Learn Bonds: – What bond investors need to know about gold. – A few weeks ago, an opinion piece by Alan Greenspan, former Chair of the Board of Governors of the Federal Reserve System, appeared on ForeignAffairs.com. The piece is entitled, “Golden Rule – Why Beijing Is Buying,” and, while the title disguises it as a short essay on China’s relationship with gold, in reality, there are other, more important considerations worth pointing out.
Learn Bonds: – General Obligation bonds – What muni investors should know. – Saying that municipal G.O.s are “secured” by taxing power is like saying that unsecured corporate bonds are secured by revenues and unlimited pricing power. Although it has been mostly true in the past that municipalities could simply raise taxes on their captive tax base, municipalities such as Detroit have proved that municipal tax bases are less captive than in the past.
Learn Bonds: – Junk Bonds – Do you have the stomach for them? – Investors are likely to think of the high-yield portion of the bond market as a small, specialized space reserved for only the very risk tolerant. While there certainly is elevated risk in loaning money to companies with not-so-stellar credit, junk bonds have become much more than a niche investment option. Current figures place the total value of domestic junk bonds somewhere between $1.5-2 trillion.
Learn Bonds: – Round three of quantitative easing is over – Did it make any difference? – Well, round three of Quantitative Easing is over. The monetary policy in the United States that has dominated the world for the past several years is done. Question is did it make a difference?
Learn Bonds: – Learn about exchange traded debt or ETDs. – You want to learn bonds? Today we’re going to learn about an investment that are bonds, but trade just like stocks. No, I’m not talking about preferred stocks, but another high yield investment that’s even safer than preferred stock.
Barron’s: – Seven lessons from Detroit’s bankruptcy for muni investors. – (Subscription) Bank of America Merrill Lynch municipal research strategists Philip Fischer, Yingchen Li, Emily Korot, and Celena Chan look at how the landmark case has treated Detroit’s various creditors. BofA examines how the case might set precedents for future muni bankruptcies (given that they’re much more rare than corporate bankruptcies) and comes up with seven key take-aways for muni investors.
AllianceBernstein: – Gauging the spook factor for municipal bond investors. – The muni market seems to be returning to normal after major outflows last summer, though several potential hot-button issues could still spook investors. We don’t think these represent major risks to market returns or properly positioned portfolios.
Reuters: – World Trade Center muni deal prices some debt at junk rates. – New York’s Liberty Development Corp issued its $1.6 billion deal for World Trade Center unrated tax-exempt bonds on Tuesday, pricing the deal with coupons as high as 7.25 percent, a level consistent with rates of risky muni junk bonds.
MarketWatch: – This shunned investment is actually among the safest today. – Conservative investors need good yields. They need protection from higher taxes. And they need to know their principal is safe in a chaotic world.
Reuters: – Atlantic City bets on house money for debt deal. – Atlantic City, New Jersey, buffeted by casino closures and its tax base gutted, hopes that playing with house money will let it avoid junk-level borrowing costs at a time when it can least afford them.
Think Advisor: – Looking under the hood of alternative bond funds. – A key reason for the appeal of many alternative bond funds is the fact that their flexible portfolios may offer more protection and steadier total returns in a rising interest rate environment than traditional bond funds.
About.com: – Did quantitative easing work? – The U.S. Federal Reserve is poised to wrap up the third round of its quantitative easing program, known as “QE”, following its October 28-29 meeting. The goal of quantitative easing, which ran in three separate segments between November, 2008 and October, 2014, was to spur economic growth during the years following the 2008 financial crisis. The Fed accomplished this by buying bonds in the open market, thereby depressing yields and keeping borrowing costs low.* With the program now wrapped up, the key question is: “Did quantitative easing work?”
IFA: – Bonds: Is the party over? – You can’t have missed the final curtain calls for corporate and government bonds in recent months. Overpriced, overbought, and soon to fall victim to deliberately-induced rises in interest rates and consumer prices as the spectre of deflation stalks the Western world. Who’d be a bond buyer now?
Benzinga: – QE is over; bull bond market likely isn’t. – The Fed has not completely withdrawn its support of the bond market. In fact, it will continue to buy bonds. Today’s announcement just signals the end of printing money to make these purchases. By pledging to maintain its balance sheet of treasuries and mortgages at $4.5 trillion dollars the Fed is committing to replace its maturing bonds by purchasing new issue from the Treasury during its auctions.
MarketWatch: – Get ready for déjà vu in the credit markets. – The Federal Reserve’s monetary policy outlook was just the slightest bit more optimistic than expected, but that may be all the credit markets need to throw a temper tantrum, according to Bank of America Merrill Lynch.
Bloomberg: – Treasury liquidity squeezed as dealer shut off machines. – It was still early in the New York trading day on Oct. 15 and investors were already pouring into U.S. government bonds as global financial markets from Asia to Europe buckled. Because yields were falling so fast, Comiskey, the head Treasury dealer at Bank of Nova Scotia, realized that he ran the risk of being stuck with losses or unwanted inventory if his computers automatically generated quotes to buy and sell with customers.
FT: – Funds buckle up for redemption surge. – (Subscription) Extolled for their liquidity and haven status, a renewed rush into government bonds this past month has come at the expense of money flowing into equities as investors wait for calmer conditions and greater clarity over the global economy and central bank policy.
MarketWatch: – Why it’s so hard to trade a Treasury bond right now. – How volatility means bumpier trading for everyone else.
Market Realist: – What the 30-year TIPS auction says about inflation expectations. – How volatility means bumpier trading for everyone else.
Businessweek: – The Treasury market fails a stress test. – Recent market volatility has raised concerns that trading could be get even more chaotic when the Fed begins to raise rates from their near-zero levels and investors rush to adjust their portfolios. “The market could not handle large flows without prices moving massively,” Michael Cloherty, head of U.S. rates strategy at RBC Capital Markets (RY), said in an e-mail. “We took that test Oct. 15 and failed.”
Investment Grade Bonds
Bloomberg: – Moody’s ‘strong’ debt pipeline augurs another record year. – Moody’s Investors Service (MCO) just gave investors a bullish sign that U.S. corporate-bond sales will finish 2014 with a third straight record.
Reuters: – High-grade week off to US$5.3bn start. – Monday was a day of extremes for the high grade market, with one issuer having to pull its deal while another amassed US$9bn of orders for a debut transaction.
WN.com: – The junk bond plunge we’re witnessing looks a lot like something we saw in 2004. – The high-yield sell-off during the third quarter follows the pattern seen in 2004. After the Federal Reserve first signaled a withdrawal of accommodation in 2004, the Credit Suisse High-Yield Index fell in the 20 weeks leading up to the June hike before resuming its bull run through the end of the year. This year, prices fell in the months leading up to the October end of quantitative easing, which marks the start of less accommodative monetary policy. If history repeats itself, high-yield bond prices should rebound in the fourth quarter.
Housing Wire: – Massive subprime mortgage bond portfolio ready to trade. – The year’s largest portfolio of pre-bust non-agency debt is set to trade this week. Investors looking to get their hands on vintage subprime, Alt-A fixed-rate, or Alt-A adjustable rate bonds will have plenty of opportunities when $4.6 billion in vintage debt hits the market Tuesday.
MarketWatch: – Fixed Income opportunities highlighted by selected high yield sectors. – Fixed-income markets remain volatile: Europe is challenged, Brazil might struggle, and China is dealing with a potential property bubble. Opportunities nonetheless remain rife for savvy investors, particularly in the high-yield markets. Western Asset believes high-yield should be a key component of any successfully diversified bond portfolio.
Businessweek: – Charter sells $3.5 billion of bonds to buy Comcast assets. – A unit of Charter Communications Inc. (CHTR:US) sold $3.5 billion of speculative-grade (BUHY) bonds to help acquire some of Comcast Corp.’s cable subscribers, more than doubling the amount it initially planned to issue.
Businessweek: – Junk bond bulls outlast October swoon as losses wiped out. – Junk bond investors who held their nerve through this month’s global selloff have recouped all their losses as the riskiest part of the corporate credit market again demonstrates its resilience.
Bloomberg: – ETF money flows into emerging markets first time in four weeks. – Money flowed back into U.S. exchange-traded funds that invest in emerging-markets after three weeks of withdrawals.
Businessweek: – Billionaire’s distressed junk bonds post biggest returns. – Billionaire Alvaro Saieh SMU SA is delivering the biggest gains to junk-bond investors in emerging markets after the distressed supermarket chain reached a deal with banks to postpone a loan payment.
ETF.com: – Daily ETF watch: Brazil bond fund planned. – WisdomTree has filed for the ETF market’s first single-country bond fund targeting Brazil, Latin America’s biggest economy.
Businessweek: – Venezuela quelling default talk spurs bond surge. – Venezuela is rewarding bond investors with their biggest gains in five years as it quells default speculation. To Stone Harbor Investment Partners LP and Barclays Plc, the rally has just started.
TheStreet: – Nuveen manager sees Mexico, high yield as better bets than europe. – Now that the Federal Reserve has ended its quantitative easing program, investors will need to be more selective with their investments, according to Tim Palmer, portfolio manager for the Nuveen Strategic Income Fund.
Morningstar: – Emerging-markets bonds in a rising U.S. dollar environment. – While a strong U.S. dollar makes it more expensive for emerging-markets sovereigns to repay their dollar-denominated debt, we note that for the most part, emerging-markets countries have ample foreign reserves. In addition, most emerging-markets countries’ U.S. dollar debt is nowhere near levels seen in the mid-1990s–at that time, high levels of U.S. dollar-denominated debt helped contribute to the Asian financial crisis.
Daily Finance: – High rates make SolarCity bonds shine, but beware the clouds. – In recent years, people who need to earn income from their investments have faced a dilemma. Low interest rates have crushed returns on traditional safe investments like bank savings accounts and certificates of deposit, making it tough to make ends meet with a conservative portfolio. To get better yields, some used more aggressive investments like dividend stocks to get the cash they need.
Artemis: – Cat bonds help California Earthquake Authority to offer rate reduction. – The California Earthquake Authority (CEA), the publicly managed residential earthquake insurance provider, is proposing to reduce homeowners rates, as savings made due to catastrophe bonds and lower-cost reinsurance flow through to consumers.
ETF Trends: – Government bond ETFs remain the safer play. – In an attempt to hedge risks associated with a struggling Eurozone and potential Federal Reserve policy changes that could weigh on corporate earnings, corporate bond portfolios have increased U.S. government debt allocations by 15% this year through September, compared to a 6.5% rise for the same period last year, reports Tim McLaughlin for Reuters.
Wealth Management: – Time to hedge your bond bets? – Something’s afoot with interest rates. At least that’s what option market makers are telling us. Take a look at the expense trend for calls and puts on 10-year Treasury futures.
InvestorPlace: – Trade of the Day: iShares iBoxx $ High Yld Corp Bonds ETF. – Banks in the United States are preparing for another round of stress tests by dumping high-risk bonds. According to data from the Fed, banks reduced their positions in these bonds by 68% in October, which is the largest selling frenzy on record. To capitalize on this, we’re opening a new bearish trade on iShares iBoxx $ High Yld Corp Bond ETF (HYG).
Market Realist: – Why you should stick with U.S. large caps and high yield. – Within the United States, I recognize opportunities, particularly in large cap, cyclical names. On the fixed income side, high yield now represents an attractive option given recent spread widening.
Market Realist: – Weighing the pros and cons of unconstrained bond funds. – Before putting your money in an unconstrained bond fund (BASIX), you should be aware of the pros and cons. As mentioned in the previous section, these are actively managed funds and don’t track a benchmark index. Besides, each fund could follow an entirely different strategy. As a result, there’s no common yardstick to compare performance. So it’s important to assess each bond fund’s benefits and disadvantages.
Wealth Management: – NextGen bond managers. – Superstar bond fund managers with many decades of experience may grab headlines regardless of performance, but there’s another generation of younger fund managers coming up in the ranks who are quietly turning in solid results without the hype.
Income Investing: – BlackRock latest to cut fees on bond funds. – BlackRock Inc. and other asset managers are cutting fees on bond mutual funds, moves seemingly intended to lure investor cash that’s in migration from Pacific Investment Management Co. after Bill Gross’ departure.
MarketWatch: – Wall Street’s Elvis has left the building. – For years, institutional and individual investors in the Total Return Fund have been Bill Gross groupies. Like breathless teenage girls, they stand stunned and lightheaded after hearing that their beloved, their Elvis, has left the building. Blessings and peace to Bill Gross at Janus. Best of luck to Total Return Fund investors as they ponder what to do next. Fortunately, I have better things to do with my time.
Bloomberg: – These strips tease ETF investors. – Two exchange-traded funds with “Treasury” in their names are running circles around other bond ETFs. The Pimco 25+ Year Zero US Treasury Index Exchange-Traded Fund (ZROZ) and the Vanguard Extended Duration Treasury ETF (EDV) are up 35 percent and 33 percent this year. That’s more than 10 percentage points above the bond ETF holding third place, the iShares 20+ Year Treasury Bond ETF (TLT). How on earth do you get returns like those with Treasuries?
ETF Trends: – First trust lowers fee, will reverse split short maturity ETF. – First Trust, the sixth-largest U.S. issuer of exchange traded funds, said it has approved an additional fee waiver for the recently launched First Trust Enhanced Short Maturity ETF (NasdaqGM: FTSM) and that the new ETF will be reverse split.
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