Treasuries rallied on Friday after weaker-than-forecast payrolls data spurred speculation the Federal Reserve will keep interest rates low for longer.
The yield on 10-year Treasuries fell 8 basis points to 2.31 percent at 11:59 a.m. in New York according to data from Bloomberg.
To see a list of high yielding CDs go here.
The labour Department said that payrolls increased by 214,000 in October while the unemployment rate slipped to 5.8% from 5.9% in September. That was slightly below a forecast of 100 economists surveyed by Bloomberg, who called for a 235,000 advance.
While August’s payroll gain was further revised higher to 180,000 to +203,000, and the change for September was revised to 256,00 from 248,000, a combined upward revision of 31,000 jobs more than previously reported.
Peter Tchir of Brean Capital said of the result:
“Headline NFP is ok. Slight miss this month but decent revisions. Treasuries taking solace with the low wage data – a miss this month and last month was revised down. Household report was extremely strong. I think Treasuries will fade, dragging other markets down. The report was too strong overall and it is wrong to latch on to the one weak number.”
Todays Other Top Stories
Learn Bonds: – Exchange Traded Debt – Why do companies issue debt? – Exchange traded debt securities are perfect for income and retirement investors, because they provide the safety of bonds, but the yields of preferred stock, and liquidity of equities. It’s the happy medium for investment.
Detroit News: – Judge approves Detroit exit from bankruptcy.– A judge Friday approved Detroit’s plan to shed $7 billion in debt, calling it “an ideal model” for restructuring a broken city while acknowledging the pain imposed by the biggest bankruptcy case in U.S. history.
WSJ: – Michigan city settles SEC fraud charges in municipal bond sale. – (Subscription) The city of Allen Park, Mich., and two of its former officials settled fraud charges related to the sale of a $31 million municipal bond issue to raise funds for a movie studio project to spur needed economic development, according to the Securities and Exchange Commission.
Bloomberg: – Redwood’s Kolatch recommends Puerto Rico’s electric power. – Jonathan Kolatch, founder of hedge fund firm Redwood Capital Management LLC, recommended buying the bonds of Puerto Rico Electric Power Authority.
Morningstar: – 6 key reasons why investing in a taxable account is underrated. – Currently low tax rates are one of the key reasons that taxable accounts should be part of most investors’ tool kits.
Bloomberg: – Detroit bankruptcy taught muni investors painful lessons. – No matter what a federal judge decides today about approving Detroit’s $18 billion bankruptcy plan, the record-setting case has already taught municipal bond investors some painful lessons.
WN.com: – Did this just change the game for muni investors? – Recent bankruptcy proceedings in Detroit and elsewhere should raise a giant warning flag for investors, says UBS’s head of muni investing.
InvestmentNews: – Likely default of Puerto Rican utility haunts brokers, muni fund managers. – One in four muni bond funds hold at least some debt by an agency the island’s government says will default on loans.
Bloomberg: – New Illinois Governor says he’ll address taxes in January. – Governor-elect Bruce Rauner said he’ll wait until mid-January to address the fate of expiring income tax increases, deflecting questions on how to help Illinois avoid an approaching fiscal meltdown.
Reuters: – Muni investors worried about tax impact from U.S. midterms. – Sweeping changes in the Senate have rekindled old worries for U.S. municipal bond investors about a clean-up of the tax code that could impact bonds, however, fundamental changes to the tax treatment of munis is seen unlikely.
Chicago Tribune: – Risky bonds prove costly for Chicago Public Schools. – Fresh from the world of high-stakes trading, David Vitale arrived at Chicago Public Schools a decade ago with a plan to transform the way it borrowed money.
ETF Trends: – Muni bond ETFs may still ride tailwinds. – The municipal bond market and related exchange traded funds will continue to benefit from the supply-demand but investors could see short-term volatility from default speculation, notably in Puerto Rican debt.
Bloomberg: – Fink joins El-Erian highlighting cost of easy central banks. – Cheap cash is losing its allure among asset managers, and even the chief providers of loose monetary policy are warning of the disadvantages of low interest rates.
Businessweek: – Bond liquidity isn’t dead, it’s just moving away from big banks. – Amid all the craziness and volatility in U.S. bonds last month, a few telling data points emerged that reflect where the market is heading. As some measures of trading surged to records, those carried out by Wall Street’s biggest banks lagged behind.
WSJ: – U.S. Government bonds rise after jobs data. – (Subscription) Treasury bonds rose on Friday as data showed a smaller-than-expected increase in October nonfarm payrolls, easing concerns that the Federal Reserve could raise interest rates sooner than investors expect.
Market Realist: – Must-know: What investment-grade corporate bonds expect in 2015. – There are a few bright spots for bond investors, especially high-quality corporate debt and Treasuries. Japan’s expanded stimulus was announced just days after the Fed’s exit. There’s also the possibility that the European Central Bank (or ECB) will follow Japan’s example and boost the struggling Eurozone economy. Expanded stimulus by central banks usually boosts liquidity in global financial markets (or QWLD).
High Yield Bonds
fastFT: – Investors pour into junk bonds for third week. – The end of the Federal Reserve’s quantitative easing programme has worked out well for junk bonds. Last week alone mutual funds and exchange traded funds investing in the securities saw $2.44bn in inflows in the week through Wednesday, according to Lipper.
S&P Capital: – High yield bond funds see $2.4B investor cash inflow; Now in black YTD. – Retail-cash inflows to high-yield bond funds were $2.4 billion in the week ended Nov. 5, according to Lipper. For a second consecutive week, the infusion is light on the exchanged-traded front, at just approximately 6% of the inflow, or $155 million this past week.
ValueWalk: – High-quality bond yields divergence. – The headwinds of rising high-quality bond yields and increasing new issuance have slowed the advance of high-yield bonds in late October 2014, relative to stock market gains. Nonetheless, we expect high-yield bonds may improve as economic expansion, earnings growth, and low defaults continue to drive our positive outlook.
Indexology: – Diversifying into Chinese bonds. – Investing into Chinese bonds adds diversification benefits to a portfolio through the exposure to local rate, credit and currency. According to the S&P China Bond Index, the Chinese bonds have historically exhibited low to negative correlations to U.S. bonds.
ETF Trends: – Build a solid portfolio with index ETFs. – It’s fun to bet on niche areas markets and win big, but when constructing a long-term investment portfolio, investors are better off sticking to simple and broad exchange traded funds.
Bloomberg: – Pimco clients pulled EU49.2 billion in third quarter. – Pacific Investment Management Co. suffered 49.2 billion euros ($60.9 billion) in investor redemptions in the third quarter, when the firm’s co-founder Bill Gross unexpectedly left.
ETF Trends: – Bond ETFs dominate October inflows. – As had been previously forecast, October was a month to remember for fixed income exchange traded funds as investors allocated a record $17.7 billion to bond ETFs. That easily topped the previous record of $17 billion set in February.
Reuters: – Vanguard bond funds and ETFs post record monthly inflows of $10.3 bln in October. – The Vanguard Group said on Friday that its bond funds and exchange-traded funds posted a record monthly inflow of $10.3 billion in October compared with $9.3 billion in September.
Slow wage gains and weak European data helping bonds rally after jobs jobs report.
— AnthonyValeri (@Anthony_Valeri) November 7, 2014
Rhodes said he is convinced Detroit officials will maintain a manageable level of debt post-bankruptcy.
— Joe Guillen (@joeguillen) November 7, 2014
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