High Yield Corporates or SPY?…PIMCOs Gross – Sell Bad Bonds, Buy Good Ones…and more!September 18th, 2012 by Simon G
Best of the Bond Market for September 18th, 2012
BCA Research: – Which is best, high yield corporates or The S&P 500? – Total returns in the high-yield bond sector have kept up with the S&P 500 over the past three years, with far less volatility. One of the reasons why high yield has performed so well versus equities is the inverse relationship between spreads and the level of Treasury yields.
CNBC: – PIMCOs Bill Gross – Its simple sell bad bonds, buy good ones. – Bill Gross, the co-Chief Investment Officer of Pimco, and manager of the world’s largest bond fund, said via Pimco’s Twitter account Monday night: “Central banks are where bad bonds go to die. Sell bad bonds, buy good ones. Investing sometimes can be very simple.”
Reuters: – Top Fed policymakers differ on QE3′s effectiveness. – Just days after the Federal Reserve launched a third round of bond-buying to boost the lackluster recovery and bring down unemployment, top Fed policymakers on Tuesday disagreed sharply over whether it would work.
FT: – What’s behind the surge in TIPS-derived inflation expectations? – US 10-year Treasury Inflation-Protected Securities (TIPS) breakeven rates are surging, and talk of a revival in inflation expectations is, understandably, doing the rounds. But we’re not entirely convinced that it is that simple.
Richard Shaw: – Comparison of corporate bonds in long-term rising and falling rate markets. It may seem a bit out of place to be concerned about how corporate bonds will perform in a rising rate environment; just days after the Federal Reserve said it would keep short-term rates near zero until mid-2015 (almost 3 years from now). However, interest rates must eventually rise.
Learn Bonds: – 4 Strikes Against Municipal Bonds? – In response to Ronald Delegge’s recent article on etfguide.com, we take a more pragmatic view about the pros and cons of investing in the muni market.
Charles Margolis: – Don’t think of stocks or bonds, think of stocks and bonds. – Bonds are often forgotten by the mainstream press who seem fixated on the stock market. But there’s more to financial markets than just stocks.
Inside Investing: – The QE3 aftermath: What it means and how it’s (not) different. – The advent of a new round of quantitative easing has significant impact for investors, but it’s important to understand what’s actually happening. Last week the Fed extended its “low rates” language from 2014 to 2015, announced it would be purchasing agency mortgages at a rate of $40bil per month, and left the amount of mortgages open-ended and contingent on economic conditions.
Investment News: – Where is there value in the muni bond market? – Municipal bond yields have sunk to near historic lows. Sector and quality spreads continue to narrow. To date, municipal bond performance is on pace with that of last year’s. In my opinion, this has been driven by returning confidence in municipal credit quality and demand continuing to overwhelm supply.
Wall Street Pit: – Inspiration or Insanity? Fed action and Market Reaction. – I was a skeptic on the efficacy of QE2 and Operation Twist and I remain unpersuaded on QE3. If the definition of insanity is that you keep trying to do the same thing over and over, expecting a different outcome, then we seem to be fast approaching that point with the Fed.
Muni Net Guide: – Timing of municipal audits mirrors prior years, says Merritt study. – Despite an increasing trend toward financial transparency, municipal borrowers do not appear to be completing their financial audits with any increased urgency, according to the third annual Merritt Research Services analysis of municipal audit turnaround time.
many well known bond investors will be hurt should the 30 yr Treasury bond continue to rally…its reason enough to get some very nervous
— Michael Pietronico (@MillerTabak) September 18, 2012
Gross: To own a TIP you need to believe in 2.5% inflation or more in future years. I do. We are in the age of inflation.
— PIMCO (@PIMCO) September 18, 2012
The problem is that central bankers, by allow credit system to run wild, create massive malinvestment & bubbles @zerohedge
— Cate Long (@cate_long) September 18, 2012
Treasuries remain the safe haven: net foreign purchases of long-term USsecurities rose to $60.2 billion, mostly in Treas bonds/notes
— Taylor Riggs (@TaylorRiggs_BB) September 18, 2012