3 Options for the Treasury as Debt Limit Hit…$150 Billion in Muni Market Calls?. Boosting Liquidity with Illiquid Bonds …and more!

January 8th, 2013 by

ZeroHedge: – Presenting the Treasury’s options to continue pretending the US is solvent. The debt limit was formally reached last week, and we expect the Treasury’s ability to borrow to be exhausted by around March 1. But the debt limit is only one of three upcoming fiscal issues, albeit the most important one. So what options are open to the Treasury now? Tyler Durden’s excellent article on Zero Hedge lays them all out for you.

Bloomberg: – Muni cap may force $150 billion in calls. – US municipal issuers may have to call as much as $150 billion of debt if President Barack Obama’s plan to limit income-tax deductions is applied to interest on the bonds, according to Citigroup Inc.

FT: – Fed injects new sell-off risk into Treasuries. Bond investors have endured the worst start to a year for US Treasuries since 2009. As debt worries in Washington have receded with a deal on the fiscal cliff and the Federal Reserve looks to trim its heavy bond-buying, the question is whether the sharp jump in yields – and fall in prices – has further to run.

Bloomberg: New Basel rules allow banks to boost liquidity with illiquid bonds - The CHART OF THE DAY shows how relative yields on the lowest-rated investment-grade corporate bonds, now accepted by regulators as liquid assets, blew out to as much as 7.3 percentage points during the crisis when investors shunned the notes.

Washington Post: US Debt default could happen as early as Feb. 15th – That’s 15 days sooner than previously expected.

About.com: – The best performing emerging bond markets of 2012. Emerging market bonds were the best performing fixed-income asset class of 2012, gaining 16.52% based on the return of the largest exchange-traded fund in this market segment. But which markets delivered the best and worst performance?

Morningstar: – What drove the top-performing fixed-income funds of 2012? – Bonds have been in a monster bull market for decades. This has plenty of people believing that interest rates have nowhere to go but up. However, we have yet to see a sustained upward move in interest rates, which would signal the end of the bond bull market.

WSJ: – Commercial mortgage bond demand spurs borrower’s market.The rally in commercial mortgage bonds since mid-2012 has paved the way for a brisk start for issuance this year and sweetened terms for borrowers.

Learn Bonds: – How to avoid the #1 mistake made by bond fund investors. – Many bond investors top priority is income, which leads them to place a heavy emphasis on a fund’s yield when making investment decisions. To show you why that’s a mistake, and why you should focus on total return instead, lets take a look at an example.

ETF Trends: – ETF investing ideas for 2013, including PIMCO’s BOND. – The exchange traded fund industry continues to innovate and evolve. Strategies have emerged to help investors cope with market uncertainty while other products have dissolved due to lack of investor interest. Some of the more successful trends recently seen in the ETF industry include low-volatility stock ETFs, emerging market local currency bonds and actively managed bond ETFs like PIMCO’s Total Return ETF (NYSEArca: BOND).

Ploutos: – 2012 Bond market review and outlook for 2013.The days of equity-like returns in fixed income are gone. It has been a storied run. Fueled by monetary accommodation from the Federal Reserve, yields reached new lows in a host of fixed income asset classes as investors were pushed out of the risk curve by historically low Treasury yields. Will this scenario continue to be played out in 2013?

FT: – Bond rush disguises lack of high-yield assets.With a temporary solution to the US fiscal cliff agreed and the European Central Bank’s pledge to backstop the euro soothing nerves, US companies including Ford Motor and General Electric Capital have taken advantage of a broad market rally. Last week they sold over $12bn in new debt in a single day.

WSJ: – Companies leap into the bond market. The investment-grade corporate-bond market was ablaze with new deals Monday. Fifteen corporate borrowers rated BBB or better raised a combined $17.7 billion, making Monday the third-busiest session by volume in the past 12 months, according to data provider Dealogic.

Reuters: – Aetna back in market with catastrophe bond offering. Health insurer Aetna has launched a catastrophe bond that will help protect Aetna against higher-than-expected medical claims on a portion of Aetna’s group commercial health insurance business.

Derek Chipman: – Cooper Tyres bonds burn rubber.Cooper Tyres (CTB) is a highly profitable company that has exhibited strong growth of the past decade. In addition, they’re not highly leveraged, making them less acceptable to be adversely affected by business risks. CTB has adequate capital structure for the industry in which it operates and continues to decrease its long-term debt outstanding with timely payments.

Jeffrey Gall: – The best high yield bond fund you’ve never heard of.The Helios Strategic Income Fund represents a nice alternative to other popular junk bond funds such as JNK or HYG. HSA provides the investor with an increased yield, discount to NAV, and superior credit quality when compared with the popular junk funds.

Adam Gefvert: – Is the sun setting on Suntech Bonds?Suntech Power Holdings (STP) is the world’s largest producer of solar panels. The stock has been on a tear recently along with the rest of the solar energy sector, but this particular stock has problems all of its own. There is a way to play it but it’s not for the faint hearted, so if you take the risk, be prepared to get your fingers burnt. 

Reuters: – Three smart money moves for 2013. Here are three ways to ensure that you’re making smart money moves this year.

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