How We’ll Know When the Bond Bull is Done…US Downgrade Coming?..Basel to Help Corporates…and more!January 7th, 2013 by Simon G
Business Insider: – The end of the bond bull market will be signaled by a stampede. – Bonds have been in a monster bull market for decades. This has plenty of people believing that interest rates have nowhere to go but up. However, we have yet to see a sustained upward move in interest rates, which would signal the end of the bond bull market.
Bloomberg: – US debt may rise as D.C. dysfunction draws downgrade. – Treasury yields, now at almost eight- month highs, are set to reverse course as political wrangling in Washington and a “likely” U.S. credit downgrade drive investors to the safety of government debt, according to UBS AG.
WSJ: – Corporate bond yields may fall further amid relaxed Basel rules. – A change of rules allowing corporate debt to count towards the capital that banks must hold to guard against potential financial stress may push bond yields even lower as demand continues to outstrip supply, analysts say.
Learn Bonds: – Important considerations for handicapping future Fed policy. – The Fed is now providing inflation and unemployment guideposts for determining future policy. So what does this mean for the bond markets?
FT Alphaville: – Just where are investors placing their money in the high yield market? – Everybody knows there’s a shortage of yield right now. This has made the high yield market exceptionally attractive in the post-crisis environment. But what’s really interesting is not really that high-yield is attractive in and of itself, but rather which particular segment of the high-yield market the money has been flowing to.
ETF Daily: – Watch for a major shift in the bond market. – With the recent fiscal cliff deal, Washington essentially kicked the can down the road with some tax increases, but no meaningful spending cuts. Instead, the $110 billion in automatic spending cuts have been delayed for a couple more months. As a result, we can surely expect more volatility in financial markets early this year as the debt ceiling drama plays out. As a result the bond market will likely get hurt more than the stock market.
ETF Trends: – Will the bond ETF bubble burst in 2013? – It has been a rocky start to 2013 for Treasury bond ETFs. After three decades of declines, interest rates are near rock bottom, and many Wall Street experts think the bond bubble may be about to burst. But ultimately, it doesn’t matter if it happens in 2013, 2014 or 2015. What matters is that you’re not invested in bonds when it does.
Quartz: – Why investors now love emerging-market junk bonds. – Investors are stampeding to lend to the world’s riskiest companies and countries. Usually a conservative bunch, bond fund managers now cannot get enough of debt issued by Chinese property developers or risky governments such as Vietnam. This is largely because investment yields on Treasury bonds have collapsed. But the rewards can blind one to the perils; these types of bonds are called junk for a reason.
WSJ: – Junk bond fire is poised to fade. – Junk bonds started 2013 much like they finished 2012—on fire. In just three trading days this year, bonds of low-rated companies delivered returns of almost three-quarters of a percent, even as most other types of bonds lost value. But the rapid march is making fund managers and analysts wary.
Forbes: – 6 Market predictions for 2013 from bond guru Jeff Gundlach. – In a CNBC interview Thursday with Gary Kaminsky, Jeff Gundlach gave his 6 market predictions for 2013. Here they are in all their glory, even if we blogged about it last week.
Market Oracle: – Stocks, bonds, and gold inflection point market trend forecasts 2013. – Investors should be prepared for the coming tax hikes and rising long term capital gains, which together hold little to no incentive for owning stocks. This will be the true culprit for a worsening stock market, actually a Bear Market; while the media misdirects you with political theater to alleviate the worries of going off the fiscal cliff.
Bloomberg: – Should the Fed change its target? – Renowned Columbia University economist Michael Woodford thinks the Fed should aim for a target level of economic output, (expressed in nominal dollar terms) instead of focusing primarily on inflation.
FT: – Beware the ‘central bank put’. – PIMCO’s Mohamed El-Erian asks how far central banks can divorce prices from fundamentals.
Ploutos: – Fixed income momentum strategies – January 2013. – Ploutos looks at a basic momentum strategy in fixed income between Treasury bonds and high yield bonds.
Bloomberg BNA: – Tax-favored municipal bonds may be swept into deficit reduction ideas. – Legislation enacted Jan. 2 avoiding or delaying more than $600 billion in automatic spending cuts and tax increases shielded, but perhaps only temporarily, tax and other federal policy changes that could materially impair municipal securities markets, practitioners tell BNA.
Reuters: – Bond market prices Fed out – but just wait ‘til the debt ceiling. – U.S. government bonds sold off last week following December Fed meeting minutes indicating growing doubts inside the central bank about the effectiveness of quantitative easing.
ETF Trends: – No cliff for muni bond ETFs. – In the eleventh hour of the first night of 2013, Congress passed legislation which, among tax increases and other items, left the municipal bond coupon tax-free and unscathed. At this time, tax-free investors can exhale knowing that their tax-free income streams remain preserved as we roll off the second strong performance year in a row.
Fort Mill Times: – New book – Investing in municipal bonds. – Announcing a new book written by Dr Phillip Fischer. Investing in Municipal Bonds: How to Balance Risk and Reward for Success in Today’s Bond Market, perfect for beginners looking to get their head around the muni market.
Gross: US growth in first half 2013 at 1%, not enough to lower 7.8% unemployment. Buy 5 year Treasuries.
— PIMCO (@PIMCO) January 7, 2013
How many months of fiscal space would $1 trillion buy? Nine months or so? Then another debt ceiling face off? Childs games…
— Cate Long (@cate_long) January 7, 2013