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Fri, Sep. 19, 3:54 PM
- The Long Duration Total Return Bond Fund will have a dollar-weighted average effective duration of at least 10 years and will invest "in debt securities of any kind." Jeff Gundlach - who will be the fund's manager - has said he sees little amiss with interest rates at these low levels, and doesn't expect much of a rise from here.
- In addition to Treasurys, the fund's mandate allows for investments in MBS, CMOs, corporate debt (IG and HY), and overseas paper, among other instruments.
- Broad fixed income ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, GBF, IUSB
Tue, Jul. 29, 3:11 PM
- "The market is very complacent right now in terms of the valuations," says Matthew Eagan, co-manager of the Loomis Sayles Bond Fund. Along with co-managers Dan Fuss and Elaine Stokes, Eagan has doubled its short-term U.S. and Canadian debt holdings to 27% of AUM - a bet government bond rates are about to move higher.
- "The global economy is strong enough to support the Fed’s decision to continue the taper and eventually raise rates by the middle of 2015," says Eagan. "We want to be prepared for that to happen."
- Eagan's fund has outperformed 98% of its peers over the last five years.
- In today's action - as the FOMC is in day one of its 2-day meeting - the 10-year Treasury yield continues go its own way - off another three basis points to 2.46%. TLT +0.4%, TBT -0.8%
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, GBF, IUSB
Thu, Jun. 12, 9:25 AM
- The quest for yield reaches a new level with London fast food outlet Chilango finding fast demand for its Burrito Bonds, which offer those who invest £10K a free burrito weekly for the life of the debt.
- The company is trying to raise £1M for expansion and hit 32% of its target goal two days after the bond opened. Other than the free lunch, the four-year paper has an 8% coupon.
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, DI, GBF, LDUR, FWDB
Tue, Jun. 10, 3:47 PM
- It may not be the top for fixed-income, but "Bond Market Shortfall of $460B Seen Boosting Debt Markets" is the sort of headline you won't see at the bottom. The article from Bloomberg takes note of a JPMorgan analysis expecting debt issued this year to fall $600M from 2013 to $1.8T, while demand increases to $2.26T.
- Globally, bonds have returned 3.7% YTD, their best start to the year since 2003, according to the BAML Global Broad Market Index.
- "Everybody was expecting supply to come down, but maybe it’s coming down sooner” than anticipated, says SEI Investment's Sean Simko. “There’s a shift in sentiment from the beginning of the year when everyone expected rates to move higher.”
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, DI, GBF, RIGS, LDUR, FWDB
Mon, Jun. 2, 10:55 AM
- "I don’t expect the consensus to be right, I’m just surprised by how wrong it has been,” says Jim Bianco of bond market forecasts. The continuing rally in fixed-income has many questioning their models, including the FRBNY which last month altered its forecasting gauge to no longer include estimates from professional economists.
- In what sounds suspiciously like curve-fitting, the PhDs' new model now shows the continuing rally in Treasury prices as making perfect sense.
- Turning to the private sector, BofA's head of U.S. rates strategy Priya Misra sys a risk metric she's previously relied on - the gap between the rate on 10-year swaps and yields on Treasurys - hasn't worked since March. "Everyone is short and they are forced to cover," says Misra, throwing years of economics training out the window.
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, GBF
Thu, May. 29, 12:32 PM
- "Being different is absolutely essential if you want a chance at being superior," says Howard Marks. Hoping to return to the top of the heap in fixed income performance, Bill Gross is at odds with many on the Street, loading the portfolio of the Total Return Fund (ETF: BOND) with Treasurys in the belly of the curve.
- The play is a bet on Gross' "new neutral," in which the neutral Fed Funds rate is at least a couple of hundred basis points less than commonly believed. If he's right, Treasurys with duration in the 3-7 year area should benefit the most as rate hikes are postponed or come in at a far slower pace.
- "Once they see the whites of the eyes of full employment, they will want to normalize rates at a faster clip," says Jonathan Beinner, co-head of global fixed income at Goldman Sachs Asset Management, summing up the conventional Street wisdom.
- ETFs: AGG, BOND, BND, BIV, SCHZ, LAG, SAGG, GBF, GVI, SHY, BIL, SHV, VGSH, SCHO, SST, TUZ, DTUL, DTUS
- Previously: Pimco: "New neutral" explains Treasury rally
Thu, May. 22, 1:02 PM
- S&P Dow Jones Indices (MHFI +0.4%) expects to unveil smart beta bond indexes in Q4, while BlackRock (BLK +0.3%) doesn't yet have a timetable, but is experimenting with different ways of weighting components of the Barclays Aggregate Bond Index (AGG -0.1%) to make ETFs based on the new indexes, according to the company's Daniel Gamba.
- Those issuers with the most debt dominate traditional bond indexes, but smart beta supposedly reduces risk by giving more weight to factors like corporate cash flow, or economic growth rates in the case of sovereign paper.
- ETF issuers like iShares hope smart beta funds will lure investors seeking alternatives at a time of worry about higher rates. Smart beta is also more profitable for issuers - Vanguard's Total Bond Market ETF costs $8 in fees for every $10K invested as opposed to a number of smart beta funds charing $50 for every $10K.
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, DI, GBF, LDUR, FWDB
Fri, May. 16, 9:13 AM
- Harkening back to the "new normal" thesis peddled by former colleague Mohamed El-Erian for the past few years, Bill Gross (BOND) talks of a "new neutral" to try and explain why 2.50 on the 10-year Treasury is a perfectly reasonable yield.
- With debt remaining high and economic expansion continuing to be lame, the "new neutral" real Fed Funds rate is about 0%-0.5%, says Gross, along with Richard Clarida. "If the new neutral policy rate is 0% and the Fed achieves its 2% inflation target, than the 10-year Treasury should trade at close to 2%."
- The investment implications: Bubble risk is lower than expected as markets have priced in a real Fed Funds rate of 1-2% and nominal of 3-4% by the end of the decade. If the "new neutral" of 0% real rates and 2% nominal plays out, asset markets could see plenty of support.
- ETFs: AGG, BOND, BND, SHY, BSV, BIV, BLV, SCHZ, BIL, PLW, SHV, GOVT, VGSH, LAG, SCHO, BYLD, ILTB, SAGG, ISTB, SST, GBF, TUZ, GVI, DTUS, DTUL, MINC, FWDB, AGND, AGZD
Thu, May. 8, 3:04 PM
- Maybe more worried about having cash on hand to meet redemptions than beating their benchmark, bond fund managers have taken cash levels up to 7.6% of AUM at the end of March vs. 3% four years earlier.
- Times have changed in fixed-income land - banks have cut thousands from trade desks and shrunk their books of inventory, making it harder for debt managers to exit positions and raising the chance of far more price volatility should there come a rush to sell.
- Fund performance is being punished: The broad U.S. bond market up 3.2% this year - the best gains since 2010, according to BAML. Non-traditional bond funds - in which managers have flexibility to decide where to invest - are ahead just 1.7%.
- Broad bond ETFs: AGG, BOND, BND, BSV, BIV, BLV, SCHZ, LAG, BYLD, SAGG, ISTB, DI, ILTB, GBF, GVI, MINC, LDUR, FWDB, AGND, AGZD
Wed, Apr. 23, 12:51 PM
- The iShares Yield Optimized Bond ETF (BYLD) will give investors to a broad array of fixed income securities listed in the U.S.
- Unlike its wildly popular Core Total U.S. Bond Market ETF (AGG), according to the recently updated SEC filing BLYD will offer exposure to both investment grade and non-investment grade securities.
- Other total U.S. bond ETFs: BOND, BND, BSV, BIV, BLV, SCHZ, LAG, SAGG, ILTB, ISTB, GBF, GVI, MINC, FWDB, GIY
Wed, Apr. 2, 2:55 PM
- "The reported 'great rotation' out of fixed-income seems to have been short-lived," writes Brian Rehling, chief fixed-income strategist at Wells Fargo Advisors. Short of an inflation scare - not on the horizon at the moment - he doesn't see investors exiting the sector en masse in the coming years.
- Worried about volatility and the fact that most bond funds and ETFs never mature (target-date ones don't)? Rehling suggests buying high-quality paper directly and creating bond ladders which allow cash to be received and then put back to work at potentially higher rates.
- ETFs: AGG, BOND, BND, BSV, BIV, BLV, SCHZ, LAG, SAGG, ILTB, GVI, GBF, ISTB, MINC, FWDB, GIY
Wed, Mar. 26, 3:06 PM
- Private pension funds and insurance companies - their equity exposure rising along with stock market - have returned to the long end of the curve this year to rebalance their portfolios, says JPMorgan Private Bank CIO Richard Madigan, helping to support prices as Fed dials back QE.
- Madigan didn't and doesn't expect a "great rotation" from fixed income to equities, instead arguing the boost in equity inflows has come and will come at the expense of too-high cash balances. Why own fixed income? Bonds continue in their role of buffering other investment risk in portfolios.
- "In the middle of everything lies opportunity," said Einstein. We're mid-cycle in the global recovery, says Madigan, maybe frustrating those late to invest, but still offering plenty of opportunity.
- ETFs: AGG, BOND, BND, BSV, BIV, BLV, SCHZ, LAG, SAGG, ILTB, DI, GVI, ISTB, GBF, LDUR, MINC, FWDB, AGND, GIY, AGZD
Thu, Mar. 6, 3:08 PM
- Typically making up 20-25% of Berkshire Hathaway's (BRK.A, BRK.B) insurance units' investment holdings ($186.8B AUM), fixed-income assets dropped to just 14% as of the end of the year. Stocks account for $114.8B of the holdings. Cash of $48.2B is up from $47B a year ago and $30.6B at the end of 2009, and of the fixed-income the units do hold, there's a decided tilt away from duration.
- Investment income in the insurance units was $3.7B in 2013, but this could drop as nice-yielding deals with Mars, Inc, Swiss Re, Goldman, and GE wound down and Buffett has only been able to replace a portion of that money with equally lucrative plays (i.e., Heinz). “Investment opportunities currently available will likely generate considerably lower yields ... We continue to hold significant cash and cash equivalents earning very low yields.”
- Broad fixed-income ETFs: AGG, BOND, BND, BSV, BIV, BLV, SCHZ, LAG, SAGG, ILTB, GVI, ISTB, GBF, DI, LDUR, MINC, FWDB, GIY, AGND, AGZD
Tue, Mar. 4, 8:21 AM
- Permanently on the whiteboard of Pimco's Investment Committee boardroom is its concentric circles of asset classes, with the Fed Funds rate occupying the center and stocks and real estate far on the outside. "Change the price of credit at the center and you change the price of assets at the outer extremities," writes Bill Gross.
- Risk assets may be high-priced, but they're not necessarily mis-priced as long as ZIRP continues. Key, says Gross, drawing on Yeats' "Second Coming," is whether the center holds, i.e. can investors be convinced of the Fed's credibility as it shifts from a quantitative to qualitative assessment of whether to tighten policy.
- "Artificial prices will not be mis-priced if circling falcons can be convinced of the efficacy of qualitative forward guidance. We believe that will be the case. Carry trades, then, in numerous forms should be profitable."
- Redemptions from Gross' Total Return Fund (ETF version: BOND) slowed to $1.6B in February, the slowest pace of outflows since the bond market blew up last May.
- Broad fixed-income ETFs: AGG, BOND, BND, BSV, BIV, BLV, SCHZ, LAG, SAGG, ILTB, GVI, ISTB, GBF, MINC, FWDB, GIY, AGND, AGZD
Thu, Feb. 13, 1:54 PM
- The Guggenheim Enhanced Core Bond ETF (GIY) is scheduled to close on March 7th after 4 years of trading.
- Competing with the iShares Core Total U.S. Bond Market ETF (AGG) and Vanguard's Total Bond Market ETF (BND) has proven an uphill climb; both have accumulated $15 billion and $19 billion in assets respectively while GIY has only $5 million.
- Other broad Bond ETFs: BOND, BSV, BIV, BLV, SCHZ, LAG, SAGG, ILTB, GVI, ISTB, GBF, MINC, FWDB
Thu, Jan. 16, 3:14 PM
- "We actually saw institutions selling equities and buying bonds, especially the long end of the curve," says BlackRock (BLK +1.7%) CEO Larry Fink, making the rounds after a big earnings report this morning. Institutions with big profits in stocks are asking themselves if they need such large exposure to equities, he continues. "The answer was that they need to be a little more balanced."
- Fink's comments square with other reports of a rotation back into fixed income as corporations all of a sudden find their pension funds fully funded thanks to the market rally.
- Within fixed income, Fink sees another rotation - and that's out of paper pegged to something like the Aggregate Bond Index (AGG +0.2%) and into "unconstrained" bond funds - not tied to the long end, but instead trying to grab yield without adding duration.
- Related ETFs: AGG, BOND, BND, BSV, BIV, BLV, SCHZ, LAG, SAGG, ILTB, ISTB, GVI, GBF, FWDB, MINC, HOLD, GIY, AGND, AGZD
- BlackRock earnings coverage
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The Fund seeks daily investment results, before fees and expenses, of 100% of the inverse of the price performance of the Barclay's Capital U.S. Aggregate Bond Index. There is no guarantee the fund will meet its stated investment objective.
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