Salient to Investors: Bond investors are lowering their outlook for inflation in developing markets to a 9-month low. Alessandro Bee at Bank Sarasin sees moderate growth compared to recent years, which should keep inflation in check and create a really nice environment for local bond markets. Bank of America said investors see
READ MORE... →Salient to Investors: Richmond Fed researchers estimate that at the end of 2011, 57 percent of financial sector liabilities benefited from perceived government support, versus 45 percent over a decade ago. FRB of Richmond President Jeffrey Lacker said: The financial system was weakened further in 2007 and 2008 by an ambiguous rescue
READ MORE... →Salient to Investors: The MSCI World Index dividend yield of 2.7 percent compares with the Bank of America Merrill Lynch Global Corporate Index bond yield of 2.6 percent and the Barclays Global High-Yield Index yield of 6.1 percent -the gap with the junk-bond index is the narrowest since at least 1995. Jacob de Tusch-Lec at
READ MORE... →Salient to Investors: FRB Governor Jeremy Stein sees a significant pattern of reaching-for-yield behavior emerging in corporate credit, which bodes ill for expected returns to junk bond and leveraged-loan investors. David Tawil at Maglan Capital said the bulls will continue to run despite the loud chorus that this is crazy because there’s nowhere else to put
READ MORE... →Salient to Investors: The dwindling role of bond insurance and yields at four-decade lows is fueling demand for muni analysts. Paul Sorbera at Alliance Consulting said the demand has significantly raised salaries. Jeff Burger at Standish Mellon Asset Mgmt said basis points matter in a low-yield environment. Investors have become more confident buying uninsured or lower-rated debt.
READ MORE... →Salient to Investors: Federal Reserve Governor Jeremy Stein says: Significant reaching-for-yield behavior in corporate credits are early signs of potentially excessive risk-taking, while not posing a threat to financial stability. A decline in the quality of debt through greater subordination or less use of protective covenants also signal reaching for yield. It
READ MORE... →Salient to Investors: US interest-rate swap levels at their highest in 4 months relative to T-yields suggests investors are seeking refuge in government bonds. Ali Jalai at Scotiabank said it is definitely not time to short Treasuries because thinking that the Fed is going to tighten is just silly because
READ MORE... →Salient to Investors: Steven Logan at Scottish Widows Investment Partnership said it’s not unhealthy for the bond market to have a reality check after a slightly chaotic spell of issuance with far too many transactions. Bill Gross at Pimco said investors should position for the end stage of a supernova credit explosion
READ MORE... →Salient to Investors: Derivatives traders are signaling little chance of a bear market in bonds for the next three years, because the Fed continues to flood the financial system with money to boost the economy. William O’Donnell at RBS Securities said the focus of the Fed is still unemployment, which it sees as not
READ MORE... →Salient to Investors: Rising long-term rates indicate traders expect the economy to pick up. Bill Gross at Pimco is avoiding long-term bonds, and sees US inflation benign in 2013 and possibly rising in 2014 to 2016 on faster inflation. Hiroki Shimazu at SMBC Nikko Securities said the recovering global economy is pushing up
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