Why Mortgage Rates Should be Even Lower…Bond Ratings Explained…Is CCC the new AAA…and more!December 10th, 2012 by Simon G
The Basis Point: – Why Mortgage rates should be lower but aren’t – Mortgage backed securities (MBS) prices suggest rates should be lower (because rates drop when bond prices rise), but they’re not because lenders aren’t passing MBS improvements to consumer rate sheets for two main reasons.
Investor Junkie: – Bond ratings explained. – Bond credit ratings are without a doubt the most important measures in the bond market. Three major ratings agencies – Moody’s, Standard and Poor’s, and Fitch drive the bond market with their research into bond quality. So how do these ratings work?
MinyanVille: – Is CCC the new AAA? – No, CCC isn’t the new AAA, but the market is starting to trade it that way. It was a decent week for fixed income, but what stood out for me was the strength in the high yield market. I thought the demand for high yield debt would subside and that the market felt toppy. Well, I was wrong.
Learn Bonds: – Will your balanced fund protect you in the next bear market? – A balanced fund is a pool of money that is invested in multiple asset classes. Balanced funds, as a collective group, are likely to outperform once again during the next bear market in equities, but I anticipate that outperformance to be less than many investors expect. Here is why.
Distressed Debt Investing: – Two great interviews with two distressed fund managers. – Two of the best fund managers in the distressed debt business talk about opportunities in the Argentine bonds and distressed debt markets.
Bloomberg: Central Banks ponder going beyond inflation mandates - Inside the world’s oldest central bank, a new debate is raging over a dilemma facing monetary authorities around the globe.
WSJ: – Emerging-market balanced funds luring more investors. – A small group of emerging-market balanced mutual funds that offer lower volatility are drawing interest from risk-averse investors and their advisers.
Lord Abbett: – Munis make a compelling choice as the “cliff” closes in. – As the “fiscal cliff” approaches, muni bonds are looking more and more appealing. Zane Brown explains why.
Sober Look: – Corporate bonds outstanding exceed MBS for the first time in over 20 years. – For the first time in since 1991 the amount of corporate paper outstanding in the US is higher than the amount of mortgage related securities.
MorningStar: – Income vs. Total return: Who says you need to take sides? – In order to build a truly balanced portfolio most investors should give due consideration to securities’ income-generating potential but within a total-return framework. Blending the two approaches allows investors to benefit from the stability that income-producing securities bring to the table without sacrificing diversification or chasing securities that, in hindsight, turn out to be yield traps.
ETF Trends: – How PIMCO manages its active ETFs. – While PIMCO is a relatively newer player in the exchange traded fund market, the fund company’s offerings have made a big splash in the industry, especially after Bill Gross, founder and co-chief investment officer, adapted his flagship Total Return fund into an ETF investment vehicle.
NewOak: – Fixed income markets 2013 & “good” jobs report. – With interest rates so low and no real prospects of rising anytime soon, investors will continue searching for yield but remain on the edge because of US fiscal policy impasse and reform struggle in Europe, says Ron D’Vari, CEO and Co-Founder of NewOak Capital.
Bloomberg: – Illinois may face downgrade if no pension fix. – Illinois Governor Pat Quinn said the battle to control employee pension costs “is our fiscal cliff and we need to deal with it” or analysts in “green eyeshades” will lower the state’s credit rating again.
NY Times: – Fed is likely to sustain its stimulus program. – The Federal Reserve is widely expected to announce on Wednesday that it will continue buying Treasury securities to stimulate growth in the New Year.
Napa Valley Register: – Bond buyers beware. – Over the past 12 years, equity markets chewed up and spit out many investors. Within a decade, the technology bubble, credit crisis and several other bears laid waste to stock equity. Many investors sought refuge in the bond market and have been rewarded. The bond market has performed relatively well in that time.
Forbes: – Muni bond manager’s journal: Seasonal affective disorder. – Usually I’m reluctant to offer specific buying and selling advice because I simply don’t know enough about a person’s investments, goals and risk tolerance. However, after years as a portfolio manager of municipal bonds at TIAA-CREF, I’ve gradually come to realize something: The investment process I use to manage a multimillion-dollar mutual fund is actually not much different from the process I would suggest to most individual investors or their advisors. So what is it?
Financial News: – Covered bond CDS market flops. – A dealer initiative to create credit default swaps for the ultra-safe covered bonds market has flopped after a lack of interest from sceptical investors.
Bond Squawk: – High yield bond portfolio. – By choosing to own individual bonds, you will have greater control that could lead to better performance. Furthermore, you should have a better grasp of your investments and where you stand today in reaching your goals. So here’s a look at Bondsquawk’s High Yield Bond Portfolio which consists of 12 bonds, one from each diverse sector. The model is used to illustrate an active High Yield portfolio that has bonds rated from BB+ or lower.
Muni Net Guide: – Steep drop in home prices affects local tax bases. – Anticipated drops in local property taxes will most likely cause the states to intervene. And while they’re at it, they need to introduce necessary local government reforms.
Bloomberg: – Franklin wins California muni bet surpassing competitors. – Franklin Advisers bet on California municipal bonds in 2009, when the state was so broke it had to use IOUs to pay its bills. The wager has enabled the company’s flagship national tax-exempt fund to beat 89 percent of its peers in the past five years. It returned an annual 6.3 percent on average in the period, data compiled by Bloomberg shows.
As wrote this weekend, be careful assuming higher treasuries is sign of risk off rather than anticipation that fed pledges more buying
— TF Market Advisors (@TFMkts) December 10, 2012
Gross: Here comes da Fed! More check writing ahead. NO twisting. Buy 5-year Treasuries for short term trade.
— PIMCO (@PIMCO) December 9, 2012
Gross: Wlth tax pckn up steam Financl reprssion (- real rates), highr taxs on incm n captal.Cn’t beat it but can ease pain.More tomrrw.
— PIMCO (@PIMCO) December 10, 2012
Two huge issues in Michigan as Obama arrives… potential Detroit bankruptcy and right-to-work pending legislation. Will O address these?
— Cate Long (@cate_long) December 10, 2012