This Week’s Top Bond Market Stories – September 6th EditionAuthor: Simon GLast Updated: March 30, 2020 To get the Best of the Bond Market delivered to your email daily click here. LearnBondsLearnBonds: – What is driving international bond markets? Look to Germany. – More and more people are saying that investors in bonds should look toward Germany…more specifically, Frankfurt…to see what is driving international bond markets.LearnBonds: – The Japanification of the U.S. bond market. – For nearly six years, the federal funds rate has remained close to the zero-bound. During that time, benchmark bond yields have remained at or near historically low levels. Despite five years of improving economic data, the Federal Reserve has still refused to raise its target rate. The reason for this is that the U.S. economy is structurally weak and highly dependent on cheap financing and rising asset prices to spur the little growth it currently has. The U.S. bond market is living through an experience similar to Japan’s.LearnBonds: – The hot air of bond bubble talk. – most pundits seem to be discounting the possibility that interest rates remain low for the foreseeable future. While I personally am not willing to predict that rates won’t go higher at some point – unlike others who seem keen on continuing to blast bonds – I admit I have no idea when that may be. I suspect “bond bubble” articles will continue to persist until bears give up or consider themselves right in the matter. That may be in six months…. but investors should keep an open mind to thinking that it may be, well, never.LearnBonds: – JPMorgan Chase – Are the skies brightening or darkening? – My attitude on banking giant JPMorgan Chase (NYSE: JPM) can be summed up in what its second-quarter 2014 earnings report two weeks ago: both good and bad, rays of optimism but also some clouds on the horizon. In short, my view is that, while Wall Street is quite bullish on JPM, it’s not clear to me just how bright the stock’s prospects are after a five-year run of handy outperformance. So my call is “Hold”: don’t sell shares if you own them, but don’t buy if you don’t own any – at least not yet, in either case.LearnBonds: – Making sense of the job numbers. – August Nonfarm Payrolls data indicate that the economy added 142,000 jobs (134,000 in the private sector). This was down from a prior revised 212,000 (up from 209,000) and well below the Street consensus of 230,000. Why such weak job numbers? Municipal BondsMedium.com: – All bonds go to heaven. – Kristi Culpepper formerly known as ‘Munilass’ looks at the trade-offs between liquidity and credit quality in the municipal bond market.Bloomberg: – Virgin Islands echoes Puerto Rico gains amid stress. – Debt from the U.S. Virgin Islands, where the budget deficit has grown to about twice its 2009 level, has gained 10.2 percent this year, Barclays Plc data show. Securities of Puerto Rico, the junk-rated commonwealth 40 miles (64 kilometers) west in the Caribbean, have rallied 9.7 percent. The returns are the third-and fourth-best among states and territories.WSJ: – Mow-down in Motown. – Bond insurers have a good case against Detroit for unfair treatment in bankruptcy.Bond Buyer: – New Mexico deal raises eyebrows. – When RBC Capital Markets underwrote $727 million of gas supply revenue refunding bonds earlier this month for a New Mexico authority created by local governments that retain RBC as a financial advisor, some market participants raised their eyebrows.Bond Case Brief: – Supply-demand dynamics should support muni market. – Despite the headline news surrounding a small handful of municipal issuers, the muni market has performed well this year and remains underpinned by strong supply and demand dynamics. It’s one of the key themes identified by the MacKay Municipal Managers team at the beginning of the year and, if anything, it’s playing out even more decisively than they predicted. Bond MarketBarron’s: – Bondholders, fasten your seat belts. – (Subscription required) Bond prices have defied expectations and risen this year, but investors should brace for significant volatility ahead. Consider moves to cash.A Few Dollars More: – Whats up with bonds? – At the beginning of the year Wall Street was certain that interest rates were on their way up. Investors dumped all kinds of bonds anticipating that prices would plummet. Bond prices did the upset. Go figure.Barry Ritholtz: – Are households smarter than institutional investors? – While rumors of an institutional rotation — selling equities and buying fixed income — swirl, we see the opposite behavior from households.WSJ: – Investment technology group to launch dark pool for bond trading. – (Subscription required) Investment Technology Group Inc. is jumping into the race to solve one of the trickiest problems for big investors: finding a better way to trade bonds now that banks have stepped back from the business. Treasury BondsBloomberg: – Treasuries decline as economists say manufacturing, jobs grew. – Treasuries fell, after posting the biggest rally in seven months in August, before reports this week that economists predict will show U.S. manufacturing and employment expanded.WSJ: – U.S. Government bonds sell off. – The roaring U.S. government bond market hit a snag following the Labor Day break. After lodging the biggest monthly rally since January, bond prices sank broadly on Tuesday, driven by an upbeat U.S. manufacturing release and a flurry of new corporate bond sales.WSJ: – U.S. Government bonds gain on jobs report. – Treasury bonds strengthened on Friday as a disappointing U.S. employment report for August boosted the allure of haven assets. Investment Grade BondsWSJ: – Companies step up bond sales as rates remain low. – (Subscription required) In the U.S. corporate-bond market, summer vacation is over. Companies of all stripes are flooding the market with bond deals, making this week one of the busiest of the year so far, as corporate treasurers continue to take advantage of low rates and investors bet an improving U.S. economy will bode well for business.Charles Schwab: – Investment-grade corporate bonds delivering strong returns. – Falling Treasury yields have helped push the total return on the Barclays U.S. Corporate Bond Index to 6.6% so far this year, above most other types of fixed-income investments.Bloomberg: – U.S. company bond sales eclipse $24 billion in busiest day. – Corporate bond issuance in the U.S. reached $24.3 billion today in what was the busiest session for the year as the market powers back to life after the sleepiest August since 2008. High-Yield BondsForbes: – U.S. High yield bond funds see first cash outflow in four weeks. – Retail cash flow to U.S. high-yield funds turned negative for the first time in four weeks, with a $198 million outflow in the week ended Sept. 3, according to Lipper. The influence of ETFs looms fairly large, at 37% of the sum, or an outflow of $74 million this past week.IFR: – U.S. high-yield braced for up to US$10bn supply week. – The US high-yield market got off to a slow start after the Labor Day holiday with only one deal announced, but bankers are predicting as much as US$10bn of supply this week especially if a surge of investment grade deals perform well.Fundsupermart: – Reasons for the recent corrections of high-yield bond funds. – U.S. high-yield bonds has been declining for many weeks since July this year, raising concerns that the bond segment is on a downtrend and will continue to weaken; although junk bonds are still on positive footing year-to-date. In this article, we will examine why the sector has underperformed in recent weeks.The Seattle Times: – Investors in junk bonds see value in buying low. – Just because yields on speculative-grade debt are falling toward the lowest ever, that’s not a good enough reason to avoid it, JP Morgan Asset Management’s chief investment officer says. Emerging MarketsSAXO Bank: – Emerging from a crisis, why you need EM in your portfolio. – Just a few months ago, as Fed policy changed, Emerging Markets were plunged into what many called a crisis, now we’re seeing signs of recovery.Market Realist: – Must-read: Use emerging market bonds for higher yield potential. – For those who want a little more adventure on their menu, there’s always the option of adding some unique flavors like spicy kebabs. This is the equivalent of adding some emerging markets fixed income to your bond portfolio. You may run the risk of a little heartburn, with occasional volatility and currency risk, but no cookout is truly complete without a little spice thrown into the mix.For the Record: – Evolution of emerging market debt. – Investors are closely reevaluating their portfolios following a global credit crisis and currently facing the headwinds of increasing sovereign credit risk, rising inflation, and escalating worldwide fiscal deficits. Catastrophe BondsBusiness Recorder: – Insurers can withstand $100 billion natural catastrophe. – The growing market for catastrophe bonds has bolstered the insurance industry to the extent it could cope with a $100 billion disaster.Bloomberg: – Worst market in memory to weigh on reinsurance rates. – The worst reinsurance market in memory looks set to carry into 2015, industry executives said.Insurance Journal: – California state funds continue to shake up cat bond market. – California’s recent “Winequake” brought the public’s focus back to the state’s significant vulnerability to seismic events. Fortunately, the tremors, while costly, did not tally a high human score. For every image of a cracked street or a toppled building, there was another of a broken bottle or a toppled cask. Thus, media emphasis on emergency response was able to quickly turn to analysis. Investment StrategyForbes: – Full circle in 8 months: Now is the time to sell bonds. – Serendipity has struck. August’s bond market rise, especially this past week, has provided an outstanding opportunity for selling bonds and bond funds. The source of this happy situation? Ironically, it’s the growing expectation of the Fed allowing short-term rates to rise – the very action long expected to drive bond prices down.Left Banker: – Double-digit distribution income portfolio: Part 1. Over 10% yield from a diversified portfolio. – High yield is an challenging and risky goal in the current income markets. I’ve constructed a model portfolio that generates double-digit yields with sufficient diversification to moderate risk to capital. The portfolio employs leveraged ETNs and closed-end funds to achieve these goals.Think Advisor: – 3 Investments retirees can avoid. – Some assets can add volatility, expenses and stress to retirement portfolios (with little upside).Wall St Daily: – ETF flows show investors hate agribusiness. – They say there’s safety in numbers. Indeed, most investors seem to believe as much. They continually exhibit herd behavior, swarming from one hot sector or stock to the next. However, following the herd leads to mediocre performance at best and crippling losses at worst. Bond FundsFT Adviser: – Greg Hopper takes on the Swip high yield bond fund. – (Subscription Required) Aberdeen’s head of global high yield Greg Hopper has taken on the management of the £1.7bn Swip High Yield Bond fund.BNK: – TLT: Large outflows detected at ETF. – Looking today at week-over-week shares outstanding changes among the universe of ETFs covered at ETF Channel , one standout is the iShares 20+ Year Treasury Bond ETF (Symbol: TLT) where we have detected an approximate $59.4 million dollar outflow.Morningstar: – 4 Questions to ask before buying a strategic bond fund. – These bond funds may appear to offer a simple solution, but there is a wide array of disparate strategies to choose from.Bloomberg: – Investors pull $435 million from loan funds in U.S., Lipper says. – Investors pulled $435 million from U.S. funds that buy leveraged loans, the eighth straight weekly outflow, according to Lipper.Zacks: – 5 Strong buy diversified bond mutual funds to bet on. – We will share with you 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 real estate funds, investors can click here to see the complete list of funds.