These Interest Rates Are Up
When interest rates go up, it will happen overnight, and you won’t know about it until it’s too late. That’s the predicament the state of Illinois found itself in after it decided to shelve a bond deal literally hours before issuing them Wednesday. Why? Because the market demanded a higher rate... Read the full story
When the Levee Breaks
Some hedge funds are using leverage to boost returns. They’re doing it with bonds. With bond yields so low, it’s one way to meet the demands of their clients. But I wonder whether their clients understand the risk that they’re taking. After all, a lot of the beneficiaries are retired teachers who... Read the full story
Municipal Bond Trap
Quite a few people have asked me about investing in municipal bonds lately. Now that the fiscal cliff is in the rearview mirror and the debt ceiling is dead ahead, more tax increases can’t be too far off. But either way, I don’t like municipal bonds. The downside risk you’re taking for the yield... Read the full story
Taxpayers on the Hook for Risky Student Loan Bet
In early 2010 at the urging of the Obama administration, Congress forced the private sector out of the student loan business. Two-and-a-half years later the Department of Education owns the majority of the student loan market, and America’s taxpayers own the accompanying risk. Josh Mitchell writes... Read the full story
Euro-area Black Magic
From the lead article in this morning’s Wall Street Journal: “With foreign investors almost completely absent from Spanish bond markets for months, Spanish banks have propped up the government, which is now forced to turn to Europe for help propping up the weaker banks. Meanwhile, the stronger banks... Read the full story
Bond Yields Turn Negative
If you thought 25 basis point yields on two-year US Treasuries were bad, take a look at the yields on German Bunds. Two year German government bond yields are now negative. Investors (and rightfully panicked Greek and Spanish savers) are now paying for the right to lend Germany money. 30-year German... Read the full story
Bond Risk
Insurance companies manage risk—their own risk. When it comes to insuring new-issue muni bonds, the only game in town is Assured Guaranty Ltd. They’re staring down the barrel of a ratings downgrade by Moody’s Investors Service. Risky muni-bond investing is about to get riskier. Check out The Wall... Read the full story
Your 2012 Bond Fund Resolution
I hope you made some good money in bonds last year, because it was not a good year for all bond funds. Through November, Bill Gross’s Pimco Total Return Bond Fund, perhaps the most widely held bond fund in 401(k)s, underperformed 90% of its peers, according to Morningstar. Morningstar estimates outflows... Read the full story
A Crucial Bond Fund Metric
When it comes to your bond money, you want to live to fight another day. To make sure you do, I recommend that you keep the duration short and the credit quality high. Duration measures a bond’s sensitivity to interest rates. It’s the predicted percentage change in a bond’s price given a 1% change... Read the full story
The Most Popular Bond Fund
When investors ask me to review their company’s 401(k) investment options, I can’t get over the lack of bond fund choices offered by the plans. More times than not, the choice is between a bond fund with a maturity too many years out for my comfort level, and one with credit risk that is far too... Read the full story
