Bill Gross likes munis…BlackRock says Sell TIPS….and more!August 17th, 2012 by David Waring
Best of the Bond Market for August 17th, 2012
BlackRock: BlackRock fixed income recommends swapping TIPS for floating rate loans - As an alternative for rising rate protection, consider floating rate loan funds. Unlike TIPS, these funds have benefited from a lack of investor interest in 2012 that has instead surged towards fixed rate high yield bond funds. As a result, the yield differential in loans vs. bonds has narrowed resulting in relatively more attractive pricing for loans.
Bloomberg: Muni’s are still yielding more than treasuries even without factoring in the muni tax advantage – Municipal securities remain cheap relative to U.S. Treasury debt even with investors directing the most cash since 2009 to tax-exempt bonds in the $3.7 trillion market.
Marketwatch: Morgan Keegan says recent selloff in treasuries is a buying opportunity - “Investors who are looking at the market over the next few months view these levels as good entry points,” said Kevin Giddis, head of fixed-income capital markets at Raymond James/Morgan Keegan.
Expected Loss: Another take on the problems with the recent NY Fed muni default report - Before municipal bond investors panic, we need to consider several points.
Learn Bonds: When you should be concerned about a ratings change - If you are a conservative investor, you might have a rule that once a bond falls BBB or BBB- , you should liquidate. Those with a high risk tolerance might want to sell bonds before they hit around B+.
Bond Buyer Video: Weekly muni market recap and preview for next week
Marketwatch: High yield issuance already highest ever for the month of August. – “High-yield is where the deluge is truly being felt,” Barclays analysts Jeff Meli and Bradley Rogoff wrote in a report Friday. “With rates still historically low and volatility subdued, new issue has been considerable, with month-to-date high yield issuance already the largest ever for August.”
Bond Squawk: 5 high income short term investment grade bonds – If you believe the Federal Reserve’s stated guidance that short-term interest rates will remain anchored through late 2014 which may be extended to beyond, then interest rates may stay low AND long enough to see these bonds perform.
InvestorPlace: The risk of rising rates may be greater than perceived TIPS mutual funds and ETFs – Exchange-traded funds that invest in Treasury Inflation Protected Securities, or TIPS, might sound like a great idea on the surface, but they’re a much different animal than holding the bonds themselves.
Businessweek: Global bond markets deliver largest monthly loss since 2010 with two weeks left to go. - Bonds are losing value after retail sales and jobs gained more than forecast, and Germany and France slowed less than economists estimated. Goldman Sachs Group Inc. says the Federal Reserve will now likely wait until late this year or early 2013 rather than September to add more stimulus by purchasing bonds in a policy known as quantitative easing, or QE.
Index Universe: Rally in Mexican government debt boosting PIMCO’s BOND ETF – BOND is heavily focused on U.S. debt, but the funds’ investment-grade debt portfolio holds Mexican debt as its second-largest allocation by market value at nearly 9 percent of the mix.
TheStreet: Are “bond motif’s” the answer to simplifying fixed income? The fixed-income motifs are comprised of bond ETFs, and they offer the same targeted solutions coupled with the ability to adjust the holdings. For instance the AMT-Free Munis motif allows investors who are typically snagged by the Alternative Minimum Tax to sidestep the prehensile hand of the feds by avoiding bonds and ETFs with so-called private activity debt issuances that could generate income subject to the AMT.
Business Insider: Interest rates are rising across the globe – catchy headline aside the charts in this piece are very interesting.
FT: Putting the recent move in the 10 Year treasury into perspective - check out the charts
Gross: 10-year AA munis sell at 115% of UST. If/when tax rates go up, munis become more valuable still.
— PIMCO (@PIMCO) August 17, 2012
US HY defying laws of gravity: index trading nr historically low yield of 6.7%, striking distance of all-time high $ price of 104.
— Bond Vigilantes (@bondvigilantes) August 17, 2012