Everyone hates bonds…Well Not Quite Everyone…Embracing Dirt Bonds…and more!January 23rd, 2013 by Simon G
James Bianco: – Everyone hates bonds. – Wall Street’s best and brightest constantly warn that the bond market is the worst investment one could possibly make. Yet the public are showing no interest in moving out of the bond market and into the stock market. This has been the case for several years. Why should they? The bond market is the best performing option. Until the Federal Reserve backs off its promise to buy bonds and the dealers are confident enough to short Treasuries, we would not look for a significant selloff.
TF Market Advisors: Well not quite everyone – Peter Tchir not only likes bonds, but he likes the long bond.
Bloomberg: – Embracing dirt bonds for homes rebound. – John Miller at Nuveen Asset Management LLC, who beat all his U.S. municipal bond-fund peers in 2012, is betting a rebounding housing market will deliver the biggest gains again in the year ahead.
Learn Bonds: – Dividend investing for bond investors – What you need to know. – The yield on the S&P 500 has historically averaged 2.11% (1990 thru Oct 2012). During that same time period, the average yield on the 10 year Treasury has been 5.06%, making bonds the more attractive choice for investors seeking income. However, the yields on bonds have fallen tremendously over this time period and the two yields are now almost the same. With the income being generated from bonds and stocks being similar, many income investors are now asking themselves would they rather own stocks or bonds.
Financial Post: There are some good reasons to like Canadian corporate bonds in 2013 - Canadian corporate bonds are off to a good start this year and should continue to provide investors solid but tepid returns in 2013, as high beta names benefit from improving economic conditions around the world, says RBC Capital Markets in its 2013 outlook for the asset class.
ETF Trends: – Investors should lower return expectations on 3D hurricane. – Investors need to scale back their performance outlooks for stocks and bonds as a “3D Hurricane” of deficit, debt and demographics weigh on global markets, Research Affiliates chairman and founder Robert Arnott said Wednesday.
ETF Trends: – PIMCO Total Return ETF’s Bill Gross: Stimulus ‘Increasingly Ineffective.’ – PIMCO Total Return ETF (BOND) manager Bill Gross on Wednesday said unprecedented global stimulus from central banks has buoyed stocks and risk assets, but that easy monetary policies are having less of a positive impact over time.
Barry Ritholtz: – Pensions have too many bonds and not enough stocks. – Pension funds and insurance companies are becoming over-invested in bonds at the expense of stocks. Since 1985, the long term mix between debt and equity has changed, according to Federal Reserve data. Bonds were 34% of assets as of Q3 2012 — that is up from 20% in 2006. Over the same period, Stocks fell to 39% from 61%.
Governing.com: – Muni bond market a political pawn in 2013. – Bond investors breathed a sigh of relief when the last-minute fiscal cliff deal in January left municipal bonds untouched. But experts say that 2013 will still be a minefield of uncertainty for those investors as the tax debate in Washington, D.C. and financial volatility at home for some states will raise questions about market stability.
Financial News: – Investors go risk on across the bond market. – Investors are willing to buy instruments issued by second-tier names across asset classes and to accept subordinated instruments from higher-rated names, bankers say.
Fox Business: – Will raising muni bond taxes hurt cities? – FBN’s Jeff Flock with Carmel, Ind., Mayor James Brainard on the potential of new municipal bond taxes raising borrowing costs for cities.
BusinessWeek: – United States of crisis hits economy; ‘Beaten bond market syndrome.’ – With the stroke of his pen the day after New Year’s, President Barack Obama extended a $5 billion farm subsidy program that he opposes and many farmers say they no longer need.
ETF Trends: – Muni bond ETFs and the tax-free coupon. – If there is one certainty that I believe municipal bond investors can lean upon as we fully commit to writing 2013 in our check registers, it is the seemingly perpetual uncertainty regarding the political deliberations about to resume in Washington, which again could include discussions about capping the benefit of the tax-free coupon.
Oblivious Investor: – What happens to bond funds when rates go up? – There is an inverse relationship between bond prices and interest rates. When interest rates rise, bond prices fall. And if you own a bond fund, the price of your fund will fall by the average duration of the fund, multiplied by the magnitude of the rise in interest rates. But in the real world, there’s a little bit more going on than in the contrived hypothetical examples.
Barron’s: – Neither snow nor rain stays these junk bonds. – historical yardsticks no longer offer much help in sizing up how long this bull run can go on or when it’s likely to end. The average junk bond risk premium, or spread over comparable Treasury bond yields, stands at 4.89 percentage points, right around its historical average and far from its all-time low 2.41 percentage points seen in 2007, when Treasury yields were much higher.
The Street: – 5 steps to cushion a bond market sell-off. – In our view, investing in bonds in the current environment is just as risky as investing in stocks. As such, an active approach to selecting bonds, just like you would do with stocks, is necessary.
Bond Buyer: – Indiana eyes $2B deal to pay off US unemployment insurance. – Indiana would become the latest state to consider issuing bonds to pay off a large federal unemployment loan if a bill introduced last week is approved by the General Assembly.
Gross: Its not Republican in politics. Its not Dem in politics. Its money in politics. Latest case: carried interest survives Obama taxhikes
— PIMCO (@PIMCO) January 23, 2013
Gross: Say what? Japan hits the 3 month snooze alarm on inflation targeting? Don’t oversleep!
— PIMCO (@PIMCO) January 23, 2013
Bank loans outperformed HY bonds by 0.05% last wk (Barclays data). A sign of what may come given the shrinking yield gap btwn the 2 sectors
— AnthonyValeri (@Anthony_Valeri) January 23, 2013