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Crystal Ball Taper Shenanigans and Today’s Other Top Stories

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Now the Federal Government is back to work, the financial press needs something to write about. So why not spend an hour looking into your crystal ball trying to speculate when the Fed is going to taper back the level of bond purchases it makes as part of its monetary stimulus program.

So here for your enjoyment is a quick summary of when some of the big movers and shakers think tapering will begin.

First up we have Chicago Fed President Charles Evans, who said Monday. “It will be tough for the Federal Reserve to have sufficient confidence in the strength of the U.S. recovery by its meeting in December to start scaling back a massive Fed bond-buying campaign, a senior U.S. central banker said on Monday.”

Citigroup seem to be ignoring Evans comments after it released a statement saying. “Its base case still anticipates tapering of QE to begin in either December or January, with asset purchases ending in the third quarter of next year.”

Barclays fixed-income strategist Ajay Rajadhyaksha says. “The Fed is most likely to start tapering in December.”

Joseph Tanious of JPMorgan told Bloomberg Television: “You’re probably looking at something early next year, possibly January under Yellen.”

And finally Ian Shepherdson, chief economist at Pantheon Macroeconomics says. “The U.S. central bank won’t begin the long-discussed pullback from its asset-purchase program until next June.”

So there you have it. The Fed could begin tapering anytime between now and next June. I think we have all bases covered there. Of course they could all be wrong, don’t forget these same analysts were convinced that tapering would begin in September.

 

Todays Other Top Stories

 

Municipal Bonds

InvestmentNews: – No end in sight for muni bond malaise. – Sell-off has created a market with lots of sellers and few buyers. Could tax season provide a solution?

DailyWealth: – Safe 8%-plus dividends in a zero-percent world. – There is one investment that’s paying big yields… more than 5%. And thanks to a tax advantage, that yield could be worth 8%-plus. You could even earn double-digits with the right fund. This investment pays a higher yield than any other safe income opportunity… yet, everyone is too scared to buy. Today, the best income opportunity I see is in municipal bonds.

Bloomberg: – Catholic Hospital Group heads for $8 Billion in debt. Catholic Health Initiatives will become the second-biggest bond issuer among U.S. hospitals after issuing $1.7 billion in debt in five states starting this week.

FT: – Puerto Rican muni bonds – a new production of ‘West Side Story’. – There are a lot of moral obligations here, and not enough assets to meet them, writes John Dizard.

FT: – Puerto Rico: Small tropical island, giant muni bond debt. – The precarious state of Puerto Rico’s municipal debt market has come into focus after William Galvin, Massachusetts secretary of the commonwealth, launched an investigation into sales of the US territory’s bonds by leading mutual fund managers to residents of his state.

 

Education

Learn Bonds: – Rethinking the United States ‘AAA’ rating. – Does the U.S. deserve its AAA rating? Financial Lexicon takes a look.

 

Treasury Bonds

Donald Van Deventer: – What debt ceiling damage? Treasury forecast down 0.10%, 1-month bill rates normal. – This week’s implied forecast reflects the midnight October 16, 2013 Congressional agreement to temporarily lift the debt ceiling for the United States of America. One month Treasury bill yields have returned to the 0.01% level after peaking at 0.32% on October 15.

FT Adviser: – “Tapering is off the table”. – Fresh from having made $1bn impeccably timing the putative US recovery in the first half of this year (and Japan, natch), Andrew Law of Caxton Associates – one of the world’s most successful macro traders – has now turned bearish, and in quite a big way.

 

Corporate Bonds

Morningstar: – IShares launches 2 short-duration corporate-bond ETFs. – Renaissance Capital launches an IPO ETF, WisdomTree rolls out a currency-hedged German-stock ETF, State Street draws up plans for an emerging-markets, low-volatility ETF, First Trust drafts a fund that would hold dividend-boosting firms listed on the Nasdaq, and more.

 

High Yield

Advisor.ca: – 4 Benefits of high-yielding assets. – und managers should take advantage of high-yield assets. So says Andrew Kronschnabel, portfolio manager at Logan Circle Partners in Philadelphia. He manages the Renaissance U.S. Dollar Corporate Bond Fund.

ETF Trends: – Popular PIMCO short-term, high-yield bond ETF gets euro-hedge. – PIMCO and European provider Source expand on the popular high-yield, short-duration bond strategy with a London-listed, euro-hedged exchange traded fund version.

FT: – M&A bonds surge to highest in 6 years. – A burst of investor “animal spirits” has boosted the value of mergers and acquisitions-related bonds to the highest raised since the financial crisis.

 

Emerging Markets

FT: – Renewed vigour for EMs favours Indonesian bonds. – The U.S. budget deal is done (well, kicked down the road in truth), while the Federal Reserve is now expected to extend its largesse to compensate for the economic damage caused by the government shutdown and political gridlock. Thus, with seasonal factors also likely to be supportive, many analysts see a window for more bullishness in which risk premiums will be reduced over the next few months. Which should be good news for emerging markets.

 

Bond Funds

Morningstar: – 6 things every investor must know about closed-end funds. – Here is a synopsis of six things every potential CEF investor should know.

About.com: – PIMCO’s ZROZ ETF: The best way to trade the bond market. – The vast majority of bond investors hold long-term positions designed to produce income and provide portfolio diversification. While the conservative approach is the most typical, there is no shortage of investors who look for ways to make short-term trades to capitalize on daily, weekly, or monthly moves in the market.

FT: – Rate risk hangs over small bond investors. – How investors respond when interest rates finally start to increase is probably the most important question facing bond markets.

FT Adviser: – End of bonds bull run threatens future income. – How to distribution funds stack up and what has been driving performance? Philip Scott finds out.

Zacks: – 5 highest yielding Zacks #1 ranked high yield bond mutual funds. – High yield securities are the preferred option for investors who have a reasonable appetite for risk and who are willing to forgo equity growth for current income. This category of securities comprise of corporate bonds of low quality, convertible securities and preferred stock, all of which carry a significant amount of risk. Mutual funds are a prudent method to invest in this class of funds as they significantly reduce the risk involved by holding a well-diversified portfolio. Such funds may also seek capital appreciation as a secondary objective.

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