A Bond Investor Blood Bath…Something’s Up With High Yield Spreads…A Global Cliff…and more!October 26th, 2012 by Simon G
Best of the Bond Market for October 26th, 2012
The Reformed Broker: Individual bond investors are setting themselves up for slaughter – There’s going to be such a brutal bond investor slaughter at some point over the next decade that the streets of Boston’s mutual fund district will run red with blood, the skies will be shot through with the lightning and thunder of unexpected capital losses and those who manage to survive will envy the dead.
ZeroHedge: What do high yield bonds know that other investors don’t? - The ratio of High-Yield bond spreads to Investment-Grade bond spreads is its highest in three years.
Washington Post: – Never mind the fiscal cliff we’re going off the global cliff says PIMCO’s Bill Gross. – Whoever gets elected on Nov 6th “they should focus on where the money is: higher tax rates on capital gains and income for the wealthy, and reduced long-term entitlements in Social Security, Medicare and Medicaid for all Americans. The fiscal gap must be closed from both ends. If not the US risks entering a period of sustained higher interest rates, a lower dollar and stunted GDP”, says PIMCOs Bill Gross.
BusinessWeek: – Bond sales fall in US as spreads widen. – Sales of corporate bonds in the U.S. fell 53 percent this week and relative yields widened for the first time this month as companies missed sales estimates and economists lowered their growth forecast for next year.
Morningstar: – A sample moderate retirement portfolio in 3 buckets. – For investors with 20-year time horizons, this portfolio includes a good mix of shorter- and longer-term holdings.
BondBuyer: – Muni participants need to make the case for tax exemption. – Access to the municipal bond market will be maintained only if market participants, especially state and local government officials, are willing to fight to preserve tax exemption, a new report warns.
NASDAQ: – High-Grade-Bond Market Absorbs $3.9 Billion of New Deals. – The corporate-bond market has faltered somewhat this week amid weak earnings, but conditions were strong enough Thursday to support a combined $3.9 billion of new deals from five high-grade issuers.
NY Times: – Illinois debt takes toll on services. – For years, Illinois has racked up billions in public debt to plug budget holes, pay overdue bills, and put money into its mismanaged pension funds. And for the people who live there, this has resulted in decrepit commuter trains and buses, thousands of unsound bridges, 200 hazardous dams and one of the most inequitable public school systems in America.
BizJournals: –Philadelphia man allegedly pockets money meant for municipal bond fund. – Stephan L. Schneider, 70, was charged with two counts of wire fraud after promoting his company, Investment Holding Group Ltd., as an investment in tax-free municipal bonds. Instead of using his clients’ funds to invest in bonds, prosecutors said, Schneider allegedly used the money to fund another business he owned.
Learn Bonds: – Book Review: The 5 fundamentals of building a retirement portfolio by the Financial Lexicon. – I have been a fan of The Financial Lexicon for quite some time, so I was excited to read his new book, The 5 Fundamentals of Building a Retirement Portfolio. Read my review here!
Matt Schilling: – 3 reasons investors should consider mortgage REITs as an alternative to junk bonds. – One of the best alternatives for yield-seeking investors to consider, are Mortgage REITs. Why? Although the Mortgage REITs rely heavily on the behavior of certain types of bonds, they provide the aggressive high-yield investor with rates that have been traditionally higher than most junk bonds.
Cate Long: – The downgrade grinder continues at Moody’s. – Moody’s released a summary of its third-quarter rating actions today and the downgrade grinder continues to turn in muniland.
Bloomberg Video: Mohamed El-Erian says there may be a bubble in equities.
Reuters: –US muni bond funds report $666 mln inflows. – U.S. municipal bond funds reported $666 million of net inflows in the week ended Oct. 24, up from $620.8 million of net inflows during the previous week, according to data released by Lipper on Thursday.
Barron’s: – BofA favors loan funds over bonds. – Bank of America Merrill Lynch credit strategists are out swinging for loan funds versus bonds this week, arguing that the first group has “a better long-term value proposition than bonds while also shielding investors from the risk of rising interest rates.”
Bloomberg: – Sandusky scandal leads moody’s to cut Penn State’s credit rating. – Pennsylvania State University had its credit rating cut one level by Moody’s Investors Service because of the “substantial financial impact” of the Jerry Sandusky child sex-abuse scandal.
Gross: Makin’ money with money gettin’ harder every day. When yields approach zero, all financial assets are squeezed.
— PIMCO (@PIMCO) October 26, 2012
SIFMA’s Michael Decker says he has noticed a change in rhetoric with regard to tax exemption for muni bonds.
— Jen DePaul (@BondBuyerJen) October 25, 2012
muni bond funds saw 47th consecutive week of inflows, with $666mn in new capital. YTD total now $44.6bn – JPM
— Taylor Riggs (@TaylorRiggs_BB) October 26, 2012
666 million muni fund inflows ($jpm). maybe the day of reckoning is drawing near in #muniland
— Muni Trader (@MuniTrader) October 26, 2012