Bill Gross Likes Treasurys Too…5 Reasons Why Bond Funds Beat ETFs…Why Not Short Treasurys…and more!March 8th, 2013 by Simon G
MarketWatch: – PIMCO’s Gross: ‘We like Treasurys here’. – PIMCO’s Bill Gross, who runs the world’s largest bond fund, expressed his interest in Treasury bonds at current yields in a tweet sent on Friday.
Forbes: – Five reasons bond funds are better than ETFs. – When it comes to fixed income, I tend to select mutual funds over ETFs. This may surprise some investors, considering that the currently low-interest rates make the lower expenses of ETFs even more compelling. But when it comes to managing fixed income portfolios, I tend to err on the conservative side when it comes to managing fixed income portfolios. My goal is to manage risks and produce consistent positive performance, and I’ve found funds are usually the best option. Here are five reasons why.
CBS News: – Why not short Treasury bonds? – For the past several years, investors have been worried that interest rates were sure to rise, leading them to stay away from investing in any bonds except very short-term ones. That has been bad enough, but some investors have even sought out funds that short Treasuries, hoping to cash in once rates go up. That strategy has been even worse. Let’s look at a few of the larger of these funds to see how investors have been rewarded for betting against bonds.
Learn Bonds: – Are high yield bank loans better than high yield bonds? – Fear of inflation and rising interest rates have prompted tremendous interest in mutual funds and closed end funds that invest in high yield bank loans. Bank loans have the magical quality of not losing value when interest rates rise because they pay a floating interest rate which moves with short-term rates.
ETF Trends: – Risk-Free? — Treasury, high-yield bond ETFs diverge. – The employment report “added to bond bears’ arguments that as the economy continues to improve, the Federal Reserve may need to cut back or even stop buying Treasury bonds before the end of this year, yet bond bulls are not convinced the Fed will change its stance on bond buying… Some traders believe that yields at multi-month highs may lure bargain hunting investors and boost demand for next weeks auctions.
ETF Trends: – Bond ETFs and the curious case of the rising rate redux. – Since the beginning of the current post-financial crisis low rate environment, every New Year has started with speculation that this year will be the year that rates finally move higher. Each year we have seen rates creep higher from January to March, and each year rates have ended December lower then where they started. This pattern raises two questions as we look at the current environment: Why did this trend happen historically? And will it repeat again this year?
BusinessWeek: – Corporate bond sales decline in US as relative yields narrow. – Sales of corporate bonds in the U.S. fell this week and relative yields narrowed as political wrangling in Washington deterred borrowers.
Yahoo Finance: – Is the bond market signaling the end of the equity rally? – Lincoln Ellis of the Strategic Financial Group says the disconnect between stocks and bonds is getting more troublesome with every uptick, creating a market tension likely to end in tears for equities.
Reuters: – Households withdraw record amounts from US muni market. – Individual investors fled US municipal bonds in 2012, pulling a record $238.1 billion out of the market in the final quarter of the year, according to Federal Reserve data released on Thursday.
Reuters: – For mortgage masters, 2013 is a bond-picker’s market. – For hedge funds that specialize in mortgage bond investing last year was almost too easy when it came to making money. But this year, mortgage debt traders are cautioning investors to temper their expectations.
Bloomberg: – Treasurys drop as gain in jobs signals Fed’s efforts paying off. – Treasuries slid, pushing 10-year note yields to an 11-month high, after US employers added more jobs than forecast and the unemployment rate fell, indicating the Federal Reserve’s stimulus efforts may be paying off.
US News: – Irrational behavior in the bond market? – When investors are borrowing money to increase positions in a market that is as overbought as anything Dan Fuss has ever seen in his investing career, I think it’s safe to say it’s not a good time to buy and that any move to lighten up on your existing bonds will likely be a good one.
Reuters: – Illinois house votes to cap pensions, rejects bigger reforms. – The Illinois House of Representatives on Thursday took the first small step of the year toward pension reform, voting to cap annual pensions to retired workers to end abuses resulting in payments exceeding $100,000 a year to some people.
Reuters: – Los Angeles looks to more cuts after sales tax increase rejected. – It’s back to the chopping block for Los Angeles after voters rejected a tax increase to help close a projected budget deficit of $216 million.
Gross: We like Treasuries here..91% on 5-year produces nearly 2% return with rolldown (assumes #Fed stands pat until 2015).
— PIMCO (@PIMCO) March 8, 2013
It will never become socially acceptable to quote us treasury prices with TLT/TBT
— David Schawel (@DavidSchawel) March 8, 2013
Hope my hedges work? “@joesaluzzi: Suppose you had a $3 trillion bond portfolio & rates started ticking up. How would you feel this morning?
— Cate Long (@cate_long) March 8, 2013