Fed’s Commitment Called into Question…Role of Primary Dealers Wanes…Bond Market Not Afraid of QE Ending …and more!February 21st, 2013 by Simon G
Economists View: – Fed Watch: Fed’s commitment in question. – The Fed’s commitment to open-ended quantitative easing is more fragile than believed. If the Fed is already wavering on the pace of quantitative easing, can it be long before they waver on their commitment to low rates as well?
New York Fed: – Primary dealers’ waning role in Treasury auctions. – On December 12, 2012, primary government securities dealers bought just 33 percent of the new ten-year Treasury notes sold at auction. This was one of the lowest shares on record and far below the 68 percent average for ten-year notes reported in 2007. So what’s behind this trend and is it set to continue?
CNBC: – Who’s afraid of QE ending? Not the bond market. – Market reaction to the Federal Reserve possibly unwinding its history-making intervention policies has been more pronounced for stocks than bonds, and with good reason.
Learn Bonds: – Steps to building an income stream. – It constantly amazes me to read about towns struggling in America, I am equally surprised that the United States has long been in financial distress. An income strategy, implemented within the past 50 years, had the potential to prevent this distress. Whether you manage a big city, a small town, or a household it is never to late to construct an income stream, that has the potential to become a river of income.
FT: – The Fed will opt for the lesser of two evils. – Stock markets responded nervously to Wednesday’s indications that America’s central bankers are getting more worried about the collateral damage of quantitative easing. But the implication is not that the US Federal Reserve will look to end its unconventional policy approach any time soon. Rather, it is that problems multiply when other policy makers and politicians fail to contribute to a balanced and comprehensive policy approach.
Money News: – Municipal bond yields hit 6-month high on sequester fears. – Yields on 10-year municipal bonds rose to the highest level in six months as U.S. state and local governments prepare for a $1.2 trillion automatic federal budget reduction.
Bloomberg: – Treasuries advance as inflation trails Fed target. – Treasury 10-year yields fell below 2 percent as inflation last month trailed the Federal Reserve’s 2 percent long-term objective, giving the central bank scope to continue bond buying to bolster the economy.
US News: – Markets rattled by Fed policy concerns. – An unexpected indication from the US Federal Reserve that it is considering how to bring an end to its super-easy monetary policy rattled markets Thursday. While supposedly riskier assets such as stocks, the euro and oil prices fell sharply, the perceived safer financial assets, such as the dollar and German government bonds, were in demand.
Moody’s: – Moody’s downgrades Puerto Rico general obligation and related bonds to Baa3 from Baa1. – Moody’s Investors Service has downgraded the general obligation rating of the Commonwealth of Puerto Rico to Baa3 from Baa1. The downgrade also applies to those ratings that are based on or capped at the G.O. rating of the commonwealth. The outlook is negative.
Cate Long: – Is there any substance behind Obama’s infrastructure proposal? – Is the president’s plan to rebuild America’s infrastructure, strengthen the nation’s assets and create good jobs using America Fast Forward Bonds a disappointment.
CNBC: – Should bond investors brace for a 1994-style crash? – The recent run-up in sovereign bond yields combined with a recovery in global growth could lead to a crash in bond prices similar to the one seen in 1994, said investment house AMP Capital in a report published Thursday.
Herald Business: – Canadians Look to implement new surveillance rules for bond market. – The investment community is being asked to comment on a proposed market surveillance system for the trade of Canadian bonds and other debt securities.
What Investment: – Investors fear corporate bond bubble. – More than two thirds of professional investors believe that corporate bonds are now overvalued, more than double the number of those who expressed concern a year ago, according to a survey by professional investment body CFA.
TrustNet: – Bond bubble will burst, warns bond manager. – The bond bubble is close to bursting, according to fixed income manager Jon Mawby, who says he is looking at methods of protecting his portfolio from rising yields.
Investment News: – Vanguard won’t offer junk-bond ETF. – Don’t hold your breath for a high-yield-bond exchange-traded fund from Vanguard. The Vanguard Group Inc., the third-largest ETF provider, is staying away from offering such a product, not because of any particular view on its outlook or its benefit to a portfolio but because of the way high-yield-bond ETFs trade.
ETF Trends: – PIMCO Total Return ETF Nears one-year anniversary. – Bill Gross shows rivals how it’s done as his PIMCO Total Return ETF (NYSEArca: BOND), reaches its first birthday and outperforms the Barclays US Aggregate Bond Index by 10 percentage points.
Tom Brakke: – Junk bond rally scares economists (Chart). – The scale of the junk bond rally worries some economists.
Reuters: – 10-yr notes firmer but yield stays above 2 pct. – 10-year Treasuries inched higher in Asia on Thursday, but its gains were limited even as weakness in equities stirred some safe haven bids for bonds.
Gross: Fed will never sell what they now own but will stop buying more @ some point. Question is when? Growth dependent. We est. Jan 2014.
— PIMCO (@PIMCO) February 21, 2013
Those trading the recent range in bonds need to be crushed if we’re ever going to break out to lower rates. Think 3.14 on the bond does it.
— no bid. (@cr3dit) February 21, 2013
Puerto Rico GO has Moody’s lowest IG (Baa3), S&P’s second-lowest IG (BBB) and Fitch’s third-lowest IG (BBB+). #ratings
— Brian Chappatta (@BChappatta) February 21, 2013
New 30 year Tips 0.639. Big tail
— Ed Bradford (@Fullcarry) February 21, 2013