Best of the Bond Market for September 25th, 2012
Amazon Money and Markets: It sounds like Vanguard is about to launch a corporate bond index fund – John Bogle blogs – “As low interest rates continue for the foreseeable future, and spreads between corporates and Treasurys remain at current levels, it can only be a matter of time until a total corporate bond index fund is made available to investors.”
Mike Ashton: Why I-Bonds are a screaming buy - Because the people who created I bonds never contemplated a negative real interest rate, or else thought the marketing angle of selling bonds at a negative real interest rate would be too bad, the fixed part of the I bond coupon is floored at 0%. This is significant, since the market rate for a 5-year TIPS bond right now is -1.59%.
Bloomberg Brief: Everything you want to know about the Fiscal Cliff and more – All in one place.
FT: – Bond markets offer mixed messages. – The US Treasury will auction $35bn of two-year paper on Tuesday, the first chunk of this week’s $99bn of sales. Some soft auctions seen in August have given way to better demand this month, but it’s fair to say chatter about whether the bond bull market may be cracking has clicked up a notch of late.
Cate Long: – In Fed policy, the losers are people with savings. – In monetary policy there are always winners and losers, and—with the Fed’s interest rate target having already been at or near zero for more than four years—the losers are people with savings.
Bloomberg: Morgan Stanley Recommends investors reduce junk bond exposure - “Risk/reward for the asset class is less attractive today than at any other point this year,” analysts Adam Richmond and Jason Ng wrote in a report dated today. “The main driver of our downgrade is unattractive total return prospects going forward.”
National Association of Bond Lawyers: White paper on the issues with current tax proposals effecting municipal bonds - The extent of the effect of eliminating or limiting the exclusion of interest on state and local bonds would depend in part on whether any change is applied retroactively to all outstanding tax-exempt bonds or only prospectively. Regardless of whether the change is prospective only or retroactive, the effect on state and local borrowers will be some combination of lower infrastructure spending, higher tax and ratepaying burdens on the public, and lower spending in other areas. These burdens would fall mainly on lower and middle-income households.
Bloomberg: – California Boosts Issue to $1.75 Billion at Record Yield. – sold $1.75 billion in tax-exempt debt at an all-time low interest rate of 3.72 percent for 30-year bonds, after boosting the size of the offering due to demand, the treasurer’s office said.
Learn Bonds: – Jeffrey Gundlach wants to be a Stock Fund Manager?! – Jeffrey Gundlach, the portfolio manager behind The DoubleLine Total Return Fund, is swimming in investor cash to invest. As a portfolio manager that has a great track record in bonds and no background in stocks, the latest pronouncements made by Jeff are curious.
MarketWire: – iTB Launches Platform Connecting Institutional Investors to Fixed Income Trading Venues. – iTB Holdings Inc., a leading software provider for institutional fixed income traders, today announced the launch of iTBconnect, a new platform that connects institutional investors to the electronic fixed income trading venues of their choice.
Investment News: – What to expect from muni bonds this fall. – The tax-exempt municipal bond market enjoyed favorable technical factors for much of the summer, which allowed it to outperform U.S. Treasuries. Looking toward the fall, we anticipate a reversal of those supporting trends.
PennLive: – Harrisburg, PA. Mayor asks for green roof for City Hall as city goes into financial meltdown. – Harrisburg city mayor Linda Thompson has asked for an increase in travel and workshop expenses, a green roof for City Hall, a water park for youth and snacks and tea for the mayor’s office. It seems no ones told her the City will be all out of cash by November.
IFRE: – Price sensitive Calpine pulls bond deal. – Calpine Corp on Monday ditched plans to take out 10% of some of its longer-dated debt, following pushback from bondholders and the company’s own price sensitivity.
Bond Squawk: – The Federal Reserve does not care if Treasury yields are higher. – There are many critics blasting the recent Fed’s announcement of QE3 suggesting it’s ineffectiveness since Treasury rates are higher or that mortgage rates are stagnant and not enough to make a material impact on the economy. Furthermore, higher inflation is apparent in the data with the long end of the yield curve rising resulting in a steepening of the yield curve.
These discussions about a QE4 are asinine. We have an open ended program and a limit of how much MBS you can buy without messing supply/dmnd
— David Schawel (@DavidSchawel) September 25, 2012
Gross: Game of Poker: Fed adds 1 Trillion to Pot via QE3, and winning hands/ assets make more money.Real Economy? No.Inflation? Yes.
— PIMCO (@PIMCO) September 25, 2012
— Cate Long (@cate_long) September 25, 2012
lets take a vote on how many #muniland traders will be gone tomorrow for the holiday. gunna be a quiet day out there
— Taylor Riggs (@TaylorRiggs_BB) September 25, 2012