Something Fishy in Harrisburg…Muni Tax Exemption & a Puerto Rican Elephant….Huge AGG Fee Cut…and more!October 16th, 2012 by Simon G
Best of the Bond Market for October 16th, 2012
Bond Girl: – Why Harrisburg’s bond deals need a criminal investigation. – Details on…a series of deals that never should have happened, but did because people were able to skim money off the top. Unfortunately, this is a culture that Pennsylvania has become known for, and it is only going to change after someone in a position to do so shows their fangs.
Cate Long: – What happens to Puerto Rico and their bondholders if muni exemption goes away? - Moody’s estimated was paying 18.7% of it’s budget in debt service. If exemption goes away that will skyrocket.
ETF Trends: iShares cuts the AGG Bond ETFs expense ratio by more than 50%- BlackRock has announced expense ratio cuts at several of its existing products as it creates the new iShares Core Series targeting buy-and-hold investors. The move follows fee reductions at rivals Vanguard and Charles Schwab.
Learn Bonds: – PIMCO’s Bill Gross is gloomy but finds solace in Gold. – Bill Gross’s pessimistic outlook for the US economy is well documented. So when in a storm look for a safe harbor, in this case that harbor is called gold.
Bloomberg: S&P revises Penn State’s credit outlook to negative - Pennsylvania State University had its credit outlook revised to negative by Standard & Poor’s, which cited financial liabilities tied to Jerry Sandusky, the former coach sentenced Oct. 10 for sexually abusing minors. Not to brag, but we called it.
Bloomberg: – The muni rally is “running out of steam” according to BlackRock’s Peter Hayes. – BlackRock the world’s largest asset manager is selling some of its riskiest municipal bonds in favor of safer local debt as $1.2 trillion of potential federal spending cuts and tax increases loom.
Financial Advisor: – When inflation rises the smart money heads for junk bonds and junk munis. – Former Merrill Lynch chief investment strategist Richard Bernstein has some advice for those of you who are worried about inflation; Bernstein thinks there are better alternatives to TIPS. Those alternatives include small-cap stocks, junk bonds and junk munis. Simply put, inflation devalues debt and makes it easier to pay down.
WSJ: – New era in mortgage bonds. – Mortgage-bond pioneer Lewis Ranieri, is aiming at expanding the market for privately funded home loans. His company Shellpoint filed a registration for a private securitization program, launching an effort that will go beyond the government-backed lending that makes up most of the business at its lender, New Penn Financial.
CNBC: – How PIMCO’s Bill Gross is playing the bond markets now. – Considered by some to be the “bond king,” Bill Gross of PIMCO reveals how he’s approaching the bond market in this CNBC interview.
Greg Harmon: – The bond rally is not over. – Yes, there is debate and discussion about the trade of the century reversing and US Treasuries finally falling in price. That is looking more and more possible as the weeks go on. But where Treasuries are rolling other debt is still going strong.
Investment News: – The muni minefield. – Municipal bonds have long been viewed as a staple asset class for conservative, income-seeking investors. But so far this year three municipalities in California have declared bankruptcy and according to Moody’s and Fitch’s these bankruptcies may only be the beginning. They warn that after decades of steady performance, municipal bonds may see higher default rates and poorer performance in the years to come.
MarketWatch: – How the election outcome may affect bonds. – Who wins the November presidential election will be beneficial to some kinds of bonds and detrimental to others.
ETF Trends: – Tom Lydon talks bond ETFs with Vanguard’s Ken Volpert. – Tom Lydon sits down at the Morningstar ETF Conference with Ken Volpert, head of Vanguard’s Taxable Bond Group, to discuss ways to hedge interest rate risk with short-duration investment grade corporate debt and diversify with emerging market bonds.
KPLU: – Beware of bad municipal bond insurance. – Municipal bonds are relatively safe investments. So insured municipal bonds should be a sure thing, right? That’s not a safe assumption.
Kurt Shrout: – The best all/intermediate-term non-junk bond investments. – An evaluation of all/intermediate-term non-junk bond investments.
NJ release on budget focuses on record Sept. collections but misses the important point that NJ missed projections – a shortfall of $250MM
— Muni Market Advisors (@Muni_Mkt_Advis) October 16, 2012
Gross: Long term transition: Total return investing morphs to yield/carry which morphs to principal protection. Timing will be key.
— PIMCO (@PIMCO) October 16, 2012
Global hot money blasting around in search of yield… “@cr3dit: Chinese Vice Foreign minister Cui says QE3 adding to global mkt instability
— Cate Long (@cate_long) October 16, 2012
San Bernardino skips POB (series 2005) payment – via Bloomberg @statesandcities
— MuniCredit (@MuniCredit) October 16, 2012