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David C. Wright, Co-Founder of Sierra Investment Management, sat down with Barron’s yesterday afternoon, to discuss his investment strategy post Fed announcement.
Wright says he has “been buying munis and high-grade corporates with both hands in the last few days,” on the belief that the Fed may not reduce its $85 billion a month stimulus package for another six months.
To get this exposure, Sierra is buying mutual funds, including the PIMCO All Asset All Authority Fund (PAUAX). Sierra is not employing exchange-traded funds nor buying individual issues.
Wright thinks that high-grade corporates and munis are undervalued relative to Treasuries, which are their benchmark. The selling pressure has eased up. There is 3% to 4% upside in the price, the value of these mutual funds, and you are getting the yields now.
It should also be noted that Sierra does not advocate a buy to hold strategy. They buy when a category price turns from downward to upward and sell when they see a downtrend punishing categories.
You can read the full interview here.
Bloomberg: – Chicago bears biggest pension load of debt-laden locales. – Chicago and surrounding Cook County have the largest pension burdens among the 50 most-indebted U.S. local governments, according to Moody’s Investors Service.
Money News: – Municipal bonds on a roll as supply dwindles. – Rising interest rates shook up the U.S. municipal bond market in the middle of the year, bringing a long run of refinancing to a halt and tempering new debt sales, Federal Reserve data showed on Wednesday.
Reuters: – Shaken U.S. municipal bond market contracted in second quarter. – Rising interest rates shook up the U.S. municipal bond market in the middle of the year, bringing a long run of refinancing to a halt and tempering new debt sales, Federal Reserve data showed on Wednesday.
Providence Journal: – Moody’s upgrades Providence’s outlook. – Moody’s Investors Service, one of the country’s top credit-rating agencies, has revised its financial outlook for Providence from negative to stable.
CNBC: – Issue municipal bonds? No thanks, we’ll crowdfund instead. – When most towns need trash cans, they use money raised from taxes or municipal bonds. But when a city that emerged from bankruptcy less than a year ago needs trash cans, a touch of creativity is required. That’s why Central Falls, R.I., is trying to use a method more commonly associated with Internet start-ups and low-budget movies: Crowdfunding.
Reuters: – U.S. money funds diversify in Puerto Rico, sidestep credit risk. – Some U.S. municipal money market funds appear to have loaded up on bonds issued by Puerto Rico, whose free-spending ways and chronic deficits have scared off many investors in recent weeks.
Learn Bonds: – Why the recent drop in interest rates may not be what you think. – Last Wednesday some interesting things occurred that had an immediate influence on interest rates and might serve as a model of how we can interpret the movements in interest rates and, hopefully, increase our understanding of what is happening in the world.
Zacks: – Time to buy Treasury bond ETFs? – We have highlighted three Treasury bond ETFs that could continue to offer price appreciation to investors as long as the Fed does not taper. The trio have a decent Zacks Rank of 3 or ‘Hold’ rating as well, suggesting that these could be a good picks at present.
Market Oracle: – Hidden panic at the U.S. Fed as flash trading hits Treasury bonds. – For two years or more, the U.S. Treasury Bond market has been deeply dependent upon artificial demand derived from the derivatives. Entire bond rallies have been fabricated with 50:1 leverage, fully supported by the financial network propaganda. Without derivative flying buttress support, the giant U.S. T Bond Tower would have collapsed a couple of years ago. Now a new support system has been begun, a dangerous musical chairs long entrenched in the stock market. It has entered the bond market finally. Flash Trading!
Bloomberg: – Verizon, Sprint lead record month for U.S. bonds. – Sales of corporate bonds in the U.S. reached an all-time high this month, with phone companies Verizon Communications Inc. (VZ) and Sprint Corp. (S) leading offerings of about $193.7 billion.
Bloomberg: – AIG sells $1 billion of 10-year bonds as corporate yields drop. – American International Group Inc. (AIG), the insurer that paid back a $182.3 billion bailout package last year, sold $1 billion of 10-year notes as corporate bond yields fell to a six-week low.
Market Realist: – Why high yield bond issuance has maintained its strong momentum. – The high yield market was very busy last week. A total of 20 transactions priced a total of $10 billion, slightly down from the $13 billion that rushed the market the week before the Fed’s announcement of delaying tapering.
Bloomberg: – High-yield bond trader Pannuzzo joins Harrell at UBS in New York. – Switzerland’s biggest bank, hired Brian Pannuzzo and Wes Harrell this month to trade high-yield corporate bonds in New York.
The Conversation: – Not all emerging markets are in the same QE boat. – The US Federal Reserve’s surprise decision to continue quantitative easing (QE) was generally well received in those countries with rapidly growing and industrialising economies. They were worried that the Fed might have ended an era where cheap dollars have moved by the trillion to the so-called “emerging markets”.
Bloomberg: – Fuss at 80 trounces bond rivals by thinking like a stock picker. – Loomis Sayles & Co.’s Dan Fuss left rival bond-fund managers including Bill Gross behind in his eighth decade, by using a style generally associated with bargain-hunting stockpickers.
Reuters: – U.S. based bond funds have smallest outflows in six weeks. – Investors in mutual funds based in the United States pulled just $2.64 billion out of bond funds in the latest week amid expectations that the Federal Reserve will keep its bond-buying program largely intact, data from the Investment Company Institute showed on Wednesday.
Reuters: – BlackRock launches short-maturity bond ETF. – BlackRock Inc, the largest provider of exchange-traded funds through its iShares business, is set to launch a new actively managed ETF focused on short-maturity bonds that will begin trading Thursday.
Gross: Should you buy the 30-year or 4 times as many duration adjusted 5-years? Why 5-years of course! ~11% yield with rolldown vs. 3.69%.
— PIMCO (@PIMCO) September 26, 2013
Bonds closed higher yesterday for the 9th day out of the past 10. Haven't seen that kind of successful batting average since Sept 2012.
— AnthonyValeri (@Anthony_Valeri) September 26, 2013
Triple-A Muni – Treasury ratio a year from now? 101-110%, says the #BBCalPub crowd.
— Rich Saskal (@RichSaskal) September 26, 2013