Stockton Battles Bondholders…Bond Market Half Year Update…and More!July 2nd, 2012 by David Waring
Best of the Bond Market for July 2nd, 2012
Bloomberg: Stockton’s Battle With Bondholders Begins this week - Stockton, California, which last week became the biggest U.S. city to seek court protection, will begin a historic effort this week to be the first American city to use bankruptcy to successfully impose losses on bondholders.
Bond Buyer: Muni Market Recap for the first half of 2012 - Issuance totaled $190.5 billion on 6,826 deals through the first half of 2012, versus $117 billion on 4,859 deals through the first six months of 2011. Refunding debt stands as the primary reason behind the 63% increase.
Bond Squawk: High Yield Bond Defaults Report for first half of 2012 - The default has increased from last year but is still hovering safely around the pre-crisis levels. The default volume has however decreased to 6.4 $bn compared to last years 18.5 $bn. The largest contributors to the default rate was the Transportation industry (24.29%) followed by Utility (11.34%) and Paper and Packaging (8.72%).
HY master index 7.05% Ytd return. 58bps last week return. Yield to worst 7.289%. Spread 649bps. $JNK 12mo div yield 7.23%.
— JunkBondMom (@junkbondmom) July 2, 2012
Marketwatch: Corporate bonds seen continuing strong run - Corporate bonds remain the darling of fixed-income managers and are expected to continue to do well during the rest of the year amid a challenging global economic environment. Corporate bonds of all maturities have returned 5.15% so far this year.
Learn Bonds: Broken Stocks but Healthy Bonds, What’s the Message? - Have you seen the stock charts of Peabody Energy (BTU), Cliffs Natural Resources (CLF), and Baker Hughes (BHI) over the past year or so? If you only look at the charts of these stocks and nothing else, you might assume these companies are on the fast track to bankruptcy.
The Financial Lexicon: Corporate Bonds Month in Review - June turned out to be quite an eventful month for the corporate bond market.
Skyler Green: High Yield Still Undervalued. – Right now is one of the best times to buy junk bonds, because of the “terror” discount that’s built into the price.
PBS: In choosing assets what’s safer than US Bonds? - In the end, my chief investment consultant, professor Zvi Bodie of Boston University and co-author of the new book, “Risk Less and Prosper,” insists that U.S. I-Bonds — inflation-protected U.S. savings bonds — remain the safest way to save.
Marketwatch: Treasury Yields Fall to Lowest in a Month – Treasury prices rose on Monday, pushing benchmark 10-year yields to their lowest level in almost a month, after the Institute for Supply Management said its manufacturing index for June unexpectedly contracted slightly. Yields on 10-year notes which move inversely to prices, fell 10 basis points to 1.57%, from 1.63% before the report. They touched 1.56%, a level they haven’t closed below since June 5.
The Big Picture: Top 10 Investor Errors Part 2: Reaching for Yield – History shows us there are few investment mistakes more costly then “chasing yield.” Fixed income is supposed to be your safe money, what you have to have back, what will cushion the ups and downs of the equity markets. Hence, you should be first concerned with return of your money, and second, the return on your money.
Time: Is Stockton The Start of a Rash of Municipal Bankruptcies? - In short, while the risks of local bankruptcies are much smaller in scale than those posed by the $15 trillion-plus national debt, the time horizon is much closer. For municipalities, the deadline isn’t a decade away — it’s the day after tomorrow.
WSJ: Get Ready for the New Investment Tax - Starting on Jan. 1, 2013, the tax rates on long-term capital gains and dividends for these earners will jump from their current historic low of 15% to 18.8%, assuming Congress extends the current law. Municipal-bond income is doubly blessed because it doesn’t raise adjusted gross income and isn’t subject to the 3.8% tax, notes Jonathan Horn, an accountant in New York.
Moody’s: Proposed Changes to US Public Pensions Data - Growth of reported unfunded pension liabilities over the past decade and the associated budgetary burden of pension contributions have increased the importance of pensions to state and local government credit, according to Moody’s, which treats pension liabilities similar to debt in order to better analyze the long-term liabilities of government entities.
Moody’s proposed adjustments would nearly triple fiscal 2010 reported unfunded pension liabilities for the 50 states to $128.8B from $36.6B
— Jen DePaul (@BondBuyerJen) July 2, 2012
Everyone hopping aboard the qe3-is-coming wagon. Go reread Bernanke’s press conf post rate decision. Surprisingly candid.
— no bid. (@cr3dit) July 2, 2012