Displaying items by tag: bonds

Wednesday, 28 November 2018 11:58

The Best Muni Bond Bargains

(New York)

Here is an interesting fact for investors—municipal bonds tend to hold up well during periods of rising rates. The underlying tax benefits of the bonds mean their demand is well insulated even in such periods. The question is where to commit capital. Well, year-end tax loss selling is creating some interesting opportunities in closed end muni funds, says BlackRock. Some funds are selling at significant discounts to the NAVs, sometimes 10% or more. These funds tend to bounce back in the new year, which is called the “January effect”. The discount to NAV allows one to gain even if the prices of the underlying assets don’t budge.


FINSUM: Closed end muni funds look like a great place for some bargaining hunting until the end of the year.

Published in Bonds: Munis
Monday, 19 November 2018 11:38

The Next Big Short? High Yield

(New York)

How to protect against the next recession? This is a difficult question. Since it may be rate induced, it will be hard to hide out in Treasuries, and gold has not inspired much confidence. Well, SkyBridge Capital thinks the big money maker is to short high yields. “Our largest short position right now is in high yield, and it’s not because we think we’re going to make money this year or next year … It’s to protect against the eventual recession or [a] surprise recession”, says a portfolio manager there. “If you’re looking to put on [a] relative cheap short position, it’s hard to figure out how you lose money given how tight spreads are”.


FINSUM: High yield has seen a big expansion of credit and a decline in quality, and when the next recession rolls around there are going to be some big losses.

Published in Bonds: High Yield
Friday, 16 November 2018 11:38

How to Get Safe 5% Yields

(New York)

This is a tricky environment for income investing. On the one hand, rising rates generally mean better yields, but at the same time, the chance of rate-driven losses is high. What if investors wanted to get safe 5% yields? Doing so is a little bit tricky and requires a blend of riskier credit and a mix of durations. However, investors can get pretty close with some individual ETFs. For instance, BlackRock’s iBoxx $ Investment Grade Bond ETF yields 4.39% and has shorter dated maturities with comparable credit quality to other funds.


FINSUM: This seems like a good choice, but there are also a number of rate hedged ETFs that have similar yields and almost no interest rate risk.

Published in Bonds: IG
Friday, 16 November 2018 11:34

The Fed is Sounding More Dovish

(New York)

Those worried about rate hikes will be happy to hear this news. Ever-hawkish Jerome Powell is finally starting to sound just a bit more dovish. Powell says the economy is strong, but could face “headwinds”. He says the Fed is discussing how much and how fast to raise rates and acknowledged that the Fed’s actions could inhibit the economy. He said the Fed’s goal is to “extend the recovery, expansion, and to keep unemployment low, to keep inflation low”.


FINSUM: It is good to hear some public consideration that rates might get in the way of the economy. While we would not exactly say this is dovish, it is certainly less aggressive than previously.

Published in Bonds: Total Market
Thursday, 15 November 2018 14:16

Goldman Sachs Says Yield Inversion Looms

(New York)

With all the volatility of the last month, and midterms, less focus has been on one of the most ominous of economic signs—the yield curve. Well, Goldman Sachs has just weighed in, warning investors that a yield curve inversion is looming. Goldman went further than to say that 2-years might be flat or overtake 10-years, the bank said that spreads between 2- and 30-year bonds would fall to zero. To put that call into perspective, it would be a narrowing of 50 basis points versus now. Goldman highlighted the move in its top themes to watch for 2019.


FINSUM: We have to give Goldman Sachs a little credit here as they have been consistently hawkish about rates for at least a year and are sticking to it. We tend to agree with this view.

Published in Bonds: Treasuries

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