U.S. Treasury yields fell in volatile trading on Thursday after the European Central Bank unveiled a more aggressive than expected bond-buying program. Yields fall as bond prices rise.
ECB President Mario Draghi announced on Thursday that the ECB plans to buy a total of €60 billion ($69 billion) a month in assets, including government bonds, debt securities issued by European institutions and private-sector bonds. The ECB plans to buy bonds maturing from two years to 30 years, a broader range than many analysts had expected.
“It is a big deal,’’ said Jim Caron, global fixed-income portfolio manager at Morgan Stanley Investment Management, with $398 billion in assets under management. “The ECB is going to mop up all the net issuance of government bonds in the eurozone over the next 12 months. We could see even lower yields ahead.”
To see a list of high yielding CDs go here.
The ECB joins the ranks of the Federal Reserve and other major central banks tapping the unconventional monetary-policy tool known as quantitative easing following the 2008 financial crisis. The money largess has sent the value of stocks and bonds soaring over the past few years.
U.S. bonds offer much higher yields compared with their counterparts in Germany, France and other major developed countries, drawing investors seeking relative value in liquid bond markets.
U.S. Treasuries whipsawed following the announcement, with the U.S. 10-year benchmark Treasury note yield climbing to a session high of 1.95 percent, before turning lower. The 10-year note was last flat in price, with the yield at 1.88 percent.
Thirty-year bonds were last down 5/32 in price with the yield at 2.47 percent, having hit record lows of 2.35 percent last week.
Todays Other Top Stories
Learn Bonds: – ECB executive board proposes quantitative easing. – Well, the word is out. The European Central Bank is moving to a program of quantitative easing, one similar to the efforts of quantitative easing put on by the Federal Reserve System in the United States. The parameters seem to be that the ECB will purchase €50 billion, or around $58 billion, in government bonds per month for at least a year.
The Street: – Municipal bonds were great but a 2015 repeat run isn’t likely. – Closed-end municipal bond funds had a great 2014, climbing 19%. However, according to Chris Larsen, director of closed-end funds at Legg Mason, that performance is unlikely to be duplicated in 2015.
Market Realist: – Investors should consider investing in municipal bonds. – Municipal bonds are an attractive investment choice for investors seeking a steady stream of tax-free income. In most cases, interest income earned from investment in municipal bonds is exempt from federal and state tax.
Fortune: – Low oil prices could bring new energy to municipal bonds. – Cheaper oil and gasoline will be a boon to municipal bonds that benefit when drivers hit the road.
Bloomberg: – Koppers pulls $400 million junk deal citing volatile markets. – Koppers Holdings Inc. (KOP) said it’s postponing a $400 million bond deal to refinance debt amid a 55 percent drop in oil prices.
FT: – BlackRock and MarketAxess target europe. – BlackRock, the world’s largest asset manager, has brought its corporate bond trading venture with MarketAxess to Europe to try to offset the retreat of large investment banks from the market.
Bloomberg: – You can’t transform bond trading without dealers, Greenwich says. – As new trading platforms seek to change how business is done in the $7.7 trillion U.S. corporate bond market, a research firm has a warning: Don’t shun the banks that traditionally facilitated transactions.
Bloomberg: – Bond traders can’t get enough low yield hedges. – As low as long-term U.S. interest rates are, derivative traders are snapping up options that provide insurance against them heading further south.
Bloomberg: – Bond managers caught in liquidity trap, Loomis’s Fuss says. – Central banks are creating a liquidity trap where money managers avoiding low-yielding bonds end up adding to reserves returning next to nothing, according to Daniel Fuss, vice chairman at Loomis Sayles & Co.
WSJ: – U.S. government bonds lifted by ECB bond buying program. – (Subscription) U.S. Treasury bonds pared earlier price losses on Thursday after the European Central Bank announced the launch of an ambitious monetary stimulus program to buy government bonds aimed at curbing the threat of deflation.
High Yield Bonds
Bloomberg: – Travelers discloses $224 million of energy-related Junk bonds. – Travelers Cos., the lone property-casualty insurer in the Dow Jones Industrial Average, had about $224 million of energy-related bonds that were rated below investment grade as of Dec. 31.
Matthew Sauer Esq: – Which junk bond ETF is best for 2015? Part 2. – In part two, we compare two short-term high-yield bond funds: the PIMCO 0-5 Year High Yield Corporate Bond and the SPDR Barclays Short Term High Yield Bond.
Emerging Market Bonds
Bloomberg: – Ukrainian bonds sink to record as Poroshenko sees more violence. – Ukrainian bonds sank to their lowest level on record after President Petro Poroshenko warned the pro-Russian insurgency in a conflict that has claimed almost 5,000 lives may escalate as the country struggles to secure another bailout.
Artemis: – Cat bonds continue shift towards ‘cedent-friendly structures’. – A factor that helped to drive record catastrophe bond issuance in 2014 was the structural changes which influenced a more sponsor friendly environment, according to the world’s largest reinsurance firm, Munich Re.
Money: – How to boost returns when interest rates totally stink. – With bond rates looking bare, income investors are eager to grab greener options. Higher payouts are out there, but watch your step: Some are riskier than others.
Morningstar: – 7 Myths that could trip up IRA contributors. – We head off confusion on Roths versus Traditional, age and income limits, and what to put inside of an IRA.
WSJ: – Bill Gross invested more than $700 million in new Janus fund. – (Subscription) Janus Capital Group Inc.’s chief executive confirmed on an earnings call Thursday that new star manager Bill Gross has invested “more than $700 million” of his own money in his new mutual fund.
ETF Trends: – Bond ETFs to capitalize on ECB easing. – The European Central Bank bond-purchasing program could ignite a rally in the Eurozone fixed-income markets and related bond exchange traded funds.
ETF Trends: – Young bond ETFs make their mark. – Approximately 200 exchange traded products debuted in the U.S. last year, the bulk of which were not fixed income funds.
ETF Trends: – Rate-sensitive ETFs at critical junctures. – Ten-year Treasury yields have tumbled another 13.3% to start 2015 after falling 27.3% last year. Predictably, the ongoing declines in U.S. government bond yields has continued being a boon for some beloved, rate-sensitive exchange traded funds.
Think Advisor: – PIMCO outflows aside, bond ETFs looking to shine in 2015. – Although investors saw heavy outflows from PIMCO Total Return bond funds after Bill Gross’ departure from the firm last year, experts say investors in the exchange-traded fund space will see healthy inflows into bond ETFs in 2015.
ECB went for a larger QE program (over 1 trillion euros) in exchange for low risk sharing (only 20% of bonds purchased by ECB, 80% by NCBs)
— Nouriel Roubini (@Nouriel) January 22, 2015
Draghi says they will also buy bonds with negative yields… just think about that for a minute… — Guy Adami (@GuyAdami) January 22, 2015
Treasuries mixed after #ECB QE news. Euro gvt bonds all highr, ylds new record lows, global stks higher. Euro big movr down 0.02 vs USD
— AnthonyValeri (@Anthony_Valeri) January 22, 2015