4 Ways to Increase Yield Without Extra Risk…Record HYG Short Interest…Gross likes CEFs..and more!November 19th, 2012 by Simon G
Barron’s: 4 ways to get yield without extra risks - Opportunities ranging from rolling down the yield curve, to emerging markets.
Bloomberg: The HYG junk bond ETF draws record volume of bearish bets - The volume of borrowed shares of the SPDR Barclays High Yield Bond ETF surged to 22.8 million on Nov. 16, about three times the average during the past year and up from 9.75 million shares a month ago, according to Markit Group Ltd. In a short sale, traders sell borrowed stock in a bet they can profit from price declines.
US News: Bill Gross likes closed end funds - The magic to them is that many of them are slightly levered: They borrow basically at zero percent or close, and then reinvest back into their asset class. Municipal closed-end funds with bonds that yield typically 4 to 4½ percent can be turned into a 6 to 7 percent tax-free investment on the basis of this borrowing and the mild leverage.
TheStreet: – Don’t abandon junk bond ETFs just yet. – There’s a high probability that congress will eventualy come to a fiscal cliff resolution which would result in the prices of many asset classes to soar. Granted, nobody can guarantee that both the legislative and executive branches will come to terms. But in the same vein, it is premature to bury high-yielding investments.
Businessweek: Environmental risks threaten government debt markets - Depleting natural resources such as water and forests could reduce government revenue within the next five years, adding to the risk of investments in sovereign bonds, the United Nations Environment Program said.
Barron’s: – PIMCO’s Gross: No bubble in munis as tax hikes loom. – With all sorts of bonds and other assets looking frothy, if not bubbly, if not at least pretty expensive, Pimco bond maven Bill Gross sees at least one asset class that remains comparatively reasonably valued: muni bonds.
MarketWatch: – Can muni bonds help you deal with fiscal cliff? – Municipal bonds continue to gain as stocks sway to and fro with every utterance from Washington on the likelihood of a deal to avert the so-called fiscal cliff, the set of tax hikes and spending cuts scheduled to start in January.
FT: – Investors pull back from US junk bonds. –Risky US corporate bonds are lagging behind after setting the pace for much of 2012 and are in danger of being eclipsed by a rally in debt issued by high-quality companies.
WSJ: Corporate cash pulls back from agency bonds - Corporate cash managers made their biggest move out of agency bonds in October, shrinking the amount they allocated to such assets to 16.1% of total cash balances at the beginning of November from 17.05% a month before. Most of that money went into corporate debt.
FT: – Bond markets: A false sense of security. – Savers who have stocked up on bonds with record low yields face danger on two fronts: on the one hand, their income could be eroded by inflation, while on the other, the value of their holdings could fall sharply when interest rates do start to rise.
SacBee: – Central bankers could trump fixed income fundamentals to keep rates low. – The actions of global central bankers and legislators may trump economic fundamentals, keeping interest rates low and affecting fixed income returns in 2013.
Learn Bonds: – Frontier Bonds and the case for exotic investments. – The sound of 8% yields and low debt to GPD ratios makes frontier bonds sound attractive. But this is not a market for the unwary. There are inherent risks involved when investing in frontier bonds and you’d be well placed to know what they are before you jump in.
aiCIO: – Corporate bonds and US equities feel investors’ mood swings. – Investors have moved out of United States equities and corporate bonds of all but the highest quality, as budget questions linger in the world’s largest economy and poor data squeezes Europe and Japan.
The Financial Lexicon: – 5 bonds to consider buying on a pullback. – Here are five corporate bonds maturing between 2018 and 2023. Four have ratings of Ba1/BB+ (highest non-investment grade rating) and one has an investment grade rating but is trading as if it is junk rated.
Risk.net: – Non-financial corporate bonds: the future for structured products? – Using non-financial corporate bonds instead of bank bonds to underpin structured products could encourage more investors to consider them, as it would help diversify the counterparty risk within a portfolio, say industry participants.
WSJ: – A Year-end thanks for Treasurys. – Expect safe-haven Treasurys to draw demand at the expense of stocks in the coming weeks, bucking a seasonal trend that has often favored riskier assets.
CALPensions: – High cost of leaving CalPERS may get higher. – The CalPERS board may make it more costly for struggling local governments to close their pension plans.
ETF Trends: – High-yield ETFs suffer outflows amid record bearish bets. – Investors have pulled over $1 billion from the two largest high-yield bond ETFs so far this month as options traders use the funds to make bearish bets against junk debt.
Reuters: – Treasury prices fall as stocks bid on fiscal hopes. – U.S. bond prices fell on Monday as signs of progress in talks between the Congress and the administration to resolve a fiscal crisis caused by large, automatic budget cuts and tax increases boosted demand for riskier assets including stocks, making safe-haven bonds relatively less attractive.
Gross: Most Assets are Bubbly.Municipal bonds much less so due to potential tax changes.
— PIMCO (@PIMCO) November 19, 2012
— Cate Long (@cate_long) November 19, 2012
MMA troubled by #PuertoRico Planning Board FY2013 downward economic growth revisions (0.5% vs. 1.1%) but applaud more realistic assesment
— Muni Market Advisors (@Muni_Mkt_Advis) November 19, 2012
What is bothering me the most about today’s price action is that bonds are not selling off in as convincing way as stocks are rallying
— Michael A. Gayed,CFA (@pensionpartners) November 19, 2012