Municipal
bonds priced at a premium often provide the same return as par bonds that have the same credit quality and structure — with the added potential benefit of higher cash flows and lower market volatility.
This begs the question: with the stock market at near - record levels and Treasury
bond prices at all - time highs, how is it at all possible that these pension funds are still underfunded to this extent?
The bond price at re-sale is determined largely by the risk of the issuer defaulting on payments, and the remaining term.
After all, the bond market works a bit like a seesaw with interest rates, or bond yields, at one end and
bond prices at the other.
With
bond prices at all - time highs as a result of the Fed pushing yields to unnatural lows, it's safe to say the U.S. bond market has never been as overvalued as it is today.
Not exact matches
NEW YORK, May 1 - The dollar broke into positive territory for the year and U.S.
bond yields inched higher again on Tuesday as the recent rise in oil
prices fueled expectations the Federal Reserve could flag more interest rate hikes
at its policy meeting this week.
The
bonds of iHeartMedia have long been in the basket of «distressed debt,» meaning their
prices have fallen so far to where their yields are
at least 10 percentage points higher than equivalent Treasury yields.
(If I owned, for example, $ 1,000,000 of «AAA» - rated
bonds from a large US company I could very easily sell them
at market
price right now.
The yield on the benchmark 10 - year Treasury notes, which moves inversely to
price, was lower
at around 2.43 percent, while the yield on the 30 - year Treasury
bond was also lower
at 3.046 percent.
Prices of the riskiest portions of collateralized loan obligations (CLOs) have fallen 50 % as of the end mid-December since mid-year, and are now trading
at $ 0.25 for every dollar that investors have put in the structured
bonds.
In theory, hedge funds can pursue a lucrative strategy of buying impaired
bonds from less knowledgeable investors
at deeply discounted
prices and then taking aggressive legal action to collect all, or almost all, of the promised principal and interest.
That's left a lot of junk
bond fund managers with plenty of exposure to the energy sector
at a time when oil
prices have crashed and defaults, particularly among fracking companies, are rising.
Timmer: Yeah, so last August which was a key inflection point for the market — because
at that point, nobody was expecting tax cuts anymore and the 10 - year Treasury had fallen to 2 %, and the
bond market which of course is always
pricing in the potential future, was
pricing in only one more rate hike over the subsequent two years.
Not only isn't there anywhere near enough bank capital in the US to supplant securitization, it is difficult to conceive that the universe of «rates» buyers will become mortgage credit buyers or move over to covered
bonds (which default to the issuing bank's credit ratings),
at least not
at the same
price levels and in the same size.
If policymakers, however, resolve to have no government involvement
at all, the
bond market will
price it out for you, but the likely outcome is a residential mortgage market that is smaller, more expensive, and less liquid.
Bond prices made a high for the year on Tuesday, and credit spreads are
at year low's.
The yield on the benchmark 10 - year Treasury notes, which moves inversely to
price, was higher
at around 2.314 percent, while the yield on the 30 - year Treasury
bond was also higher
at 2.877 percent.
«The
pricing and performance of the new issues this week indicates the demand for
bonds has remained strong despite the broader market weakness,» Yuriy Shchuchinov, credit strategist
at BofAML, said in a note to clients.
The company's senior unsecured
bonds due in 2018 last traded Thursday
at 5.25 cents on the dollar, down from 72 cents the week before the bankruptcy filing, according to Trace
bond -
price data.
With equity valuations
at historic highs and government
bonds barely eking out a return, junk
bonds offer solid yields
at a good
price, he reasons.
If Brexit - like sentiment in other nations leads to restrictions on the flow of trade and labor, he adds, «that is going to create greater uncertainty and volatility» —
at a time when some commentators believe that global stock and
bond prices are overdue for a tumble.
Any chance a dealer had of selling
bonds at a high
price is pretty much gone.
Being short, especially
at record
prices on
bonds, doesn't have the same danger as being long.
Rising inflation expectations in recent months have been reflected in U.K. government
bond (gilt)
prices with the yield on 10 - year gilts touching its highest level since April this year
at 1.509 percent in Monday's session.
If
at this point we found that using an interest rate of 6.8 % in our calculations did not yield the exact
bond price, we would have to continue our trials and test interest rates increasing in 0.01 % increments.
As I've said that the 10 yr
bond crossed over 3.0 % means the US$ will be going to be weaker and weaker further and further by the 1st half of 2020 yr:) Also, the commodity
price esp WTI will be going up to the level of 70 - 80 $ no later than 1st half of May (
at the earliest), or no later than 2nd week of June, and then it will be in the range to the end of Trump Era:)
The Central Bank of Hungary kept its key interest rate
at 1.35 percent on the back of falling commodity
prices, boosting demand for forint
bonds.
so now the issue is whether the
bond market (or macro hedge funds) eased too much thinking the Fed would choke off liquidity and now is staring
at still a weaker dollar and high commodity
prices indicating an elevated level of excess liquidity.
The article makes the point that unlike most ETFs, high yield
bond ETFs often trade
at prices far from their fair value.
The financial sector wins
at the point where you don't see that the
prices that the banks are inflating are asset
prices — real estate
prices,
bond and stock
prices — and that the role of commercial banks is to increase the power of wealth over the rest of society, over labour, over industry, to create a new ruling - class of bankers that are even more heavy than the landlords that were criticised in the last part of the 19th century.
In actuality, while the skill set necessary to make intelligent decisions can take years to acquire, the core matter is straightforward: Buy ownership of good businesses (stocks) or loan money to good credits (
bonds), paying a
price sufficient to reasonably assure you of a satisfactory return even if things don't work out particularly well (a margin of safety), and then give yourself a long enough stretch of time (
at an absolute minimum, five years) to ride out the volatility.
When rates rise, this is a huge plus for
bond funds because they can continuously reinvest
at higher rates, which offsets some of the sting you get from the
price decline.
Banks receive government
bonds or central bank deposits in exchange for their bad debts, accepted
at face value rather than
at «mark - to - market»
prices.
The fact that the
bond market retreated during the first week of the year on «old» news and in the second week on very little new economic news, though Wednesday saw softer JOLTS (where job openings slid to a six - month low) and Import
Price data barely rising
at all, is revealing.
At the start of the sustained rise in equity
prices, stock dividend yields exceeded the yields on Treasury
bonds and this was perceived as normal, partly reflecting the searing experience of the Great Depression.
Indeed, the downturn in the US government -
bond market
at the end of 2016 and earlier this year benefited many fixed income arbitrage managers who were able to take advantage of the
price decline in US Treasuries during those periods.
Tesla's
bonds dropped 4.5 cents on the dollar to 86.5 cents
at 12:02 p.m. in New York, according to Trace, the
bond price reporting system of the Financial Industry Regulatory Authority after reaching their lowest
price ever earlier Wednesday.
a
bond where no periodic interest payments are made; the investor purchases the
bond at a discounted
price and receives one payment
at maturity that usually includes interest; they have higher
price volatility than coupon
bonds as a result of interest rate changes
With market volatility hitting multi-decade lows, junk
bond yields also
at record lows, the median
price / revenue ratio of S&P 500 constituents
at a record high well - beyond 2000 levels, and the most strenuously overvalued, overbought, overbullish syndromes we define, I'm increasingly concerned about the potential for an abrupt «air pocket» in the
prices of risky assets that could attend even a modest upward shift in risk premiums.
But longer - dated
bonds fell over inflation fears;
prices for 30 - year debt sank and fell most of the day for the benchmark 10 - year Treasury, though the latter turned moderately positive
at day's end.
The Wall Street firm, however, says it bought the block of
bonds,
priced at about 31 cents on the dollar, through a broker and did not interact directly with the government.
These securities are known as Original Issue Discount (OID)
bonds, since the difference between the discounted
price at issuance and the face value
at maturity represents the total interest paid in one lump sum.
Prosecutors claimed Demos lied to his customers about the
prices at which his company could buy or sell mortgage
bonds, boosting the profit his firm earned on a trade and therefore increasing his own bonus.
A repo is a contract between two counterparties where one agrees to sell a
bond to the other and repurchase it
at a specified
price at some date in the future.
One of those ETFs was Direxion 20 - Year Treasury Bull 3x ($ TMF), a fixed - income ETF that roughly follows the
price of the US long - term treasury
bond, but is leveraged
at a 3 to 1 ratio.
But the real emergency affects mainly debtors — mortgage debtors with negative equity, companies loaded down with junk
bonds (many of them taken to buy back corporate stock and increase dividend payouts to increase the
price at which managers can cash out).
The company's 5.3 percent notes due 2025 were down 1.5 cents on the dollar and were quoted
at 87.5 cents, according to Trace
bond -
price data.
Entities in smaller markets typically issue foreign currency debt in offshore
bond markets because they can issue larger, lower - rated and / or longer - maturity
bonds than they can (
at least
at comparable
prices) in their domestic market.
Some 5.7 % of corporate junk
bonds from emerging markets are trading
at prices below 70 cents on the dollar, more than double the rate for higher - risk U.S.
bonds, according to JPMorgan.
This is especially true
at a time when some investors have lost faith in this principle following several notable episodes in recent years when stock and
bond prices moved together.