Best of the Bond Market for September 20th, 2012
HighYieldBond: Intelsat Jackson Just made history as the lowest yield ever for a CCC issuer - as it placed a $640 million issue of 6.625% notes due 2022, at par, the middle of talk. The CCC+/Caa2 paper is essentially steady since freed to trade, with quotes at 99.75/100, according to sources.
CNBC: – The Problem with Bond Fund Ratings – Many individual investors put too much weight on bond fund ratings from research agencies like Morningstar. But these ratings often contain flawed data and the analysts don’t fully understand the complexities of the assets involved.
Retuers: TCW Fund Beating PIMCO and Doubleline Total Return Funds YTD- The $7.4 billion TCW Total Return Bond Fund, which has more than 80 percent of its assets invested in mortgage-backed securities, is up 10.68 percent for the year. The TCW fund is besting the 8.61 percent year-to-date return for the $272.5 billion PIMCO Total Return Fund – the world’s biggest bond fund – and the 7.89 percent return posted by the $32 billion DoubleLine Total Return Bond Fund.
Bloomberg: – California – More Bankruptcies on the Way. – California may see more municipal bankruptcies than the three that have been filed since June, state Controller John Chiang said. Municipal budgets already strained by surging pension costs and declining real-estate tax revenue were stripped of more than $1 billion in local redevelopment funds and vehicle-license fees to cut California’s deficit.
Marketwatch: Tepid demand from key groups of investors at Treasury’s auction of 10-year inflation-indexed debt - Bidders offered to buy 2.36 times the amount of debt sold, compared to an average of 2.78 times at the last six comparable sales.
Cate Long: – Things are not so sweet in Moberly, Missouri as muni fraud leaves a bitter taste. – In 2010, the small town of Moberly, Missouri issued $39 million in municipal bonds for a private manufacturing facility that the town hoped would add 600 jobs to its community of 14,000. Yesterday the Missouri Attorney General Chris Koster filed felony theft and securities fraud charges stemming from the collapse of that project, the Mamtek sweetener factory.
Bond Buyer: – Chicago schools teachers’ contract cost $300 million. – Chicago Mayor Rahm Emanuel and Chicago Public Schools’ leaders shed little light Wednesday on how the cash-strapped district will afford the estimated $300 million price tag for a new four-year teachers’ contract that ended the system’s first strike in 25 years.
Learn Bonds: – 3 Income Investing Ideas: Dividend Stocks, High Yield Bonds, MLPs. – While our parents’ generation may have expected their retirement to last 10 or 15 years, couples today expect their retirements to last 27. Much longer retirements represent a major financial challenge. With a 30 year time horizon, the ability to drawdown on principal to support living expenses becomes a much less practical strategy. With that in mind here’s 3 income investing ideas to help you save for a happy retirement.
Kiplinger: – Are Municipal Bonds still safe investments? – Stockton, Cal has become a cautionary tale for buyers of municipal bonds. Investors, who once believed it was nearly impossible to lose money with bonds backed by the full faith and credit of a city government, are now being told that Stockton expects them to accept a loss on their investment. But is Stockton an isolated case or are there more municipal bankruptcies to come?
ETF Daily News: – As bonds evolve so does the aggregate. – Fixed income might have the word “fixed” in its name, but there is nothing truly “fixed” about it – it’s actually a very dynamic asset class that is constantly growing and evolving. While it’s one thing to say that, it’s another to see it in action, and you can do that by looking at the Barclays US Aggregate index. If you were tracking the Aggregate since its inception, what would you have seen in the past 26 years? Let’s take a look back in time.
Bond Squawk: – After QE3 Richmond Fed President Lacker Explains Dissent. – Yesterday, Federal Reserve Bank of Richmond’s President, Jaffrey M. Lacker shared his perspective on the recently announced FOMC’s program for asset purchases and accommodative monetary policy. The main message was that he does not believe that the FOMC’s current program would work, based on two reasons.
Bloomberg: – Bond volatility approaches record low. – The Federal Reserve’s decision to hold borrowing costs steady into 2015 and buy mortgage debt each month is reducing bond market volatility and demand for options that hedge against changes in interest rates.
ETF Trends: – Municipal Bond ETFs: Opportunity in plain sight. – Municipal bond yields have sunk to near historic lows. Sector and quality spreads continue to narrow. So where can an investor harvest returns while the Fed keeps rates low?
Suggestion has been made that states issue infrastructure bonds which Federal Reserve would buy in lieu of mortgage bonds @theleftbanker
— Cate Long (@cate_long) September 20, 2012
— PIMCO (@PIMCO) September 20, 2012
fitch: wouldnt be surprised to see more BKs in Cali. we rate 40 cities in cali and dont expect BKs to be any of those
— Taylor Riggs (@TaylorRiggs_BB) September 20, 2012
-80ish yield on 10 year Tips really drives home what a bad deal US Treasuries are for real money.
— Ed Bradford (@Fullcarry) September 20, 2012