High Yield Bond Investors MUST Understand These 2 Things…Puerto Rican Bonds Rally…Bill Gross Says Buy Gold…and more!

February 6th, 2013 by

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David Schawel: – Two things about high-yield bonds investors must understand today. – I am not calling for a top in HY or saying that it can’t have a place in an investor’s portfolio today, but the characteristics of these assets have changed. Investors who are not aware of these changes are likely to meet with a reality that differs greatly from their expectations.

Bloomberg: – Puerto Rico climbs most in year as redemptions rise. – Puerto Rico debt, rated one step above junk, is rallying the most in a year as a strengthening national economy helps lure investors to bet on the commonwealth.

The Market Oracle: – Bill Gross bond market king says buy gold. – Renowned bond investor Bill Gross, the manager of PIMCO’s Total Return Fund, the world’s largest bond fund, just shared his top investment picks with Barron’s. Leading the savvy investor’s short and selective list was gold. Why is a bond bull keen on investing in gold? It’s because Gross sees gold as a stellar inflationary hedge as global central banks attempt to reflate their economies.

Learn Bonds: – The facts about dividend investing (for conservative investors). – Yields on stocks and bonds have converged, causing many income investors to consider portfolio reallocation. A heavier stock allocation provides the potential for greater capital gains and dividend growth. At the same, it potentially increases portfolio volatility. To explore these issues we spoke with David Casesse, one of the portfolio managers for the Blackrock Equity Dividend Fund.

YAHOO Finance Video: Are junk bonds flashing a warning sign to stock investors? 

Bloomberg: – Emerging-Market bond sales reach record $42 billion in January. – Companies in developing countries sold a record $42.1 billion dollar-denominated debt in January, fueled by demand for Asian bonds and non-investment grade notes, according to Bank of America Corp.

NPR: – Puerto Rico’s battered economy: The Greece of the Caribbean? – Puerto Rico’s population is declining. Faced with a deteriorating economy, increased poverty and a swelling crime rate, many citizens are fleeing the island for the U.S. mainland. In a four-part series, Morning Edition explores this phenomenon, and how Puerto Rico’s troubles are affecting its people and other Americans in unexpected ways.

The Market Oracle: – Bernanke blows bond bubble into stocks. – Ben Bernanke was instrumental in creating a bubble in US Treasuries. His actions have served to inflate it to the point that it has now become the greatest bubble in the history of global investment. Not only has the Chairman of the Federal Reserve guaranteed that current bond holders will get destroyed once the sovereign debt bubble bursts, but he has also begun to inflate yet another massive bubble in US equity prices.

TF Market Advisors: – Bond ETF’s – Don’t ignore the trees for the forest of bonds. – There are many parts of the HY market that will do well to just return coupon in the near term. I don’t want to pick on indices or ETFs, but let’s do it.

CNBC: – ‘Severe’ danger looming in Corporate Bonds: BofA. – A jump in interest rates could spark an unruly exit from the $12 trillion corporate bond market, according to a new analysis. Investors have been flocking to the relative safety of corporate and government debt while interest rates have stayed low and stock market tensions have run high.

Bloomberg: – PIMCO dictates to Peso bond market with tweets. – Bill Gross’s ability to drive up the value of Mexican bonds is showing no signs of fading. Yields on Mexican debt due in 2024 fell to an all-time low 5.07 percent after Gross, Pacific Investment Management Co.’s co-chief investment officer, said yesterday the peso was a “great currency” while praising the nation’s low debt level and interest-rate stability in a Twitter post.

Risk.net: – No exit: The problems facing UBS in its fixed income retreat. – UBS is shutting down large chunks of its fixed-income business – the first dealer to announce such a dramatic step – but some of its now-unwanted trades could be difficult to exit. Risk looks at the challenges involved in unwinding a capital- and funding-intensive business.

Reuters: – Emerging corporate bond boom stretches into 2013. – January was a month of record issuance for corporates, yielding $51 billion or more than double last January’s levels and after sales of $329 billion in the whole of 2012. (Some of this buoyancy is down to Asian firms rushing to get their fundraising done before the Chinese New Year starts this weekend). What’s more, despite all the new issuance, spreads on JPMorgan’s CEMBI corporate bond index tightened 21 basis points over Treasuries.

Capital Spectator: – Carving up the global bond market. – Categorizing the planet’s supply of fixed-income components is complicated. Equities, by contrast, are a breeze. In the interest of brevity here, I’m streamlining the task, although no one should confuse the data that in this report as the final world on defining the global bond market.

Barron’s: – Vanguard to add new international bond fund, ETF. – Vanguard Group looks ready to apply more pressure to fund costs this year. Up next: A family of low-priced international bond funds.

ETF Trends: – Emerging Market bond ETFs yielding over 4% in slump. – In recent sessions there has been selling pressure in the Emerging Markets bond space, particularly with two of the more popular products in the space.

FT: – Corporate bond redemption limits hit new low. – Protection once thought to be standard for bond holders is beginning to evaporate as a furious rally on junk-rated debt shows little signs of abating.

Reuters: – Private bank Coutts prepares for bear market in bonds. – Coutts, the private banking arm of Royal Bank of Scotland, is telling clients to switch part of their allocations to equities from bonds ahead of a bear market in fixed-income markets.

WSJ: – US Treasury considers ways to extend debt maturity. – The US Treasury and its Wall Street advisers are weighing steps to more rapidly extend the maturity of government debt, a development that could partially blunt the Federal Reserve‘s effort to lower long-term interest rates.

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