rate on the 10 year Treasury up around 50 basis points over the last month, many prominent bond investors (including PIMCO’s Bill Gross) have called an end to the decades long bond bull market.  Judging by his presentation earlier this week entitled “What in the World is Going on?” bond guru Jeff Gundlach may not agree.  Here are 3 reasons he thinks interest rates aren’t headed much higher from here.

Learn Bonds:  – Higher dividend stocks still seem rather pricey. – One of the things that happened in response to interest rates becoming so low was that higher dividend stocks became even pricier. Even though prices seem to have come down recently, higher dividend stocks are, it seems, still a poor investment relative to other stocks.

Learn Bonds:  – Bankers to Fed – We are concerned about an unsustainable bubble. – The financial media, financial advisors, and portfolio managers, as a collective group, have been calling the bond market a bubble for quite some time. So the Federal Advisory Council (FAC’s) mentioning that possibility is really no surprise. But what is surprising is the FAC’s expressing concern about an equity bubble.

Learn Bonds: – Why is there so much hysteria over Fed tapering? – During the month of May, intermediate-to long-term benchmark Treasury yields rose 40 to 50 basis points, depending on the security. As the month wore on, talk in the financial media surrounding the reasons for the rise in rates centered more and more on the possibility of the Fed tapering QE. Not only did bond yields rise, but certain preferred stocks, REITs, and dividend-paying stocks also took it on the chin as fears of rising rates spread. This begs the question: Are assets so overvalued that merely tapering will cause notable selling?

BusinessWeek: – Gross sticks with high-quality debt after Treasury selloff. – Pacific Investment Management Co.’s Bill Gross, whose flagship fund suffered its first withdrawals since 2011 in May amid a selloff in Treasuries, said he is sticking to high-quality bonds as market risks are rising.

Fiscal Times: – Bill Gross: Should you still bet on the bond king? – Bill Gross didn’t set out to be a guru, but nevertheless, a number of well timed investment decisions have propelled him into the limelight, to the point where many investors hang on his every word. Thats all well and good until things go wrong. Gross’s flagship fund, the Pimco Total Return Fund, recently placed its biggest bet on Treasuries in three years. That was just in time for the May selloff in bonds that took yields back above 2 percent, Morningstar calculates that investors pulled some $1.3 billion from the Pimco fund in response to its poor performance. So has the bond king lost his crown?

FT: – Long term looks bad for portfolio returns. – Sometimes the long run is easier to forecast than the short. Over the next decade, the odds are that returns on both bonds and stocks will be very poor. The outlook is as bad as it has been in a century.

Gary Dorsch: – ‘Dangerous divergences’ between bonds and stocks. – Already, the ratio between the value of the Dow Industrials and 10-year T-note futures has reached the 116-level, – doubling from the 58-level – where it bottomed out in March ’09, and is within striking distance of its 2007 high. A last gasp rally in the U.S. stock market could be the catalyst that triggers a sharp sell-off in T-notes.

Forbes: – The Madoff of munis. – Rita Crundwell stole $53.7 million from Dixon Ill. over a 21 year period. Her crime highlights the lackadaisical auditing standards of most municipalities, which are much less stringent than their corporate counterparts.

Financial News: – Junk bonds: Buyer beware. – Treat the recent rise in Treasury yields and subsequent drop in junk bond prices as a warning. Owners of junk bonds could easily incur principal losses in the future and the higher and faster the rate increase, the greater the loss.

Market Oracle: – US Treasury bonds will be returned to sender. – A new trend has begun to show itself. While the West, in particular the United States, is locked with focus on maintaining a stable US Treasury Bond yield, the East is preparing wide channels to send toxic US Bonds back to London and New York.

Bloomberg: – Detroit proposal has big implications for muni bond market. – Detroits proposal to force investors to take less than they’re owed on general-obligation debt would “have a major impact on the bond market,” according to Richard A. Ciccarone, chief research officer at Oak Brook, Illinois-based McDonnell Investment Management LLC.

BBC: – Why worry about the US bond market? – If you’re not an economist or a bond trader, you might wonder why there should be such a fuss about roughly half a percentage point rise in the interest rates on US 10-year government debt. Stephanie Sanders looks at the implications of rising bond yields, good and bad.

CNBC: – Bond rates may inch up: Gundlach. – Increases in U.S. Treasury bond interest rates will mean a continued “buy,” DoubleLine Capital CEO Jeffrey Gundlach said Tuesday.

Reuters: – Fed: Slowing bond buys does not mean tightening policy. – Slowing the pace of Federal Reserve bond buying would not mean tightening US monetary policy and would help wean financial markets off their dependence on ultra-easy money from the U.S. central bank, one of its senior officials said on Tuesday.

ETF Trends: – High-yield ETFs see record volume at key support. – It could be make-or-break time for high-yield corporate bond ETFs that have seen trading volume surge after falling to a key technical support level. A breakdown here would be a worrying sign for credit markets, the S&P 500 and other major U.S. equity benchmarks, according to technical analysts.

Money Beat: – The Intelligent Investor: How funky is your 401(k)? – Is the invasion of the “offbeat bond funds” about to reach your 401(k)?

Barry Ritholtz: – US 10 year yields in perspective. – The move in the 10 year yields has led to all sorts of speculation as to the underlying cause. Since none of this is within our control, all we can do is look at this from a longer term perspective to put [it] into broader context .

Yahoo: – Declarations of bond-market death spasms. – Slowly improving U.S. economic conditions, receding fears of a financial-crisis sequel, preparation for the Fed to pare back its bond buying and the flooding of markets by the Bank of Japan with ultra-cheap yen have brought widespread declarations that the 30-year bull market in bonds is in its death spasms. But what’s the big picture?


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