Shilling Says Sell Stocks and Buy Treasuries…High Yield Defaults Should Remain Low…Fed to Crash Bonds?…and more!February 25th, 2013 by Simon G
Forbes: – Why you should you sell stocks and buy Treasurys. – Interview with Gary Shilling, where he talks about the state of the economy and what the future holds, with some interesting advice about “risk on” high yield debt and “risk off” Treasurys. “Never buy Treasurys for yield.”
AllianceBernstein: – We expect high-yield defaults to remain low. – High-yield bond defaults are historically low today, even for troubled companies. Despite the worries we hear in some corners about looming high-yield defaults, we think default rates will stay low for at least the next few years.
Market Oracle: – How the Fed will crash the US bond market. – Richard Moyers humorous look at how bond markets work and the potential risk to investors.
Learn Bonds: – Another Aaa rating bites the dust – who’s left? – On Friday, Moody’s downgraded the United Kingdom’s government bond ratings by one notch to Aa1 from Aaa. The ratings outlook, which was changed to negative in February 2012, is now once again stable. With the recent downgrade of the U.K., readers might be wondering which sovereigns with the coveted Aaa designation remain?
WSJ: – Worried about a bear market in bonds? Here’s what you can do. – Financial advisors give several ways in which you can protect your portfolio from a bear market in bonds.
Financial News: – When the bond bulls stop charging. – There has been much discussion about the imminent end of the 25-year bull market in bonds and the implications for investors. Indeed many of us would have expected the bull market to have come to a close somewhat earlier. But what can you do about it?
Bloomberg: – PIMCO joins Invesco finding value in TIPS with low CPI. – Pacific Investment Management Co. and Invesco Ltd. say growing central-bank tolerance of inflation means securities with interest or principal tied to consumer prices are the ones to own.
Market Wire: – PIMCO launches emerging markets full spectrum bond fund. – PIMCO, a leading global investment management firm, has launched the PIMCO Emerging Markets Full Spectrum Bond Fund (PFSIX), designed to give investors a comprehensive, “one stop” fixed income strategy to capture the wide variety of investment opportunities in the developing world.
What Investment: – It’s ‘absolutely not’ all over for fixed income, says BlackRock. – The losses incurred by bond funds so far this year are not fixed income’s death knoll, according to a BlackRock fund manager.
SoberLook: – Leveraged loan market on fire. – Sub-investment-grade loans continue to perform well, driven by demand for floating rate product. As market participants rotate out of HY bonds, which have been frothy for some time, and into loans, we are seeing the beginnings of another QE-driven market frenzy. Covenant-light transactions are a large part of the primary market recently.
FT Advisor: – Generating income from bonds and equities. – The consensus among multi-asset managers is that equity income holds the most opportunities, thanks to their ability to grow their dividends over time and, if the market recovery continues, the better total return should make up for the income being only around 4 per cent.
Barron’s: – Fed has designs on a tapered exit. – Signs have emerged this month of an increasingly divided Fed when it come to the course of monetary policy, and that’s led to increasing uncertainty about the Fed’s plans and its timetable for ending its stimulus measures, and of course markets don’t like uncertainty. One plan is to slowly wind down the Feds bond buying, therefore alleviating any shock to the markets when it stops.
ETF Trends: – High-Yield bond ETFs can’t shake bubble talk. – High-yield corporate bond ETFs fell suddenly in January, hinting that US equities were due for a pullback following an early-year rally. Junk debt ETFs have recouped some of last month’s losses but still face speculation the fixed-income sector is overvalued after posting robust performance. So are high-yield bonds in a bubble and heading for collapse?
Haaretz: – Why you should buy more bonds. – The injection of $85 million a month is very significant, even for the vast American market. This is more than $1 trillion a year in demand, which flows into the bond market on a daily basis. That keeps bond prices high and yields low, spurring investors who want more than 0% returns in real terms, to put their money into stocks. When big money like this is flowing into the markets, stocks go up. But what will happen if this flow of money slows down or stops?
Washington Times: – The Fed’s bubble fuel. – Stocks have climbed even as the real economy has failed to grow. That’s a warning signal that the gains could be nothing more than an asset bubble that will pop when the Fed is forced to reverse course to curb inflation. The Fed must realize continuing down this path of failure only makes it harder for the economy to recover.
4Traders: – Dissent in the Fed good for bond markets. – Kathleen Gaffney, VP, Eaton Vance thinks dissent at the Fed is healthy for the markets. She says, “What we’ve been seeing is risk assets, particularly credit, grind tighter and tighter and it’s really technically or liquidity driven. And the fundamentals, while I think they’re positive, they’re very slow to emerge. And the risk in Washington is still hanging over the markets. So I really view the Fed’s message, that discourse, to really relieve a little of that steam and bring a little bit more value to the market. I thought it was a good move.”
Bezinga: – Corporate Bond ETFs: An Alternative to EM Sovereigns. – Due to higher yields than what is available on U.S. Treasuries and other developed market bonds and, in many cases, stronger government balance sheets, emerging markets sovereign debt has attracted an increasingly large following among developed market investors. However, there is an alternative that should not be ignored.
PlanB Economics: – Bullish on stocks? There may be a better alternative. – If you are bullish on the markets your first inclination might be to look to stocks as the best way to profit. However, research suggests that other choices exist. Namely, high yield bonds may provide a better alternative to the stock portion of a balanced portfolio.
Macro Economist: – No growth, no inflation, no earnings. – Is the US growth cycle about to start; are we on the cusp of hyper-inflation; will stocks benefit from a “Great Rotation”; is there any value in safer assets – namely treasury securities. Macro Economist has the answer to all these questions and more.
Gross: Weaker #Yen and BOJ will drive global asset markets in future for better or worse. Yen down/risk on. Yen up/ risk off.
— PIMCO (@PIMCO) February 24, 2013
Gross: La Dolce Vita – Are Italians voting for austerity, prosperity, or promiscuity? The world’s markets hang in the balance.
— PIMCO (@PIMCO) February 25, 2013
Big technical damage done to the great rotation today. Feels great.
— no bid. (@cr3dit) February 25, 2013