Little more than a year ago the investing world was on fire when Meredith Whitney made a dreary prediction about the state of the municipal bond market.
On one of the highest rated television shows, 60 Minutes, Whitney said that she expected several hundred billion dollars of municipal bond defaults. That is to say that Whitney believed that the municipal bond market would essentially blow up because cities and local borrowers wouldn’t be able to pay back their growing debt balances.
Municipal Bonds Blossom
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Bonds
Meredith Whitney, municipal bond defaults, municipal bonds
The Federal Reserve reports the M0 money supply, the amount of physical cash and reserves held at the Federal Reserve by member institutions.
Recently, the M0 money supply seems to be falling, indicative of big changes in the economy. Generally, the M0 money supply is held mostly constant. The “monetary base,” as it is known, changes mostly due to Fed involvement in driving down interest rates.
The Fed hasn’t been actively buying securities, nor is it reducing the amount of securities it holds from the open market.
Fed M0 Money Supply Figures
Here is a chart of the M0 money supply as most recently reported:
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Bonds, Economy
m0 money, m0 money supply, m0 money supply 2012, monetary base
With rates at record lows, US Treasury prices are now at record highs. Investors who want to solidify their position in the next move toward rising interest rates needs to know how to short Treasuries to profit on rising rates.
Traditionally most investors could not short Treasuries. Futures accounts were restricted only to those with sufficient capital and knowledge of the futures market.
Additionally, the bond markets have always been the Achilles heel to stock investors, who understand one market but not the other. We’ll show you how to short Treasuries in the article below.
How to Short Treasuries
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Bonds, ETF
how to short treasuries, rising yields, shorting treasuries, TBT, TLT
Fixed-income investors are getting more than their fair share of pain in the credit bubble that is sweeping the financial markets. Recently, several large issues from A-rated corporations have produced yields that are so low they threaten to provide investors with negative real returns after inflation.
Several big corporations just released a slew of debt on the short and long end of the yield curve. Johnson and Johnson, for example, sold $4.4 billion of issues with rates at .7%. That’s well under the 3.2% annual rate of inflation..
Even Google, which has more than sufficient cash, decided it would seek out a $3 billion loan from investors. Never mind that the company has $30 billion in cash, and had virtually zero debt before the newest offering.
When it bursts
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Bonds
bond bubble, corporate bond yields, fixed income, inflation
Yesterday we talked about how it’s time to refinance your mortgage. With rates sure to start moving upward in the US out of necessity, it’s time to start thinking about cutting your mortgage payment and your bond exposure.
High Yields = Low Valuations
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Bonds, Investing
Bonds, convexity, rate hikes, sell bonds, yield curve
Ahh, memories. Those good ol’ savings bonds that made you a proper American. They were used to fund warfare, social programs, and government spending.
Buying a savings bond was like investing in the whole country all at one time. You were anti-American if you didn’t do it!
Today, though, savings bonds aren’t nearly as popular with investors as they were years ago. While grandparents are still buying them for their grandchildren as gifts, college savings plans, or just as a thoughtful way to give the gift of investing, there are still better investments out there than the savings bond.
How to Cash a Savings Bond
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Bonds
cash in savings bonds, how to, interest rates, savings bonds, treasury
While few investors can pick stocks that beat the market, almost everyone can beat the risk-free returns. In this day and age, with computers scouring the markets with electronic eyes faster than that of humans, it makes a lot of sense to start targeting an ideal asset allocation instead of market-beating returns.
What Asset Allocation Theory Knows
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Bonds, Stocks
asset allocation, Bonds, Investing, Mutual Funds, retirement, Stocks
As investors tire of the same old stocks, the same old bonds, and those boring ol’ mutual funds, peer-to-peer lending sites are finding that investors are willing to “get social” when it comes to investing, too. It isn’t all about the dollars and cents—some find that lending to others helps other people and themselves by providing attractive returns on their investment dollars.
Strategies for Peer to Peer Lending Success
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Bonds, Business
Investing, lending, lending club, loans, p2p, peer to peer, strategies for peer to peer lending
While I’ve previously covered bond convexity and bond barbell’s on this blog, I think it is important to cover a very powerful savings strategy, the certificate of deposit (CD) ladder. At its core, the CD ladder is very much like the bond barbell; the number one goal is to reduce exposure to low interest rates and set your portfolio up for the best possible returns with the least amount of risk.
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Bonds, Investing
cd, certificates of deposit, conservative investments, ladder
As the world exits from recession and the United States considers remedies to a growing Federal deficit, we’re sure to hear plenty of references to the yield curve for both monetary policy decisions, as well as fiscal policy from the US House and Senate. Now might be a good time to know what the yield curve is; we’ll explain below.
What is the Yield Curve?
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Bonds, Investing
Bonds, curve, Investing, yield
After a second glimpse into their books, the US Treasury found that the Chinese government actually owns far more US debt than was previously thought—some 30 percent more. In fact, following a release two months ago, China’s ownership of US debt was revised up to $1.6 Trillion.
Chinese Stockpile of US Debt Exploding
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Bonds
China, debt, ownership, Treasuries, us
Unfortunately, many investors haven’t yet figured how bonds work into their portfolio. They are, as an asset class, an interesting bunch and their movements can be confusing to many “hands-off” investors. Read more…
Bonds, Investing
BIV, BSV, GMMB, ITM, MLN, MUAA, MUAB, MUAC, MUAD, MUAE, MUAF, MUNI, SHM, SMB, SMMU, WMT
For the first time in recorded history, investors have paid the US government to lend it money. That is, there was so much interest in today’s $10 billion TIPS (Treasury Inflation Protected Securities) auction that the winning bidders took home negative interest rates. Why did they do it? Read more…
Bonds
With 2010 now winding down, it’s time to start thinking about 2011. Where you put your money next year is a crapshoot just like any other year. Except this time we’re deep in the midst of the worst recession in 80 years, regardless of what the NBER says. Read more…
Bonds
US Federal Debt has been particularly attractive in this economic downturn as more than ever investors are concerned about the prospect of deflation. At present, a 10 year bond offers a yield of just 2.64%, and that’s probably about as low as we’ll see in our lifetime. Read more…
Bonds
Bond investors have been all over the new Build America Bonds as created by the 2009 economic stimulus package, and it should be no surprise that American cities are as well. The new bonds allow for the Federal Government to subsidize the interest expense on new projects funded with debt, and cities are sure to grab as much of the subsidies as they can. Read more…
Bonds
Bond investors know it too well. Overleveraged fixed income traders fear it. And the shorts love it. The bond maturity wall is coming up, and quickly, to the tune of $1.2 trillion. Read more…
Bonds
As 10-year treasury bonds cross the important 4% yield, high yield debt is still in vogue. Ford, perhaps one of the riskiest borrowers of them all, dumped $1.75 billion in 5 year debt. And believe it or not, the company earned the lowest interest rate yet at 7%. Read more…
Bonds
Irony alert! The Federal Reserve, which has long been the source of most bubbles, is going to complete its own internal investigation as to why speculative bubbles form. Unfortunately, the early answer from the FED is that regulations can end bubbles. They couldn’t be more incorrect. Read more…
Bonds, Economy
When it comes to the alphabet AAA and AAA are exactly the same. But when you compare US debt to that of American businesses, investors aren’t so willing to say AAA and AAA are exactly the same. Read more…
Bonds
Long term bond prices are on the brink of collapse. With record high borrowing ahead in 2010 as well as indication from the Fed that it wants higher rates whilst promoting inflation, bond yields are set to soar while prices crumble. Read more…
Bonds
Quantitative easing is such a beautiful word for such an ugly subject: inflation. With record amounts of Treasuries up for maturity in 2010 and huge amounts of new issuance, the Fed will be forced to again ease the fixed income markets. Read more…
Bonds
Exchange-traded funds are loved by investors for their tax advantages, especially when it comes to capital gains. Because most funds are indexes that track the returns of a subset of stocks/bonds/commodities and rarely buy or sell holdings, capital gains are almost never incurred on the operating end. Usually, a trader will only have to pay taxes when a capital gain is generated on his/her side after the position is sold. Unfortunately, this isn’t exactly true for bond funds, which had to move funds around in a very volatile 2009. Read more…
Bonds, ETF
The treasury bubble has officially began its burst. A recent government auction of treasury bonds was a virtual flop, and the Chinese have slowed, nearly ceased, all additional purchases of Treasury bonds. The bond bubble’s burst is near, very near, and the actions taken to keep it from bursting has only made the bubble that much worse. Read more…
Bonds, Investing
Treasuries are in bubble mode, investors were snapping them up like subprime mortgages in 2007 after the credit crunch began. The once safe flee to US dollars will come with a price, near zero returns and worries about the US government’s own credit standing as it faces trillion dollar deficits. Read more…
Bonds, Investing
