Austria’s 100-Year Bond at Less Than 1%

Austria’s recent return to the century-bond club with a 2 billion-euro ($2.3 billion) debt issue is a clear example of how the European Central Bank is encouraging greater risk taking, according to a recent article in Bloomberg. “That’s what it was designed to do, for issuers and investors alike,” the article notes, adding that the successful sale (which was more than 10 times oversubscribed) may “just be the start of a wave of European sovereign… Read More

Bill Gross Had the Right Idea

An article in Bloomberg by columnist Nir Kaissar offers insights on the career of “hall-of-fame” bond manager Bill Gross, who announced his retirement earlier this year after what the press hailed as a “messy last act” as manager of the Janus Henderson Global Unconstrained Bond Fund (since 2014).” “Gross made some big bets at Janus Henderson that didn’t pay off,” writes Kaissar, who adds that even though things didn’t go the way the manager would… Read More

Active Bond Managers are Beating the Market

When it comes to bond funds, says a recent article in The Wall Street Journal, “bargain shopping may not be the best idea.” Higher-priced portfolios assembled by active money managers, it reports, are “handily beating the cheaper index-tracking competition, largely because they are doing a better job protecting their portfolios from rising interest rates.” Citing Morningstar data, the article notes that 70% of fund managers who choose intermediate-term bonds are outperforming their passive peers, adding,… Read More

Loomis Sayles’ Bond Manager on Trade

John Waggoner of Investment News recently spoke with Dan Fuss, a bond expert and 42-year veteran of Loomis Sayles, about new risks facing investors. Here are some highlights: Fuss expects the Fed to implement another two to three rate hikes this year. On corporate spending and wage increases, Fuss says he believes some of the big industrials (citing Caterpillar and Deere as examples) are incorporating contingencies in their spending plans: “If the trade barriers start,… Read More

Bonds Still a Reliable Safe Haven

After years of market calm, volatility is back, but investors’ faith in bonds has been “shaken” by years of low interest rates, according to a recent Bloomberg article. But the article advises not to “assume that bonds’ muted outlook will hamper their ability to hold up during market downturns. In fact,” it adds, “during the 20 bear markets since 1928…the average return from long-term government bonds was 5 percent, and the median return was 3.2… Read More

The “Near Perfect” Investing Environment May End Soon

For the past two decades, government bonds have moved in the opposite direction of equities in the short run but have produced similarly strong gains in the long run, representing a nearly “perfect” investment, according to a recent article in The Wall Street Journal. From the beginning of 2000 to the end of 2017, the article says, “holding the latest 10-year Treasury and reinvesting coupons returned 155%, the S&P 500 with dividends 158%, while a… Read More

AQR Says Active Bond Fund Returns Juiced by Junk

Researchers at AQR Capital Management say that active bond fund managers are beating benchmarks by “loading up on junk bunds to juice returns.” This according to a recent Bloomberg article. “Since the category is closely linked to equities, that’s stripped away the diversification benefit bond funds normally provide,” the article states. The AQR study, which focused on several different fixed income categories, found that excess returns are highly correlated with junk bond markets. The researchers… Read More

Rotation Out of Bonds Might Be Coming

The probability that funds will flow into equities “at the possible expense of debt” is increasing, despite forecasts to the contrary. This according to Credit Suisse Group AG, reported in a recent Bloomberg article. Robert Griffiths, an equity strategist based in Credit Suisse’s London office, told Bloomberg, “The increase in total returns from stocks, if it continues over the next couple of quarters, raises the prospect of a tipping point in asset allocation in favor… Read More

Bulls and Bears Both Gaining Ground

The continued climb in global stocks this year is being accompanied by rallies in safe-haven assets such as gold and bonds, according to a recent Bloomberg article. “There are plenty of reasons being cautious is paying off,” the article says, such as “politics in Washington is fractured, tension on the Korean peninsula is rising and worries have revived about low U.S. inflation.” But these factors aren’t impeding gains for “equity bulls,” the article says, “who… Read More

Bond Bull Market on Borrowed Time says Miller

The post-election drop in bond prices is pointing toward an end to the decades-old bull market in fixed income, says investor Bill Miller in a recent CNBC article. The founder, chairman and CIO of Baltimore-based LMM says that the money leaving bonds will likely be channeled into the stock market. “The over-investment in bonds is going to switch somewhere,” he says, adding, “I think a large part is going to go to equities like it… Read More