This Week’s Top Bond Market Stories – May 25th Edition


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Learn Bonds: – Raining dividends, income snowballs. – In this article go over some basic methods of research that may be useful for beginners trying to find companies and funds to start with. I want to emphasize that beginner investors must realize the stock market is currently at an all-time high, and interest rates are at historic lows, so it is important to consider not diving in all at once, remember “slow & steady wins the race.”

Learn Bonds: – How bad is the U.S. debt situation? – Kurt Shrout looks at the amount of U.S. debt as a percentage of gross domestic product (GDP) and then compares that with 25 other developed economies.

Learn Bonds: – Investing in P2P loans: Learn to love defaults and late payments. – Investing in peer-to-peer loans can provide you double digit annual returns. However, you need to be prepared for defaults. Many borrowers aren’t going to pay off the full amount they owe. Ironically, a large number of defaults may be a sign that you’re investing correctly.

Learn Bonds: – Constellation Brands – You buy the wine, now consider buying the debt. – In today’s ultra-low interest rate environment, I often find myself spending more time looking at double-B and triple-B-rated corporate bonds in search of the right combination of yield, duration, and credit risk for my portfolio. Even when yields are not at levels I find attractive, I still search for bonds to add to my watch list, so when yields rise (whether market-wide or only on a select few individual issues), I am ready to immediately take advantage of the opportunities that will then present themselves. One such example is the Constellation Brands 4.25% coupon 2023 maturing notes.

Learn Bonds: – Want yield? Take a look at Petrobras’ new bonds. –  A few weeks ago, Apple completed a massive $17 billion, six-part bond offering. Although not as large as Apple’s record-breaking corporate bond deal, Petrobras, the Brazilian energy giant, just completed quite the massive bond offering of its own. Its six-part, $11 billion offering, was issued by the subsidiary Petrobras Global Finance B.V. and includes both fixed-rate and floating-rate notes. The offering was broken down as follows.

Market Realist: – High yield fund flows stumble, demand side may be getting weak. – High yield bond flows for last week posted the first outflow in five weeks, possibly signaling weak investor confidence.

FT Adviser: – Top 5 tips for investing in emerging market bonds. – Emerging market debt has seen its stock rise in recent years as investors seek new income opportunities away from western government bond yields that barely edge above inflation. With a number of different options available that include active and passive exposure and hard and soft currencies, here our our top tips on how to approach investments in this sector.

Bloomberg: – Investors risk getting burned: Optimism too high for stocks, bond yields too low. – From his view of the world in Scotland, Bruce Stout says investors risk getting burned because optimism is too high for stocks and bond yields are too low. The markets might be proving him right.

Business Insider: – Goldman: ‘The bond sell-off: It’s for real’. – U.S. Treasury yields bottomed out in July 2012 after three decades of a steady grind lower. Since then, they have had their ups and downs, but eventually, the yield on the 10-year U.S. Treasury hit a high of 2.06% on March 11. In the last 3 weeks, however, yields have reversed as investors have sold bonds and are once again testing the post-low highs set in early March. And this time, Goldman Sachs says the bond market sell-off is for real.

CNBC: – Why quantitative easing isn’t printing money. – I’d like to explain in a bit more detail why quantitative easing (QE) is not printing money and why bank reserves aren’t money.

Forbes: – Sell Alert: Get rid of low quality muni bonds. – BUY HIGH and SELL LOW! That is, only buy high quality municipal bonds and sell the low quality munis you own. And—don’t listen to the talking heads pontificating that General Obligation bonds are safe and secure—that was true in the “old days” but no longer.

Bloomberg: – Bernanke says Fed may taper buys. – Federal Reserve Chairman Ben S. Bernanke told Congress this morning the Fed may cut the pace of bond purchases at the next few meetings if policy makers see indications of sustained economic growth.

Barron’s: – PIMCO’s Gross: Treasuries not in A bubble, but stocks frothy. – Pimco‘s Bill Gross was asked a direct question about what he sees as the most overvalued asset out there right now. Gross names both Treasuries and Japanese government bonds. He said he sees more overvaluation in 30-year Treasuries than in 5-year Treasuries, but that there’s “not a bubble in Treasuries.”

Oblivious Investor: – Are bond funds unusually risky right now? – Many people are concerned — or even scared — about the riskiness of their bond holdings right now. Mike Piper tries to put peoples mind at rest.

Reuters: – Fed’s Bullard: bond buying best policy when rates near zero. – Massive asset purchases are the closest thing to normal monetary policy once interest rates get near zero, a senior U.S. Federal Reserve official said on Tuesday, recommending that the European Central Bank weigh such action if inflation falls further.

Quartz: – The bonds-to-equities great rotation fallacy, in one chart. – A few months ago, strategists warned of a “great rotation” away from bonds, which are currently earning investors record-low yields, into equities, which might be more lucrative. Since then, we’ve seen the S&P 500 beat all-time highs. But we’ve also seen the yields on junk bonds fall to historic lows—meaning there’s a ton of demand for the stuff. Weird things have been happening in bond markets around the world. So while it’s certainly true that investors have started purchasing stocks in big numbers, bucking the 2012 trend, it’s not at all clear that this is going side-by-side with a pullback in the funds flowing to bond markets. As this chart proves.

Reuters: – Cat bond investors on alert after Oklahoma twister. – Investors in niche financial bonds that cover insurers against huge natural disasters are on alert for future events that could force them to pay out after the powerful tornado that struck the U.S. on Monday, brokers and fund managers said.

TF Market Advisors: – Treasuries vs Equities (QE, Fed, and Inflation). – There is an almost universal acceptance that stocks must go higher. The general consensus is that the world has changed and stocks are entitled to grind higher every day because either the news is good, or the news isn’t good and we’ll get more QE and eventually the news will be good. At the same time, there is a growing consensus that bonds can’t go higher in price, at least not treasuries.

Bloomberg: – Gross to Buffett omens disregarded as sales soar. – Sales of corporate bonds in the U.S. are surging toward the busiest May ever as borrowers race to the market before demand dries up with Bill Gross and Warren Buffett cautioning against buying debt at all-time low yields.

Rick Ferri: – A reason to own bonds. – Probably one of the biggest investment concerns today is the so-called “bond bubble.” Interest rates are at an all-time low thanks in part due to Central Bank bond buying and weak demand for borrowing in this slow growth economy. The fear of owning bonds has hit an unprecedented — and in my view, unwarranted — level. There is a good reason to own bonds in a portfolio.


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