High Yield ETF Record Outflows…Fed to Un-Junk Junk Bonds?…Bond Ladders…and more!February 8th, 2013 by Simon G
Zero Hedge: High Yield ETFs Report Highest Outflows on Record - If you include high yield bond funds in general however, its not even close to a record.
Financial Iceberg: – Will the Fed un-junk the junk bond market? – With Treasury yields at historic lows but starting to consolidate, investors have gone after yield in other segments of the market, the high yield bond market is often one of the places investors seek out in that chase for income. Today we are going to take a look at the iShares High Yield Corporate Bond ETF (HYG). We will see that the Fed Un-junked the Junk Bond Market.
CBS: – Are concerns about “bond ladders” valid? – We often hear criticism from the financial media and some professional advisors about the use of “bond ladders.” Unfortunately, much of the criticism is based on falsehoods and the conflicts of interests from advisors who only use mutual funds and ETFs. To correct such misperceptions, we’ll address each of the criticisms raised, beginning with the issue of credit risk.
CBS: – Can credit ratings on muni bonds be trusted? – On Feb. 4, the US Department of Justice filed civil fraud charges against Standard & Poor’s for its role in granting positive ratings on nearly $3 trillion worth of mortgage backed securities that later collapsed in value. The failure of credit ratings agencies to properly rate these securities raises an obvious question: Why trust the quality of their ratings of municipal bonds?
Money Morning: – If you’re investing in bonds, Bill Gross has a message for you. – Bill Gross wrote in his February newsletter that the factors that contributed to last month’s 1% loss for US Treasuries – the biggest since March 2012 – aren’t going away any time soon.
RGJ.com: – Weighing the pros, cons of municipal bonds. – The nation’s economic woes have affected all of us, but municipalities have been hit particularly hard resulting in cash-strapped state and local governments across the country. Consequently, you might be wondering how this situation could affect an investment class you might be considering: municipal bonds.
Financial Lexicon: – The ‘Great Rotation’ and other nonsense. – The fear mongering surrounding a supposed imminent destruction of your US bond portfolio is reaching fever pitch. Part of that fear mongering is the rampant talk surrounding a forthcoming “Great Rotation” out of bonds and into stocks. Cries from the world of equity investors about much higher bond yields have been heard for nearly four years now. Perhaps if the pundits keep saying it over and over, they will eventually be right. But for now, very normal seasonal moves in bond yields continue to be misinterpreted as something much more.
MarketWatch: – Great Rotation equals sloppy thinking. – Have you been gullible enough to believe all the recent talk about a Great Rotation? If so, I have a bridge I want to sell you.
Learn Bonds: – The S&P lawsuit: Here’s what you need to know. – Standard and Poor’s (S&P) is being sued by the Department of Justice for providing fraudulent ratings on certain debt securities. Several of these securities received, S&P’s highest rating (AAA) in 2007, only to default in 20008. On first glance, the actions of the Justice Department would seem to be a positive for all investors. However, I believe that this lawsuit may negatively impact buyers of municipal bonds.
Fox Business: – Bond market may spring to life. – Insurers are weighing a new strategy for coping with the cost of baby boomers living longer than expected: issuing bonds. Banks began shopping at least two “longevity” bonds to potential investors in recent weeks, the biggest spurt of activity the fledgling market has seen.
New York Times: – Fed governor raises the specter of a bubble in junk bonds. – Some financial markets are showing signs of overheated speculation as investors take larger risks in response to the persistence of low interest rates, a senior Federal Reserve official said in a speech on Thursday.
ETF Trends: – Tax changes mean muni ETF yields look more attractive. – The past few months have been an interesting time for municipal bonds. Thanks to the drama leading up to the fiscal cliff, these tax-advantaged securities were first in hot demand as a potential safe harbor against tax increases, then experienced a selloff in December amid speculation that their tax-exempt status could be removed for high-income households.
ETF Trends: – How rising interest rates would impact top-selling bond ETFs. – Investors are getting bombarded by talk of a so-called Great Rotation from fixed-income to stocks after a three-decade bull run in bonds and as interest rates bump higher and US equities flirt with all-time highs. Of course, investors who bought bond ETFs the last three years are sitting on nice gains following the drop in Treasury yields to historic lows. But just how safe are those profits to a rise in interest rates.
ETF Trends: – Finding opportunities in corporate bond ETFs. – In an increasingly global economy, opportunities for investors are occurring all over the world. In fact, the majority of the world’s corporate earnings (64%1) are currently being generated by companies outside the United States.
Reuters: – Stocks with rising dividends seen as ‘Next Corporate Bond’ – The hunt for yield is moving into the U.S. equity market. Companies that are likely to grow their dividends have been increasingly favored by yield-starved investors for their competitive income-producing shares.
Barron’s: – Still no emerging market bond bubble, capital economics says. – Should investors be worried about an emerging market bond bubble? Not yet, says Capital Economics’ John Higgins.
Gross:Economies 2 highly levered 4 any centrl bank 2 raise interst rates for years. Stick 2 5yr maturities; lng bonds reflect futr inflation
— PIMCO (@PIMCO) February 8, 2013
MS: Given longer maturities of HY bonds, blended duration of HY market is longer than broader muni market. Call risk is also a concern.
— Bond Girl (@munilass) February 8, 2013
MS: Would expect HY to outperform as interest rates rise: (1) spreads for riskier assets should tighten in period of accelerated growth, and
— Bond Girl (@munilass) February 8, 2013