Munis Crushing Treasuries…Unfunded Pensions…High Yield Completely Out of Control…and more!January 16th, 2013 by Simon G
Bloomberg: – Munis on pace for longest rally versus Treasuries in 3 years. – Investors are pouring the most money since 2009 into U.S. municipal debt, putting the $3.7 trillion market on a pace for its longest rally versus Treasuries in three years.
Cate Long: – American cities are bloated with unfunded pension liabilities. – There have been hundreds of articles written about how a number of U.S. states have unfunded pension liabilities. These massive shortfalls have been researched by numerous groups, and although they differ on the size of the shortfalls, they all agree that pension liabilities are creating a troublesome drag on many state budgets.
Distressed Debt Investing: – The high yield market is “completely out of control.” – Many people realize the market is heavily overvalued in terms of compensation of return versus risk, but they still are buying. But why, and what can you as an investor do to limit the risk?
Marketwatch: Bill Gross is out performs himself - The ETF returned 1.6% in the final quarter of 2012, while the mutual fund rose 1.2%. The ETF also gained a little more in the third quarter.
Retirement Researcher: – The 4% Rule is not safe in a low-yield world. – The safety of a 4% initial withdrawal strategy depends on asset return assumptions. Using historical averages to guide simulations for failure rates for retirees spending an inflation-adjusted 4% of retirement date assets over 30 years results in an estimated failure rate of about 6% with Monte Carlo simulations. Looking at overlapping periods from the historical data, 4% always worked.
Market Oracle: – Bond market maths. – This is the year for stocks, so one would gather from the media. The Wall Street Journal offered a lukewarm endorsement on Monday, January 15, 2012, with the headline: “Investors Flock to Stocks – So Far.” The diffident prediction opens: “As 2013 gets underway, one of the biggest questions in financial markets is again bubbling: Will this be the year that investors dump bonds and return to stocks?”
Learn Bonds: – The most interesting chart from Jeff Gundlach’s recent presentation. – Last week bond guru and DoubleLine Capital Co-Founder Jeff Gundlach gave his market outlook presentation for 2013. As always the presentation was information packed, but this chart really stood out.
Market Oracle: – The fiscal cliff deal just made US bonds even more risky in 2013. – It was shaping up to be another strong year for US Treasury Bonds right up until the moment it looked like a fiscal cliff deal would be reached. Since then, 10-year notes yields have been on the rise jumping by as much as 23 basis points since New Year’s Eve. Now you have to wonder whether or not the bond bubble has suddenly sprung a leak.
FT Advisor: – Equity funds outsell fixed income. – The latest sales data showed that fixed income fund sales in November last year were at their lowest since October 2008, while UK Equity Income had its highest month since May 2007.
Barron’s: – Bond investors grow wary of some retail MBS. – Some investors have begun avoiding mortgage-backed securities tied to retail real estate, causing commercial mortgage bonds, including some malls, to lag a recent sector rally. Both investors and rating agencies are now looking more carefully at new deals.
ETF Trends: – Junk bond ETFs for yield in 2013. – Junk-bond exchange traded funds were a high yield favorite last year and most advisors are recommending investors keep some exposure to them in their portfolios. S&P Capital IQ agrees that although the junk bond market may be a bit overpriced, it is still a hot spot to gain yield.
MarketWatch: – Treasury prices gain for a fourth day. – Treasury prices advanced on Wednesday for a fourth day, erasing the quick selloff that characterized the beginning of the year and representing a more balanced approach among investors concerned about monetary policy and the political risks to the economic outlook.
Forbes: – Hands off munis for revenue! Group rallies to prevent tinkering of tax-exempt debt. – If an organized group of municipal bond players has its way, plans to cap or do away with the tax-exempt status of municipal bonds won’t come to fruition.
Triangle Biz Journal: – N.C. Taking $325M in bonds to market. – The State of North Carolina has been busy in the opening days of 2013 planning trips to the bond market.
Artemis: – December was quiet in the catastrophe bond market due to hurricane Sandy. – Both the primary and secondary catastrophe bond markets were subdued in December as the markets participants continued to assess the fall-out and industry losses that hurricane Sandy had caused.
ETF Daily News: – Target date bond ETFs: Best or worst fixed income funds? – Often times, income seeking ETF investors are paralyzed by choice when it comes to fixed income investing. To make matters worse, we have had numerous bond ETFs filing and launches over the past few quarters suggesting that more are on the way as well.
Barron’s: – DoubleLine to launch a trio of equity mutual funds. – According to a filing with the Securities and Exchange Commission, Jeffrey Gundlach’s bond fund firm will soon be home to The DoubleLine Equities Small Cap Growth Fund, the DoubleLine Equities Growth Fund and the DoubleLine Equities Global Technology Fund, all of which will aim for long-term capital appreciation.
Reuters: – S&P says corporate spec-grade bond yields at historic lows. – The increased demand for corporate debt created some of the most favorable lending conditions for corporate borrowers since the financial crisis of 2008. The yield on five-year U.S. Treasuries hit a record low of 0.56% on July 24, 2012, and has remained relatively unchanged since–forcing investors to look for returns elsewhere.
MoneyShow: – The state of money bonds. – As we enter 2013, it’s a good time to see where munis stand after avoiding most of the threats posed during fiscal cliff negotiations.
Gross: Mexican Peso “yields” 4.5%; Brazilian Real “yields” 7.25%. Better use of cash than high yield bonds.
— PIMCO (@PIMCO) January 16, 2013
Morgan Stanley: If tax status of munis is modified, possible for muni yields to overshoot corporate equivalents. (1) Shock of change.
— Bond Girl (@munilass) January 16, 2013
Fun fact: Wordsworth’s poem “To the Pennsylvanians” was written after he lost his savings holding their bonds.
— Bond Girl (@munilass) January 16, 2013