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TF Market Advisors: – Treasuries vs Equities (QE, Fed, and Inflation). – There is an almost universal acceptance that stocks must go higher. The general consensus is that the world has changed and stocks are entitled to grind higher every day because either the news is good, or the news isn’t good and we’ll get more QE and eventually the news will be good. At the same time, there is a growing consensus that bonds can’t go higher in price, at least not treasuries.
Bloomberg: – Gross to Buffett omens disregarded as sales soar. – Sales of corporate bonds in the U.S. are surging toward the busiest May ever as borrowers race to the market before demand dries up with Bill Gross and Warren Buffett cautioning against buying debt at all-time low yields.
Rick Ferri: – A reason to own bonds. – Probably one of the biggest investment concerns today is the so-called “bond bubble.” Interest rates are at an all-time low thanks in part due to Central Bank bond buying and weak demand for borrowing in this slow growth economy. The fear of owning bonds has hit an unprecedented — and in my view, unwarranted — level. There is a good reason to own bonds in a portfolio.
Learn Bonds: – Want yield? Take a look at Petrobras’ new bonds. – A few weeks ago, Apple completed a massive $17 billion, six-part bond offering. Although not as large as Apple’s record-breaking corporate bond deal, Petrobras, the Brazilian energy giant, just completed quite the massive bond offering of its own. Its six-part, $11 billion offering, was issued by the subsidiary Petrobras Global Finance B.V. and includes both fixed-rate and floating-rate notes. The offering was broken down as follows.
Bloomberg: – PIMCO favors Brazil, Mexico bonds as yields overtake U.S. junk. – Pacific Investment Management Co. is favoring local bonds in Brazil, Mexico and South Africa as emerging-market notes pay more than U.S. high-yield corporate debt for the first time in two years.
Investment Week: – Navigating ‘unprecedented times’ for high yield bonds. – Peter Khan, portfolio manager of the Fidelity Global High Yield Bond fund, argues investors are facing unprecedented times when it comes to fixed income yields. This is particularly true for the high yield bond market, which is yielding below 6% today.
Wall Street Pit. – Fed-speak: Ease air out of bonds – support equities. – While the fundamentals of our underlying economy bump along with continued structural headwinds and fiscal support from Uncle Sam remaining anemic, the Federal Reserve’s QE-infinity remains the underlying cornerstone supporting our markets. With equities making new highs and high yield bonds trading at stratospheric levels, recent pronouncements from Fed officials strike me as looking to accomplish two goals.
MarketWatch: – Tax-free munis paying more than taxable corporate junk. – To get a sense of how heated the corporate high yield market still is, try comparing it to the high yield municipal market. This makes for an interesting juxtaposition, since high yield munis have remained relatively level for much of the year, while junk bonds have been on a tear.
Business Insider: – Anyone who says that bonds are in a bubble needs to answer two simple questions. – With markets hitting new highs, the “b-word” has been getting tossed around a lot more. It’s being applied to both stocks and bonds equally. And there’s a large contingent of people hate bonds, and think the bond market is a bubble being engineered by Bernanke. But as Paul Krugman has recently pointed out, there’s a big flaw with saying bonds are in a bubble.
WSJ: – Is this the best time for investors? Don’t bet on it. – Interest rates on Treasury bonds are near historic lows. Corporate bonds, including those for blue-chip and riskier companies, are booming. Those who stuck with markets through the crisis of 2008, and especially those who held a balanced portfolio of stocks and bonds, are probably feeling very pleased with themselves, and well they might. But there’s a problem at the heart of financial markets. Psychologists would call it cognitive dissonance—the problem of trying to believe two incompatible things at the same time.
Inequality.org: – Tax-free municipals: An unnecessary giveaway. – Do we really have to line the pockets of billionaires — and Wall Street banking giants — to help states and localities improve their infrastructures? Of course not. But we do.
CFA Institute: – How big money bets for and against rates: Part 2, interest-only bonds. – As a result of the Fed’s QE program, the landscape of the MBS market has dramatically changed. Fewer bonds are available for investors to hold, with the Fed purchasing nearly two-thirds of all new issuances, and the new bonds outstanding in the market have lower coupons and greater extension risk. The investors still holding premium mortgages are facing headwinds from faster prepayments, which causes their bonds to be returned at par.
Dallas News: – Don’t swing for the fences when investing in municipal bonds. – Your focus when building an investment portfolio should be on ensuring that your investments are diversified, match the amount of risk you can tolerate and when you need the money. Whether it be muni bonds or other investments, don’t reach for unrealistic returns. When something comes with a higher return, it generally means that there’s higher risk on the other side.
Reuters: – Detroit Chp. 9 possible in 12-16 months-investor. – Director of Northern Trust’s Municipal Fixed Income unit, Tim McGregor says a bankruptcy filing could be in Detroit’s future in the next 12 to 16 months.
ETF Trends: – PIMCO set to launch three new ETFs. – PIMCO is getting ready to launch three new actively managed exchange traded funds this year. The funds will follow the success of PIMCO Total Return ETF (NYSEArca:BOND).
Forbes: – Stocks riskier than bonds? Not if you think like Buffett. – Some of the latest research by Javier Estrada, professor of financial management at IESE Business School, challenges conventional thinking about the relative risk of stocks and bonds.
MSRB: – The Municipal Bond Market and the MSRB. – What is the MSRB and what role do they play in the $3.7 trillion dollar municipal bond market?
Forbes: – High bond prices show there’s no government debt problem. – An argument being used in certain corners of the econosphere at the moment is that high bond prices (or low yields, they’re the same statement) show that there’s no problem with debt. For, if people were worried about the amount of government debt that there is then government bonds prices would be lower and yields would be higher. Thus, as no one is worried, because yields are low, then therefore there cannot be a problem.
BusinessWeek: – U.S. bonds cheapest since 1990. – The longest decline in Treasuries this year has left U.S. government debt the cheapest since March 2011 when measured by real yields and the best relative value compared with German bunds in more than two decades.
CNN Money: – Death cross brewing in bond market. – Investors have been dumping bonds lately, but a little-known technical indicator suggests that may not last for long. The 10-year yield is flirting with the so-called death cross, which occurs when its 50-day moving average falls below its 200-day moving average.
Gross: The day will come when risk assets underperform. Circling that date is the hard part. Sooner rather than later is our view.
— PIMCO (@PIMCO) May 20, 2013
The comparison to USTs yields is now being made by almost every asset class & modest changes in UST yields could have surprising impacts
— David Schawel (@DavidSchawel) May 20, 2013
Spread depicts pricing ambiguity, inconsistent cust flow & possible need for even higher ylds to set firmer baselines & improve liquidity
— Muni Market Advisors (@Muni_Mkt_Advis) May 20, 2013