Bill Gross’s Strategy….Financial Bonds in the Spotlight….Avoiding Long Dated Bonds…and more!September 4th, 2012 by Simon G
Best of the Bond Market for September 4th, 2012
MarketWatch: What is Bill Gross’s secret sauce? - Optimizing sector allocation, Managing interest rate risk measure, Investing beyond the benchmark, Leveraging, Frequent trading.
Bloomberg: – Big banks are becoming increasingly reliant on your deposits to fund trading activities. – Breaking up today’s mega banks would mean restoring the old model of financing securities firms in the bond markets. Without Bank of America’s $1.04 trillion of deposits, Merrill Lynch would have to depend again on capital markets to fund trading and back up derivatives contracts.
BusinessWeek: – Financial bonds beat industrials for the first time since 2005. – Bonds of financial institutions are returning more than those of industrial firms for the first year since 2005 as banks cut debt amid regulatory scrutiny while companies leverage up to tap record-low borrowing costs.
InvestmentU: Why you should avoid getting sucked in to long dated bonds - A Wall Street Journal article described recent corporate bond offerings as almost entirely focused on the long end of the maturity curve – greater than 10 years. That’s the exact opposite of where buying should be in this market.
MyPlanIQ: A momentum portfolio comprised only of bond ETFs - In a recent research paper titled ‘Hot Hands’ in Bond Funds by Derwall, Jeroen and Huij, Joop, it is shown that investing based on past performance momentum in bond funds could earn statistically significant returns.
Business Insider: – As major indices flounder Treasuries surge, but is there momentum behind the rally? – To see treasuries surge again, then – even as the major indices flounder and act weak below the resistance of multi-year highs – is a significant non-confirming sign. If this rally were strong and gaining momentum – as opposed to potentially fading – bonds would still be in a confirmed downtrend, not finding their footing and roaring back.
Learn Bonds: – PIMCO Real Returns Commodity Strategy Fund – Not the Inflation Protector it Claims to Be. – The PIMCO Real Returns Commodity Strategy Fund (PCRAX) is described as A Double Real™ inflation-hedging strategy. But is it true, we take a closer look at the fund to find out.
Bloomberg: – Illinois bonds suffer as they continue to bury their head in the sand. – Illinois continued procrastination regarding their pension deficit is costing the state dear. Higher yield penalties are the result of Standard & Poor’s credit downgrade last week. This is in stark contrast to California who are benefiting from lower yield penalties after confronting the issue head on and agreeing a new pensions deal which should save the state $55 billion.
Reuters: Bankruptcy saves tiny Rhode Island city, but leaves scars. Central Falls, in Rhode Island, is close to emerging from bankruptcy with a plan that hammers its retired municipal employees but leaves bondholders unscathed, in a contrast with other recent U.S. municipal bankruptcies.
BondBuyer: – What are Capital Appreciation Bonds (CABs) and what are the risks? – Fitch analyst Amy Laskey discusses the pros and cons of capital appreciation bonds. What are they and what are the risks involved?
BondBuyer: – Muni World Comments on Guilty Verdicts in UBS Bid-Rigging Case. – In the aftermath of guilty verdicts Friday against three former UBS AG professionals in a municipal bond bid-rigging case that government prosecutors lauded, two defense attorneys said they would appeal and an industry organization said the verdicts were a warning to muni bond professionals.
Gross: Draghi appears willing to write 2-3 year “checks” to peripherals. Very reflationary. Buy gold, TIPS, real assets.
— PIMCO (@PIMCO) September 4, 2012
Janney Montgomery: YTD, muni new issue calendar running 52% ahead of 2011, largely on refunding sales#muniland
— Cate Long (@cate_long) September 4, 2012
Open ended bond buying with no restrictions as to amount and duration, I preferHelicopter drops
— InterestArb (@InterestArb) September 4, 2012