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Lewis Ranieri the man often referred to as the godfather of mortgage-backed security bonds has come out in favor of a new breed of bonds which are backed by investor owned rental properties.
Ranieri told CNBC:
“It obviously works. It’s one more version of taking the cash flows off of a series of hard assets and securitizing them. It works, and so I think they’re good securities and you’ll see more of them.”
The new bonds which are being offered by Blackstone, were recently given a triple A credit rating from Moody’s. Highlighting the general creditworthiness of these new bonds, which bundle together the cash flows generated from a portfolio of rental properties which private equity companies have been quietly snapping up since 2012.
Blackstone owns nearly 40,000 such properties, according to recent statements from its chairman, Steve Schwarzman. Securitizing the rental stream of these homes is the next step for the new asset class.
Ranieri went on to say that he remains frustrated that these new bonds do not include an option to purchase. “Taking single family homes off the market and renting them out works, but its not a long term solution”, he said.
You can watch the full interview here.
Barrons: – Munis make the shopping list. – Put a bunch of bond-fund managers from different firms in a room and you’re likely to hear an array of contradictory viewpoints on markets, valuations, and investing strategies. When nearly everyone agrees on one thing, it’s worth noting. The current cause for agreement: Municipal bonds are cheap, and people should buy them now.
Forbes: – The Puerto Rican bond plot thickens. – The federal government is now putting under its microscope mutual fund companies that have invested billions of dollars in Puerto Rican municipal debt, according to several news reports last week.
Wealth Daily: – Municipal bonds lose their safety. – The municipal bond market has been one of the safest investments for years. People never doubted bonds before. That is, until now. The glory days of bonds are unfortunately over. People are nervous about them, and who can blame them? But that doesn’t mean you shouldn’t invest in them.
Business Insider: – We just saw the worst run of outflows in Muni bond history. – Fears over rising interest rates and the dire credit environment for Detroit and Puerto Rico combined to create 22-straight weeks of redemptions, totaling $58 billion. But the worst is over.
MMA: – MMA Municipal Issuer Brief – Municipals get another boost. – Most bond markets traded into lower yields last week. Municipals did somewhat better than average to the advantage of states and localities issuing bonds. This week’s prospects look generally good.
Learn Bonds: – Bond ladders – Consider this before building them. – Laddering a bond portfolio is one method of managing interest-rate risk and liquidity needs while also giving yourself a chance to earn higher yields than those offered on short-term bonds. There are all sorts of bond ladders fixed income investors can build. They can be spread out over multiple decades or just a few years. They can consist of only bond funds, just individual bonds, or a combination of both. And their focus could be within one segment of the bond market or spread out across various segments (Treasuries, corporates, munis, etc.).
Bloomberg: – Wells Fargo leads doubling in U.S. corporate bond offerings. – Wells Fargo & Co. (WFC), the largest U.S. mortgage lender, and ABN Amro Bank NV led U.S. corporate bond sales that more than doubled from last week as issuers captured borrowing costs at four-month lows.
Bloomberg: – Treasury volatility falls on speculation Fed to maintain policy. – A gauge of Treasury market volatility fell to a five-month low on speculation the Federal Reserve will maintain its debt purchases at $85 billion a month following a two-day policy meeting that ends Oct. 30.
Bloomberg: – Fed may likely hold tapering until March. – Yannick Naud of Glendevon Asset Management discusses when he sees the Federal Reserve beginning tapering of bond buying, the impact on emerging markets and compares U.S. and European earnings.
FT: – Retail investors embracing risk fuel U.S. junk bond fund revival. – Global retail investors have renewed a push into the riskiest corners of the US credit markets, lured by the relatively high yields provided by assets such as junk bonds.
Reuters: – New York Fed examines mortgage real estate investment trusts. – The New York Fed is examining banks’ exposure to a type of mortgage-backed security that is vulnerable to a sharp rise in interest rates, the Financial Times reported, citing unnamed people familiar with the matter.
WSJ: – Emerging Market bond outflows accelerate. – Outflows from emerging market bond funds accelerated in the week ending Oct. 23, in contrast to equities where investors piled in more cash on expectations the Federal Reserve will keep stimulus measures in place for longer.
ETF Trends: – ETF Chart of the day: Emerging markets bonds. – Late last week we spoke about a noticeable uptick in options activity in the Emerging Markets equity space via two benchmark ETFs. We also witnessed outflows of about $150 million in the largest Emerging Markets Bond based ETF in the landscape, EMB (iShares J.P. Morgan USD Emerging Markets Bond, Expense Ratio 0.60%), which has a total asset base currently just shy of $4 billion.
ETF Trends: – A surprising bond ETF safe haven. – Emerging markets bonds exchange traded funds, both the dollar-denominated and local currency varieties, have come under significant pressure this year. Investors have not been shy about pulling capital from these funds amid fears that tapering of the Federal Reserve’s quantitative easing program would crush leveraged developing markets that had freely borrowed in previously weak U.S. dollars.
FT Alphaville: – Money-go-round theme du jour, bonds beat cash. – So what have the retail investors been up to? Buying stocks! But, even with yields down low and no-where to go, they are yet to break the bond buying habit.
FT: – Bond funds look to cash in on equity surge. – When even bond fund managers are recommending equities, it must be time for investors to take a sceptical look at fixed income in their portfolios.
ValueWalk: – Bond fund managers return over 100 Percent on Greek debt. – Greek government bonds have been one of the most successful investment stories in the last few years. The biggest and brightest of the U.S hedge fund industry have profited in huge sums from betting in favor of Greek bond yields. Dan Loeb’s Third Point and Seth Klarman’s Baupost Group are some of the famous names who have scooped up major profits by buying Greek bonds.
— PIMCO (@PIMCO) October 28, 2013
— Brian Chappatta (@BChappatta) October 28, 2013
#Muni fund industry outflows last week: $750MIL. Big news: last week reported -$4.8BIL; now restated -$1.3BIL.
— Fixedology (@Fixedology) October 28, 2013