10 Year Treasury Fake Out…Junk Bonds Say Bulls are Back…Corporate Bond ETF Outflows Concerning…and more!January 15th, 2013 by Simon G
Bespoke Investment Group: 10 Year Treasury Breakout or Fakeout? - That breakout in yield, however, is quickly beginning to look like a fake out. As shown in the chart below, after the last few days the yield on the 10-year has now drifted back below its breakout point. Commentators have been quick to write the obituary of the bull market in treasuries, but based on the 10-year yield in the last few days, the market may be saying not so fast.
CNBC: – Junk bond prices point to return of bulls. – The junk-bond market is sending a bullish signal for the global economy in 2013, with investors in US high-yield securities earning higher returns so far this year than those who have bought investment-grade debt.
Barron’s: – Outflow trend from corporate bond ETFs ‘A concern’. – It’s probably wise not to draw too many conclusions from the first two weeks of the year, especially when it comes to the technical’s. And yet, it’s hard to dismiss $52 billion of supply, a 30bp back up in rates, or credit’s underperformance versus equities.
Future’s Magazine: – Higher rates could trigger liquidity shortages in fixed income. – A downturn in global fixed-income markets brought on by an uptick in interest rates or other causes could trigger liquidity shortages for institutional investors. So warns consultancy Greenwich Associates in a new report in which it names the leading dealers in global fixed income.
Learn Bonds: – When does past performance not equal future returns? – The truth is that looking at past performance is critical to understanding the likely future performance of a fund. However, looking just at the absolute % gain or loss of a fund in isolation can be misleading.
MarketWatch: – PIMCO’s Gross ponders if Bundesbank gold move means central banks don’t trust each other. – PIMCO chief Bill Gross is tweeting about Germany’s reported plan to repatriate its gold reserves.
Gross: Report claims Germany moving gold from NY/Paris back to Frankfurt. Central banks don’t trust each other?
— PIMCO (@PIMCO) January 15, 2013
FT: – Bonds to suffer bear market until end of decade. – Star multi-manager Patrick Armstrong has warned that bond markets are now locked into a bear market that will last until the end of the decade.
WSJ: – Corporate bond market prices $9.25 billion. – The beer maker Anheuser-Busch InBev (BUD) sold $4 billion worth of bonds in a four-pack featuring three-, five-, 10-, and 30-year maturities. The deal formed the bulk of a $9.25 billion session for high-grade debt sales Monday, indicating broad support for new deals even after $42 billion worth was priced last week in the second-busiest week on record, per Dealogic.
Bondsquawk: – Understanding credit risk for corporate bonds. – One of the most significant risks for bond investors to consider is credit risk. Credit risk, also known as default risk, is the risk that a bond issuer will default on their payments of interest and principal. When a bond issuer defaults on their payments, the holders of the bond may lose most of their principal.
Mike Williams: – Why income investing will be tough in 2013. – In order to acquire income producing securities in 2013 that provide above average yields without sacrificing quality (risk of capital return), we are going to have to look in some less crowded areas of the marketplace, and we’re going to need to have a variant view of beaten-down securities.
Zacks: – Best or worst fixed income funds? – With the prospect of a junk bond bubble bursting, investors are starting to grow somewhat uneasy about investing in the space, even though it still does provide an outsized level of income to investors.
Vincent Feher: – Bernanke’s pending departure could exacerbate bond market volatility. – Until a new chairman is chosen the Treasury and equity markets could see increased volatility. Accordingly, during times when the Fed is releasing minutes and decisions, investors may want to add some protection for their equity and treasury positions.
Barron’s: – JPM on shift from bonds to stocks: Don’t forget 2010, QE. – With a possible broad-based investor shift from bonds to stocks likely to remain a big topic in 2013, JP Morgan urges investors to look back to late 2010, which saw an abrupt re-allocation from credit to equity funds. But as soon as 2011 started, intensified Europe-related risk put a halt to all that and investors piled back into bonds.
Morningstar: – Busy week in the bond markets. – Investors had plenty of cash ready to put to work, but the sheer volume of new issuance and the lack of new issue concessions allowed for weakness in the secondary markets.
Reuters: – Bonds get safety bid before debt ceiling battle. – U.S. Treasuries prices rose on Tuesday, drawing a safety bid from weaker stock prices and from a prospective battle in Washington over the government’s borrowing limit, and support from large debt purchases by the Federal Reserve.
Cate Long: – Pennsylvania bets on $70 billion in cash flows. – A big brawl is going on in Pennsylvania over the way that Republican Governor Tom Corbett has been maneuvering to privatize the state’s successful public lottery. The governor held negotiations in secret for months before announcing in November, 2012 that he had chosen a single bidder, the UK’s Camelot Global Services, to be awarded a 20-25 year contract to operate the lottery.
— Cate Long (@cate_long) January 15, 2013
10yr TIPS now ~15bps more negative since Jan 3 – low was -87bps in early December
— David Schawel (@DavidSchawel) January 15, 2013