Treasuries Rise as IMF Cuts Growth and Today’s Other Top Stories

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Treasury bonds strengthened for a second day on Tuesday after the International Monetary Fund cut its forecast for world growth boosting demand for ultrasafe U.S. government debt.

In today’s trading, the benchmark 10-year note was 9/32 higher, yielding 2.393%, according to Tradeweb. Yields fall as prices rise.

The International Monetary Fund warned that stagnation in Europe, a slowdown in large emerging markets and heightened political tensions in Russia and the Middle East threatened an increasingly fragile global economy.

At a news conference starting its semiannual meeting, an event that attracts financiers, policy makers and central bankers from around the globe, the fund’s top economists highlighted a tepid economic recovery in which the major nations of the world have failed to keep up with the United States.

The fund brought its estimate for global growth down to 3.3 percent from 3.7 percent, and reduced its forecast for 2015 to 3.8 percent. The fund pointed to weaker growth in China, Europe, Japan and Latin America (Brazil in particular) as the main culprits behind the broad retrenchment.

Signs of an uneven pace of global economic growth and ongoing geopolitical uncertainties in Ukraine and the Middle East have sent Treasury bond yields lower over the past few months even though the U.S. economy has gained traction.

A better-than-forecast jobs report for September sparked selling in Treasury bonds on Friday, but the market clawed back the loss on Monday.

Some bond investors and analysts expect the Fed to be patient in raising interest rates given the uncertainties over the global economy. Tame inflation in the U.S. also gives the Fed some breathing room.


Todays Other Top Stories

Learn Bonds

Learn Bonds: – A rare victory for bondholders in California. – The municipal bond market is currently a story of tightening credit spreads and a rare victory for bondholders in California of all places.


Municipal Bonds

NY Times: – How the big tobacco deal went bad. – Looking at the continuing decline in cigarette sales and the corresponding payments, many analysts, believe that tobacco bond defaults will begin to materialize by 2026.

Left Banker – On sale now: Tax-free income over 6%. – Municipal bond CEFs solidly outperform ETFs in this asset class, frequently by a large margin. Discounts are currently running at exceptionally low levels, indicating bargain shoppers should be able to find rare deals in today’s muni bond CEF marketplace.

Bloomberg: – Puerto Rico Senate passes borrowing up to $1.2 billion in notes. – Puerto Rico’s Senate approved selling as much as $1.2 billion of notes, which would be the U.S. commonwealth’s first borrowing after enacting a law allowing some public agencies to restructure debt.

Barron’s: – Monoline Insurers ‘could reach 10%’ of muni market again – Citi. – Like bison on the Great Plains, monoline insurers used to roam in great numbers across the muni-bond landscape. Then the financial crisis hit and monolines nearly went extinct. But now they’re on the rebound, and though far less abundant than they were a decade ago, they soon could climb back to relevance in the muni market.

WSJ: – A Calpers comeuppance. – A major political battle line these days is between public-union pension funds and taxpayers who pay the bills. Taxpayers won a major victory late last week when federal judge Christopher Klein ruled that the California Public Employees’ Retirement System (Calpers) isn’t protected from cuts in the city of Stockton’s bankruptcy trial.

Janney: – Municipal market review September. – We are seeing cracks in the U.S. state sector and an unprecedented multi-year run of credit deterioration by some local governments.


Bond Market

FT: – High risk bonds have further to fall. – Searching for yield and buying risky assets have been the name of the game for bond portfolio managers since the crisis. The riskier the bonds, the better the performance: high yield bonds beat the S&P 500 in three of the past five years.

Business Recorder: – Financial market storm brewing as 2014 winds down. – With the exception of commodities, the swollen sea of liquidity pumped out by central banks has once again buoyed all boats. Ultra-safe US and German government bonds compete favourably with riskier Wall St, Shanghai or frontier stocks for best performing asset of the year so far.

Zero Hedge: – Chart of the day: Why every corporate bond manager is freaking out. – The rising bond ownership by central banks has not only eroded bond overweights but has also made private non-bank investors very overweight credit.

Barron’s: – Volatility ahead? What to expect from fixed income. – (Subscription) As volatility and economic growth picks up, what does this mean for bond investors? Meg McClellan, J.P. Morgan’s Global Head of Market Strategies, Global Fixed Income & Liquidity, talks with Dr. David Kelly, Chief Global Strategist, J.P. Morgan Funds, and Bob Michele, Chief Investment Officer of J.P. Morgan’s Global Fixed Income Group, about the economy, the Fed and the implications for the fixed income markets.

FT Adviser: – Natural resources power bond markets. – (Subscription) The speed and scale of U.S. shale oil and gas production – and the clear potential for other countries to develop previously uneconomical deposits – is bringing many resources companies to bond markets, which means they could form part of a multi-asset portfolio.


Treasury Bonds

WSJ: – U.S. Government bonds gain on global growth concerns. – Treasury bonds strengthened for a second straight day on Tuesday as fresh worries over global economic growth boosted demand for ultrasafe U.S. government debt.


Investment Grade Bonds

Donald van Deventer: – Kinder morgan energy partners edges Berkshire hathaway for ‘best value bond trade’. – 2 issues by Kinder Morgan Energy Partners edge out a Berkshire Hathaway Inc. bond issue for best value bond trades.


High Yield Bonds

Financial Lexicon: – Here’s what’s wrong with HYG. – I have three strict requirements for investing in bonds. HYG has experienced periods of falling prices and falling yields-on-cost. For me to feel comfortable investing in HYG, it would require significantly lower prices.

Kiplinger: – Handle junk bonds with care. – Because interest rates are so low today, the extra income you get from high-yield, or “junk,” bonds looks tempting. But before you buy in to junk, you should know what you’re getting yourself into.


Emerging Markets

Investment Week: – Ashmore partners with Source for active EM ETF launch. – Emerging markets specialist Ashmore has partnered with ETF provider Source to launch a suite of actively-managed emerging market debt ETFs.


Investment Strategy

Investopedia: – Pimco investor? Consider this before bailing. – Here are six considerations for Pimco investors as you decide what to do going forward.

Morningstar: – The bucket approach to retirement allocation. – A diversified portfolio with various time frames can help you meet your income needs during retirement.

ETF Trends: – Potent inflation-fighting ETFs. – Treasury inflation protected securities have been used as a go-to hedge for rising prices. However, there are a number of other assets and exchange traded funds investors can utilize to shield against inflationary pressures.

Investors.com: – Four bond ETF ideas in unclear rate climate. – The investing world has its own version of tea leaves: interest rates. You may as well read one as take a guess on the other. Here are some ETF ideas to consider as you sort through the hawkish and dovish signals from the Fed on policy normalization.

Market Realist: – Where do bond funds go from here? – What can investors expect going forward now that Bill Gross has joined Janus Capital? First, in the short term there will be a net outflow from various PIMCO bond funds to bond funds of other strong players like BlackRock, iShares Core U.S. Aggregate Bond ETF (AGG), and Vanguard Total Bond Market ETF (BND). Plus, there will be a benefit to Janus too, as Mr. Gross will bring in his expertise.

FT Adviser: – The opportunities for effective diversifiers. – (Subscription) So far this year, a significant theme has been equity markets hovering near all-time highs and bond yields falling further. This climate has made it more challenging for multi-asset investors to find effective diversifiers, but a few bright spots remain in equities and commercial property.

BlackRock: – Three bond moves to consider after the September jobs report. – Given all the fixed income headlines over the last week, you may be wondering what the latest jobs report means for your bond portfolio. Rick Rieder shares three investing implications of the September employment numbers.

ETF.com: – Moving beyond active vs. passive debate. – I understand businesses need to make hay while the sun is shining. And five years into a screaming bull market can make a lot of hay for passive managers. But are we doing right by clients when we recommend one methodology over the other? Should deciding between active and passive management styles be an “either-or” decision?


Bond Funds

Reuters: – Pimco’s outflow headaches only just beginning. – Outflows from Pimco may be far from over as many investors have yet to decide whether to stick with the Newport Beach, California-based asset manager.

ETF.com: – Post-gross, BOND 18% smaller; flows slow. – In the week since Bill Gross unexpectedly resigned from PIMCO, investors have pulled nearly 20 percent of the assets from the PIMCO Total Return ETF he managed, a conspicuous exception in a week that featured sizable inflows into bond funds amid a stock-market pullback.

USA News: – The hidden risks and costs of ETFs. – ETFs can make a great addition to your portfolio, assuming you don’t misuse them.

Market Realist: – Will Bill Gross’s departure from PIMCO net profits for Janus? – Many financial publications last week covered the departure of the legendary bond mutual fund manager Bill Gross from Pacific Investment Management Company, LLC (or PIMCO) to join Janus Capital (JNS).


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Adam Green is an experienced writer and fintech enthusiast. He he worked with LearnBonds.com since 2019 and covers a range of areas including: personal finance, savings, bonds and taxes.

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