PIMCO’s El-Erian Likes Muni’s and has Advice for Obama…Bond Market Election Reaction…and More!November 7th, 2012 by Simon G
CNN Money: – PIMCO’s El-Erian gives advice to President Obama. – In a letter to President Obama, PIMCO CEO Mohamed El-Erian offers a four-point plan for getting the country back to 3% annual growth and less than 5% unemployment.
Financial Advisor: – PIMCO’s El-Erian says municipal debt more attractive after election. – Pacific Investment Management Co.’s Mohamed El-Erian said municipal debt is more attractive after the re-election of President Barack Obama with lawmakers faced with addressing what’s become known as the fiscal cliff.
Minyanville: – Bonds rally, equities drop after Obama reelection. – Equities are down and bonds are up after Barack Obama’s reelection victory. President Barack Obama handily won by a larger-than-expected margin in the electoral college and broke 50% in the popular vote. Democrats held the Senate and Republicans held the house. Essentially, the uncertainty of the election is gone, and we will probably have more of the same Congressional gridlock and dovish monetary policy.
Barron’s: – Election over, bonds look again toward Europe, fiscal cliff. – With that election business out of the way, bond markets are already looking toward Europe again, where Greece is facing a parliamentary vote on austerity measures, while the year-end fiscal cliff now looms as the next major fixture on the calendar.
CNN Money: – What bond rally says about Obama’s next four years. – If Wall Street hates the fact that President Obama will get four more years in the White House, someone forgot to tell the bond market.
Vanguard: – The ‘noise’ to avoid: A lesson from the muni non-crisis. – From November 2010 through May 2011, amid predictions of massive municipal defaults, investors withdrew $35 billion from US muni bond funds. The timing of their exodus was unfortunate. Over the next 15 months, the returns of the broad municipal bond market exceeded 12%. Now that fear has subsided and munis have rallied, investors are piling back in. So what news should you be listening to?
iShares: – A bond’s-eye view of the fiscal cliff. – The Fed, with its third round of quantitative easing, has telegraphed its intention to keep short-term interest rates near zero through mid-2015. At the same time, the QE programs that have been put in place are keeping longer term rates down as well. The current challenge for markets is less about Fed policy and more about politics: The looming fiscal cliff.
ETF Trends: – ‘Hot Money’ drives junk bond ETF yields to ‘surreal’ lows. – Investors have pumped over $9 billion into junk bond ETFs so far this year as they take on more risk in their endless search for yield. However, some analysts are worried high-yield ETFs are helping to foster a bubble in speculative-grade corporate debt with insatiable demand pushing yields to record lows.
Learn Bonds: – The myth that mom and pop are driving down junk bond yields. – I am sure the numbers being reported regarding individual investors rushing into high yield bond funds are true. However, I am not sure the correct facts are being circulated. The main narrative is that net inflows into junk bond mutual funds are at record highs. At the same time the reports say that the supply of new high yield bond issues in dollar terms has never been higher, and yields on junk bonds have never been lower. This leads to the conclusion that retail bond investors are causing a junk bond market bubble. I think both narratives are incorrect, and I have not seen any stories that include what I believe are the most important facts.
Bloomberg: – Voters pass at least $10.9 billion of local-debt. – U.S. voters from California to Florida passed at least $10.9 billion of bond issues with interest rates on municipal debt close to the lowest since the 1960s. Local governments sought approval for about $37 billion of borrowings yesterday, 45 percent less than in 2008. It’s the sharpest drop in six decades for a presidential election year.
NASDAQ: – The best choice in junk bond ETFs? – Although the Fed’s low rate policy has now gone global, many investors are still searching for pockets of high yielding securities in order to boost lagging income levels. There are still opportunities to be had in some emerging markets however.
Bond Buyer: – Voters pass at least $10.9 billion of local-debt. – Voters from California to Florida passed at least $10.9 billion of bond issues with interest rates on municipal debt close to the lowest since the 1960s.
Gross: What to buy: muni bonds & intermediate Treasuries. What to sell: 3-4% dividend paying stocks now at risk to higher tax rates.
— PIMCO (@PIMCO) November 7, 2012
Gov. Snyder sees slightlymore risk of Chapter 9s in Michigan following PA 4 repeal. #muniland
— Ben Eisen (@BenEisen) November 7, 2012
@dennisjsn Municipal bond markets dont react as quickly as stock markets.Let’s give it a week then check Puerto Rico yields.
— Cate Long (@cate_long) November 7, 2012
Puerto Rico advisory statehood vote not really likely to change things soon — but Gov. Fortuno’s defeat may have credit impact.
— Rich Saskal (@RichSaskal) November 7, 2012
heres the good news for #muniland. higher taxes mean munis much more attractive! woohoo!
— Taylor Riggs (@TaylorRiggs_BB) November 7, 2012