Best of the Bond Market for March 29th, 2012
Tweet and chart by @ritholtz
Our Take: I knew the fed has increased the money supply dramatically since the financial crisis, however this chart put together by Barry Ritholtz of The Big Picture shows just how large the increase has been. What I would love to see is this chart compared to the money that has been “taken out” of the economy through consumer de-leveraging.
Article by The Wall Street Journal
Fed Chief Bernanke Defends Bond Buys - Our Take: Beranke spoke again today at George Washington University as part of his college lecture series. You can see the video here. He defended the dramatic increase in the money supply shown in the chart above and outlined the Fed’s options to take that money back out of the economy should inflation pick up: “These include selling assets and raising the interest rate it pays on the reserves that banks hold at the Fed, which would encourage banks to keep money parked with the Fed rather than lending it out to consumers and businesses”.
Tweet and Article by @indexuniverse
Why Fixed Income ETFs May Fall Short Our Take: The unique characteristics of the bond market make it especially difficult to create ETFs to mimick the underlying indexes they are supposed to track. If you are investing in or trading Bond ETFs this is a must read but the short version is:
Tweet by @DavidSchawel
Bonds keeping their strength despite equity comeback…10yr real rates 2bps lower on the day Our Take: Further proof that everyone calling for the trend in earlier march of further bond weakness to continue were pre mature.
Video by @morningstarinc
Nuveens John Miller Says Muni Credit Risk Is Overblown - Our Take: Good video which not only sums up how much lower the risk is with municipal bonds than other types of bonds but also where there are currently some good opportunities for yield in the market. It all basically comes down to high yield muni bonds for the following reasons:
Default rates are still only around 1% for high yield municipal bonds because they are still generally issued to fund services that are essential to a community.