Bonds

Junk Bond Update

At the beginning of May 2013, had a average yield of 5.2%, 4.5 percentage points above U.S. government paper—well above the “crazily tight spread of 2.44 percentage points seen just before the (2008) financial crisis (source: WSJ). Issuance of junk bonds hit records in the U.S. and Europe in 2012.

 

In 1997, a group of Los Angeles-based traders, led by Michael Milken, helped structure and market the first “junk” bond, a $30 million offering for an oil company, Texas International.

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Municipal Bonds

Municipal Bonds

Roughly 20% of the nearly 50,000 issuers of U.S. municipal debt do not supply timely disclosures after their bonds have been issued (source: WSJ, May 2013). It appears Harrisburg, Pa is one of those municipalities, agreeing to settle SEC charges. The SEC faulted Harrisburg for making misleading financial statements from 2009 to 2011. The SEC brought a similar case against New Jersey in August 2010.

 

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Oil Price Perspective

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Junk Bond Update

When Interest Rates Rise

On May 13, 1981, the three-month T-bill rate was 17.01%, when the Dow was under 1,000. During March 2013, three-month rates were 0.12%. When rates do begin to rise, whenever that may be, the over $30 trillion U.S. bond market may be in for a wild ride.

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Fixing Credit Reports

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401(k) Trustees

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Earnings Per Share

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MLPs

TIPS Concerns

Treasury inflation-protected securities (TIPS) are issued by the U.S. Treasury and are designed to keep pace with CPI increases. The first TIPS were issued in 1997. TIPS comprise two parts: a real return and a CPI adjustment every six months. The “moving part” is the CPI change. The “real return” is a locked-in rate that stays the same until the maturity date. Investors earn a fixed rate of interest on an ever-increasing amount of principal.

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Grey Divorces

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Client Language

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Oil

Municipal Bond Default Update

The long-term default rate for GO bonds, which represents 40% of the municipal bond marketplace, is just 0.01%. According to Municipal Market Advisors, municipal bond segments with the highest default rates are: [1] community development districts (17% of issues), [2] assisted living (5% of issues), [3] independent living (4% of issues), [4] nursing home (3% of issues), and [5] telecom (3% of issues).

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High-Yield Bonds

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