Swapping Bond Index Funds for BOND…Fiscal Cliff and Emerging Market Bonds…Treasuries in Hot Seat…and More!

December 14th, 2012 by

Barron’s: – Buy PIMCO total return ETF over passive funds. – Scared of the bond market? Don’t panic. If you own exchange-traded funds, think about replacing your passive investments with the PIMCO Total Return ETF (BOND). So says Morningstars Samuel Lee.

Barron’s: – Will the fiscal cliff hammer emerging market bonds?  Emerging-market bonds might hold up better than investors expect if the US goes over the fiscal cliff, according to a recent Citigroup report.

iShares: – Treasuries in the hot seat (Video). – Concerns about low yields and future rising interest rates have given investors pause when it comes to US Treasuries. Russ Koesterich and Matt Tucker compare views on the asset class everybody loves to hate.

NYT: – Risk creeps up in long-term bonds.The prolonged low level of interest rates — both short-term rates that are administered by the Fed and longer-term rates that are more subject to market forces — has caused many investors to search for yield by purchasing longer-term bonds. But there are two major risks associated with this strategy; make sure you know what they are.

TBO: – Removing bond exemptions would be costly. As Congress and the president wrestle with solving the so-called fiscal cliff crisis, one particular issue should be of serious concern to local and middle-class taxpayers. The removal of tax-exempt status on municipal bonds — If passed, it not only will raise taxes on middle-class families, it also will slow local job growth and stymie the building of needed public infrastructure.

Futures: – S&P ordered by Japan financial watchdog to improve rating system. Standard & Poor’s Japan unit was ordered by the nation’s financial watchdog to improve its system for verifying and updating credit ratings in the regulator’s first action against a ratings company.

CNBC: – Is corporate behavior too bubblicious in bond market? Armed with record cheap debt, corporate Treasurers are becoming increasingly aggressive with how they use financing, a trend some analysts see as possible red flags for their bonds and stocks.

WSJ: – Japanese investors say yen weakening isn’t turning point for bond market. – Some foreign investors are betting that Japanese government bond (JGB) yields, near multiyear lows, could turn a corner in response to the yen’s recent weakening trend. But yield-starved domestic investors say otherwise, noting that a drop in the currency would only present a welcome opportunity to buy JGBs.

HTC: – Morgan Stanley said could go on cutting fixed income for years to come. Morgan Stanley may continue cutting assets in its fixed-income business for another five years as it seeks higher returns, said Howard Chen, a Credit Suisse analyst.

Barron’s: – Junk bonds overvalued, negative 2013 returns possible. Junk bond maven Martin Fridson says that “Based on the consensus forecast of a rise in Treasury yields, the expected 2013 total return on high-yield bonds is below 0%. The outcome could prove less bearish if the high-yield overvaluation persists throughout 2013, but the odds are against it.”

Reuters: – US municipal bond fund inflows fall to $311 mln. – U.S. municipal bond funds reported $311 million of net inflows in the week ended Dec. 12, down slightly from $489 million of inflows in the prior week, according to data released by Lipper on Thursday.

MarketWatch: – George Friedlander and Tom Kozlik to lead municipal bonds for America technical advisory committee. – Municipal Bonds for America (MBFA) announced today that Citigroup chief municipal strategist George Friedlander and Janney Montgomery Scott Director and Municipal Credit Analyst Tom Kozlik will lead the coalition’s Technical Advisory Committee.

Learn Bonds: – Allan Roth is off base on the dangers of bond funds.Our very own David Waring takes Allan Roth’s recent “The Dangers of Bond Funds” article in the WSJ to task. Are actively managed funds really dangerous?

PBS: – CDs v. Bond Funds: Which is better? – Paul Solman looks at the differences between Certificates of Deposit (CDs) and Bond Funds. He also shows you how to compare the interest rate risk of a CD with that of a bond fund?

FT: – Book Review: The fundamentals of municipal bonds. Recognized as an important primary-level sourcebook on the municipal bond market, The Fundamentals of Municipal Bonds was first published in the 1960s by the Investment Bankers Association of America. The latest edition covers the foundations of the municipal bond market, as well as the major changes and developments in the market since 2001. It’s a must read for all muni investors.

Bondsquawk: – Terex Corp bond offers high income opportunity. – Industrial leader, Terex Corporation’s bonds offers investors an opportunity to capture high income. We included Terex bonds as part of the Bondsquawk high yield portfolio earlier in the week.

Artimis: – Cat bond market can expand with new perils and regions. – Reinsurer Swiss Re held a media event yesterday at which they discussed trends in the insurance-linked securities, catastrophe bond and reinsurance convergence markets, how the market has developed in 2012 and a few thoughts on where the market can develop further in 2013 and beyond.

Daily Beast: – Why is Larry Summers signing up with Lending Club? – The “peer to peer” lender has big money and big names attached to it. Can it free the masses from credit cards?

Powerline:The municipal bond tax loophole — low-hanging fiscal fruit. – Peter Schweitzer proposes a tax increase that will raise $124.4 billion over the next ten years. He wants to eliminate the tax-exempt interest on municipal bonds for upper income Americans. What he fails to understand is that the purpose of tax exemption for state and municipal bond interest is not to help rich people, but rather to lower the borrowing costs of state and local governments.

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