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Bond Originators South Africa Originator FNB ABSA Nedbank Sanlam Standard Bank Second

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Bond market newsStandard Bank Home Loans Bond market newsSA Home Loans Bond market newsCommercial Property Loan Bond market newsContact Us

Bond Originators South Africa

It is no secret that a professional bond originator can get you a better deal, than dealing directly with lenders. The demand for a bond origination service has increased over the past few years, with more and more people utilising such a service. In order to receive prime less rates, the utilisation of bond originators have become a vital part in securing a confident choice of mortgage products.

Bond originators or mortgage originators acts as an intermediary who sources mortgage bonds on behalf of individuals or businesses. These services are absolutely free to clients. Traditionally, banks and other lending institutions have distributed their own products. However as markets for mortgages have become more competitive, the role of bond originators has become more popular.

Bond market news

In competitive mortgage markets many lenders use an array of rate offers and other incentives to attract customers. To many consumers, due to their infrequent purchases of mortgage products, the mortgage market may appear confusing and somewhat daunting.

Bond originators can guide clients through the process of selecting a suitable mortgage and offer mortgage and property related financial advice. For borrowers with poor credit records, or other unusual circumstances, finding a lender may be difficult.

Bond originators, having specialised knowledge and multiple lending sources, will normally be a valuable resource in obtaining financing. Bond originators receive a fee from the banks and not their clients. The sheer volume of business provided by bond originators to the banks, gives the originator negotiating power to muscle low rates for their clients. Usually the bond loan process is much quicker when using bond originators. You should be weary if a bond originator asks you for fees or charges clients in anyway for their services.





Bond Originators South Africa Originator FNB ABSA Nedbank Sanlam Standard Bank Second

bond market news

Bond market news

Bond market newsStandard Bank Home Loans Bond market newsSA Home Loans Bond market newsCommercial Property Loan Bond market newsContact Us

Bond Originators South Africa

It is no secret that a professional bond originator can get you a better deal, than dealing directly with lenders. The demand for a bond origination service has increased over the past few years, with more and more people utilising such a service. In order to receive prime less rates, the utilisation of bond originators have become a vital part in securing a confident choice of mortgage products.

Bond originators or mortgage originators acts as an intermediary who sources mortgage bonds on behalf of individuals or businesses. These services are absolutely free to clients. Traditionally, banks and other lending institutions have distributed their own products. However as markets for mortgages have become more competitive, the role of bond originators has become more popular.

Bond market news

In competitive mortgage markets many lenders use an array of rate offers and other incentives to attract customers. To many consumers, due to their infrequent purchases of mortgage products, the mortgage market may appear confusing and somewhat daunting.

Bond originators can guide clients through the process of selecting a suitable mortgage and offer mortgage and property related financial advice. For borrowers with poor credit records, or other unusual circumstances, finding a lender may be difficult.

Bond originators, having specialised knowledge and multiple lending sources, will normally be a valuable resource in obtaining financing. Bond originators receive a fee from the banks and not their clients. The sheer volume of business provided by bond originators to the banks, gives the originator negotiating power to muscle low rates for their clients. Usually the bond loan process is much quicker when using bond originators. You should be weary if a bond originator asks you for fees or charges clients in anyway for their services.





Greenspan Sees No Stock Excess, Warns of Bond Market Bubble, bond market

Greenspan Sees No Stock Excess, Warns of Bond Market Bubble

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Heeding Alan Greenspan’s Bond Bubble Warning

Equity bears hunting for excess in the stock market might be better off worrying about bond prices, Alan Greenspan says. That s where the actual bubble is, and when it pops, it ll be bad for everyone.

By any measure, real long-term interest rates are much too low and therefore unsustainable, the former Federal Reserve chairman, 91, said in an interview. When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace.

While the consensus of Wall Street forecasters is still for low rates to persist, Greenspan isn t alone in warning they will break higher quickly as the era of global central-bank monetary accommodation ends. Deutsche Bank AG s Binky Chadha says real Treasury yields sit far below where actual growth levels suggest they should be. Tom Porcelli, chief U.S. economist at RBC Capital Markets, says it s only a matter of time before inflationary pressures hit the bond market.

The real problem is that when the bond-market bubble collapses, long-term interest rates will rise, Greenspan said. We are moving into a different phase of the economy — to a stagflation not seen since the 1970s. That is not good for asset prices.

Bond market news

Stocks, in particular, will suffer with bonds, as surging real interest rates will challenge one of the few remaining valuation cases that looks more gently upon U.S. equity prices, Greenspan argues. While hardly universally accepted, the theory underpinning his view, known as the Fed Model, holds that as long as bonds are rallying faster than stocks, investors are justified in sticking with the less-inflated asset.

Right now, the model shows U.S. stocks at one of the most compelling levels ever relative to bonds. Using Greenspan s reference of 10-year inflation-adjusted bond yields, currently around 0.47 percent, the gap with the S P 500 s earnings yield at around 4.7 percent, is 21 percent higher than the 20-year average. That justifies records in major equity benchmarks and P/E ratios near the highest since the financial crisis.

If rates start rising quickly, investors would be advised to abandon stocks apace, Greenspan s argument holds. Goldman Sachs Group Inc. Chief Economist David Kostin names the threat of rising inflation as one reason he isn t joining Wall Street bulls in upping year-end estimates for the S P 500.

While persistently low inflation would imply a fair value of 2,650 on the benchmark gauge, the more likely case is a narrowing of the gap between earnings and bond yields, Kostin says. He is sticking to his estimate that the index will finish the year at 2,400, implying a drop of about 3 percent from current levels.

That s no slam dunk, as stocks have proven resilient to bond routs so far in the eight-year bull market. While the 10-year Treasury yield has peaked above 3 percent only a few times in the past six years, sudden spikes in yields in 2013 and after the 2016 election didn t slow stocks from their grind higher.

Those shocks to the bond market proved short-lived, though, as tepid U.S. growth combined with low inflation to keep real and nominal long-term yields historically low.

That era could end soon, with the Fed widely expected to announce plans for unwinding its $4.5 trillion balance sheet and central banks around the world talking about scaling back stimulus.

The biggest mispricing in our view across asset classes is government bonds, Deutsche Bank s Chadha said in an interview. We should start to see inflation move up in the second half of the year.





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The High Yield Bond Market Has Never Been This Decoupled From Reality

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The High Yield Bond Market Has Never Been This Decoupled From Reality

Recovery rates in 2016 are extremely low.. for high-yield bonds, the recovery rate YTD is 10.3% (10.5% senior secured and 0.5% senior subordinate), which is well below the 25-year annual average of 41.4%. Final recovery rates in 2015 for high-yield bonds were 25.2%, compared with recoveries of 48.1%, 52.7%, 53.2%, 48.6%, and 41.0% in full-years 2014, 2013, 2012, 2011, and 2010, respectively. Notably, average recoveries for Energy and Metals/Mining bonds were 18.3% and 20.0%, respectively, which weighed down overall high-yield recovery rates. Excluding the troubled commodity sectors, high-yield recoveries were a more respectable 46.1% (32.1% Ex-Energy only ). As for loans, recovery rates for first-lien loans thus far in 2016 are 24.5%, compared with their 18-year annual average of 67.2%. Final 2015 1st lien recoveries were 48.2%, while average recoveries for Energy and Metals/Mining 1st lien loans were 44.1% and 38.4%, respectively.

The record collapse in recovery rates is shown below.

It is not just JPM who points out what we first noticed in January: in an interview with Goldman s Allison Nathan, credit guru Edward Altman reiterates that same warning, although he focuses on the 2015 recovery rate which already is more than two times higher than that seen in 2016 defaults:

Allison Nathan: What is your view on recovery rates?

Edward Altman: Our approach to recovery rates is not centered on sectors. What we ve looked at carefully over 25 years is the correlation between default rates and recovery rates. As you would expect, when the former rise to high or above-average levels, you always observe the latter dropping to below-average levels. This strong inverse relationship is as much a function of supply and demand as it is of company fundamentals. So if we are expecting a higher default rate in 2016 and even 2017, then we would expect a lower recovery rate. Already in 2015, the recovery rate dropped dramatically relative to 2014 even though the default rate was below average; we saw a 33-34% recovery rate versus the historical average of 45%, measured as the price just after default. This is primarily due to the heavy concentration of energy companies whose recovery rates depend on their ability to liquidate their assets at reasonable prices, which in turn depends on the price of oil. Low oil prices have pushed recovery rates in the energy sector below 25% and even into the single digits for some companies. And that s going to continue. So this year I expect recovery rates much below average, producing a double-whammy of high default rates and low recovery rates for credit investors.

Since then recovery rates have dropped even further. BUT high-yield bond prices have surged on the back of ECB, BOE buying and the knock-on effects of $200 billion per month of experimentation by the world s central-planners.

Simply put, the revelation of a default event exposes the vast gap between real asset values (upon liquidation or bankruptcy) and the artificially supported prices seen in bond markets .

In the 30 year life of the so-called junk bond market, the chasm between reality and central-planner-created markets has never been wider.





Bond Market’s Big Illusion Revealed as U #business #investment

#bond market news

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Bond Market’s Big Illusion Revealed as U.S. Yields Turn Negative

For Kaoru Sekiai, getting steady returns for his pension clients in Japan used to be simple: buy U.S. Treasuries.

Compared with his low-risk options at home, like Japanese government bonds, Treasuries have long offered the highest yields around. And that’s been the case even after accounting for the cost to hedge against the dollar’s ups and downs — a common practice for institutions that invest internationally.

It’s been a “no-brainer since forever,” said Sekiai, a money manager at Tokyo-based DIAM Co. which oversees about $166 billion.

That truism is now a thing of the past. Last month, yields on U.S. 10-year notes turned negative for Japanese buyers who pay to eliminate currency fluctuations from their returns, something that hasn’t happened since the financial crisis. It’s even worse for euro-based investors, who are locking in sub-zero returns on Treasuries for the first time in history.

For a detailed description of how this index was created, click here.

For an analysis of hedging costs for Japanese investors, click here.

That quirk means the longstanding notion of the U.S. as a respite from negative yields in Japan and Europe is little more than an illusion. With everyone from Jeffrey Gundlach to Bill Gross warning of a bubble in bonds, it could ultimately upend the record foreign demand for Treasuries, which has underpinned their seemingly unstoppable gains in recent years.

“People like a simple narrative,” said Jeffrey Rosenberg, the chief investment strategist for fixed income at BlackRock Inc. which oversees $4.6 trillion. “But there isn’t a free lunch. You can’t simply talk about yield differentials without talking about currency differentials.”

DIAM’s Sekiai has been shunning Treasuries since April, a month after foreign holdings of U.S. debt hit a record. Instead, he favors bonds of France and Italy because they “offer some degree of yield and the currency-hedging costs are cheap.” That shift lines up with the latest available Treasury Department data, which showed that demand from non-U.S. investors in April and May was the weakest in a two-month stretch since 2013.

The fact that yields on 10-year Treasuries are still way higher than those in Japan or Germany is part of the reason foreigners are having such a hard time actually profiting from the difference. Negative interest rates outside the U.S. have caused a surge in demand for dollars and dollar assets, pushing up the cost to get into and out of the greenback at the same exchange rate to levels rarely seen in the past.

Ten-year yields in the U.S. are currently about 0.23 percentage point below a basket of bonds from Australia, France, Germany, Italy, Japan, Spain and Switzerland on a hedged basis, versus 1.4 percentage points above on an unhedged basis, according to data compiled by BlackRock. At the start of the year, hedged Treasuries yielded over a half-percentage point more.

In Japan, where 10-year government bonds yield less than zero, the advantage for Treasuries has dwindled from a percentage point at the start of the year to less than 0.1 percentage point now. Without much added value for overseas investors, it’s harder to see foreign demand driving Treasuries to new records, especially as the Federal Reserve moves toward gradually raising rates.

Since falling to a record 1.318 percent on July 6, yields on 10-year notes have backed up as a string of economic reports such as last week’s jobs data bolstered the case for higher rates. They were at 1.58 percent today.

For a large swathe of institutional investors, especially those with conservative mandates, hedging is the norm when they go abroad. It eliminates the need to worry about the daily ebbs and flows in exchange rates and how that might affect their returns. When it comes to Treasuries, overseas buyers usually lock in a fixed exchange rate on the interest payments they get in dollars.

Conversion Costs

In that trade, the cost to convert payments from one currency to another is determined by the cross-currency basis swap. Take Japanese insurers as an example. Under normal circumstances, they would swap their yen for dollars and get interest on the yen they loaned out over the course of the contract.

But now, because the rate has turned negative, they’re effectively paying interest to lend the yen, which eats into their bond returns. That’s on top of the Libor rate they’ll need to pay for borrowing the dollars, which currently stands at 0.79 percent over three months.

The basis, as it’s known, was at minus 0.6425 percentage point for yen-based investors, which is close to the most expensive in five years. For those with euros, the basis is minus 0.43 percentage point. That’s more than twice as costly as the average over the past three years.

In a perfectly efficient market, none of this would matter. Differences in interest rates would be perfectly offset by the cost of exchanging two different currencies over time. But in the real world, things are far messier.

As unconventional monetary policies in Japan and Europe pushed yields lower and lower in recent years, demand for dollars has soared in tandem with the currency’s appreciation. Banks responded by demanding stiffer terms to swap into dollars as supply diminished, cutting into profits on the “carry trade” in Treasuries.

Treasuries will remain a better alternative for many overseas investors as long as an advantage exists, no matter how small the hedged yield pickup has become, according to Ralph Axel, a bond analyst at Bank of America Corp.

“They’ll just keep buying,” Axel said. Because of forces like negative rates and quantitative easing outside the U.S. “you clearly have a long-lasting bid.”

Of course, there’s the flip side. The overwhelming demand for U.S. currency is proving to be a boon for American investors and foreign central banks sitting on billions of dollars. Pacific Investment Management Co. also says there’s profit to be made by getting paid to swap dollars into yen.

Interest-Rate Swaps

Overseas money managers, though, have had to turn to more novel solutions to avoid the onerous hedging costs. Jack Loudoun, who helps oversee about $88 billion for Vontobel Asset Management in Zurich, says he prefers interest-rate swaps and futures on Treasuries to get exposure to the U.S. market because lower upfront costs help reduce foreign-exchange risk.

“We’re using derivatives to get access,” he said. “If you’re worried about hedging cost, swaps and futures are the avenues to go down.”

Whatever the strategy, there’s little debate over how important foreign demand is for the $13.4 trillion market for Treasuries.

“We’re at a point now where investors have to start thinking about this,” said Sachin Gupta, a foreign-bond fund manager at Pimco, which oversees $1.51 trillion. “As the cost of hedging rises to such an extent, there’s no extra carry to be had. That itself will slow down the demand — and, at some point, even reverse the demand — for Treasuries.”

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Evaluating Bond Funds: Keeping It Simple #understanding #bond #funds


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Evaluating Bond Funds: Keeping It Simple

Are you overwhelmed by the amount of information there is to analyze when evaluating a bond fund. Knowing what information is most important can be confusing regardless of whether you are looking at a research service like Morningstar or a mutual fund company ‘s website/prospectus. We’ll show you how to determine what is important in your analysis and how to project a bond funds’ risk and return, a task that can be difficult even if you have a good understanding of how bonds work.

We’ll look at some important factors of bond fund analysis, and then we’ll use these factors to compare two of the industries’ largest bond funds: PIMCO Total Return Fund (PTTRX) and Vanguard Total Bond Market Index Fund (VBTLX). The first represents the extreme of active management while the latter represents the extreme of passive management. The industry standard Barclays Capital Aggregate Bond Index is the benchmark for both of these funds. (The equivalent index in Canada is the Scotia Capital Universe Bond Index)

Duration, in the simplest terms, is a measure of a bond fund’s sensitivity to interest rate changes. The higher the duration, the more sensitive the fund. For example, a duration of 4.0 means that a 1% interest rate rise causes about a 4% drop in the fund. Duration is considerably more complex than this explanation but when comparing one fund’s interest rate risks to another, duration offers a good starting point.

As an alternative to duration, weighted average maturity (WAM) also known as “average effective maturity,” is an easier metric to comprehend. WAM is the weighted average time to maturity of the bonds in the portfolio expressed in years. The longer the WAM, the more sensitive the portfolio will be to interest rates. However, WAM is still not as useful as duration, which gives you a precise measurement of interest sensitivity, while WAM gives you only an approximation.

Credit Risks
Given the amount of U.S. Treasuries and mortgage-backed securities in the Barclays Capital Aggregate Bond Index, most bond funds benchmarked against this index will have the highest credit rating. “AAA.”

Although most bond funds diversify credit risk well enough, you should still understand that the weighted average credit rating of a bond fund will influence its volatility. While lower-credit-quality bonds bring higher yields, they also bring higher volatility.

Bonds that are not investment grade. also known as “junk bonds ,” are not part of the Lehman Aggregate Bond Index or most investment-grade bond funds. However, as PTRAX is allowed to have up to 10% of its portfolio in non-investment-grade bonds it could, therefore, end up being more volatile than your average bond fund.

Additional volatility is not only found in junk bonds. Bonds rated as investment grade can sometimes trade like junk bonds. This is because ratings agencies, such as Standard Poor’s (S P) and Moody’s. can be slow to downgrade issuers because of their agency conflicts (ratings agency revenue comes from the issuer they are rating). For example, GM’s bonds traded at junk levels for months before S P cut them to junk status in May 2005.

Many research services and mutual funds use style boxes to help you initially see a bond fund’s interest rate and credit risk. The funds we are comparing – PTRTX and VBTLX – both have the same style box, which we show for the latter below.

Figure 1 – Vertical axis represents credit quality .

Foreign Exchange Risk
Another cause of volatility in a bond fund is foreign currency exposure. This is applicable when a fund invests in bonds that are not denominated in its domestic currency. As currencies are more volatile than bonds, currency returns for a foreign currency bond can end up dwarfing its fixed-income return. The PTRTX, for example, allows up to 30% foreign currency exposure in its portfolio; to reduce the risk this poses, the fund hedges at least 75% of that foreign currency exposure. Just as with non-investment-grade exposure, foreign currency exposure is the exception,not the rule, for bond funds benchmarked against Barclays Capital Aggregate Bond Index.

Return

Unlike stock funds, past absolute performance for bond funds will likely give little or no indication of their future returns, because the interest rate environment is forever changing (and out of a fund’s control). Instead of looking at historical returns. you are better off analyzing a bond fund’s yield to maturity (YTM), which you will give you an approximation of the bond fund’s projected annualized return over WAM.

When analyzing the return of a bond fund, you should look also at the different fixed-income type investments the fund holds. Morningstar divides bonds funds into 12 categories, each with their own risk-return criteria. Rather than trying to understand the differences between these categories, look for a bond fund that holds material portions of these five different fixed-income categories: government, corporate, inflation-protected securities. mortgage-backed securities and asset-backed securities. Because these bond types have different interest rate and credit risks, they complement each other, so a mixture of them helps the risk-adjusted return of a bond fund (see Asset Allocation with Fixed Income ).

For example, the Barclays Capital Aggregate Bond Index does not hold material weightings in inflation-protected securities and asset-backed securities. Therefore, an enhanced risk-return profile could likely be found by adding them into a bond fund. Unfortunately, most bond indexes mimic the market capitalization of their market rather than focusing on an optimum risk-return profile.

Understanding the makeup of your fixed-income benchmark can make evaluating bond funds easier, as the benchmark and the fund will have similar risk-return characteristics. For the retail investor. index characteristics can be tough to find, though. However, if for the index there is a bond exchange-traded fund (ETF), you should be able to find the applicable index information through the ETF’s website. Given that the goal of an ETF is to minimize tracking error against its benchmark, its makeup should be representative of its benchmark.

Costs
While the above analysis gives you a feel for the absolute return of a bond fund, costs will have a big impact on its relative performance, particularly in a low interest rate environment. For example, in May 2005, the average bond fund benchmarked against the Lehman Aggregate Bond Index had an expense ratio of 1.1%, while the index’s YTM was only 4.6%. That expense ratio is equal to nearly 25% of the YTM!

Adding value above the expense ratio percentage can be a difficult hurdle for an active bond manager to overcome, but passively managed bond funds can really add value here because of their lower expenses. The VBMFX, for example, has an expense ratio of only 0.2%. Such an expense ratio takes a smaller chunk out of your returns. Also look out for front- and back-end loads. which, for some bond funds, can be devastating to returns.

Because bond funds are constantly maturing and being called and intentionally traded, bond funds tend to have higher turnover than stock funds. However, passively managed bond funds tend to have lower turnover than actively managed funds and, therefore, may provide better value.

The Bottom Line
Evaluating bond funds does not have to be complex. You need only to focus on a few factors giving insight into risk and return, which will then give you a feel for the fund’s future volatility and return.

Unlike stocks, bonds are black and white: you hold a bond to maturity and you know exactly what you get (barring default). Bond funds are not quite as simple because of the absence of a fixed maturity date. but you can still get an approximation of returns by looking at the YTM and WAM.

The biggest difference between the two funds comes down to fees. In a low interest rate environment, this difference is even further accentuated. The addition of non-investment-grade bonds and unhedged currency in the PTRAX will likely increase its volatility, while higher turnover will also increase its trading costs when compared to VBTLX.

Armed with an understanding of these metrics. evaluating bond funds should be far less intimidating for you going forward.


What Are the Best International Bond Markets? #business #etiquette

#bond market news

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What Are the Best International Bond Markets?

What Are the Best International Bond Markets?

With low interest rates in the U.S. and outright negative rates in some overseas markets, the bond market probably isn’t the first thing to come to mind when investors are looking for yield.

But experts are pointing to some niches of the international bond arena that are yielding well above what can be had domestically, albeit with more risk.

Both high-quality and lower-quality bonds have been performing well in terms of price. High-quality developed market bonds have rallied with demand from risk-averse investors, such as those worried about Britain voting to leave the European Union .

But of course as bond prices rise, their yields decline. So, needing to make money, investors have also been turning to lower-quality emerging market bonds. That also drives their price up, but these bonds simply yield more because they are riskier.

It can be tempting to stay within the U.S. in terms of bonds, says Richard Lawrence, senior vice president of portfolio management at Brandywine Global Investment Management, which is a subadvisor for the Legg Mason BW Global Opportunities Bond Fund (ticker: GOBIX ). But that would be eschewing higher yields in emerging markets and some developed world bonds.

“You have to look beyond the headlines,” he says.

Emerging markets can be a good place to look for yield, but that’s because they are associated with certain risks, says Eric Stein, co-director of global income at Eaton Vance Management, which has the Global Macro Absolute Return Fund (EIGMX ), the Emerging Markets Local Income Fund (EEIAX ) and the Emerging Markets Debt Opportunities Fund (EIDOX ). The three main risks for foreign bonds are currency, interest rates and default, he says.

International bonds also move in step with the Federal Reserve and U.S. Treasurys. If the Fed raises rates, that would cause bond yields elsewhere to rise, meaning their value would fall in the short term. This would only create a headwind for international bonds if the Fed raises rates more than expected and Treasurys sell off, Stein says.

If U.S. rates rise more quickly than expected, this could strengthen the U.S. dollar and cause some emerging market currencies to weaken.

Demand from China is also a risk as many emerging market countries are commodities producers and China is a large consumer, he says. A sell off in the Chinese currency can also send shockwaves through global risk markets, he says.

Oil prices are also a risk, since many emerging market countries are oil exporters, he says.

With the top five global bond issuers – the U.S. France, Germany, the United Kingdom and Japan – all yielding low or negative rates, emerging market countries are “last bastions of yield,” says Meb Faber, a co-founder and chief investment officer of Cambria Investment Management.

Rising interest rates in the U.S. would lead to higher rates elsewhere. So in the short term, that would cause international bond prices to decline and their yield to go up, Faber says.

Whether international bonds will face a strong headwind as the Fed raises rates depends on how the market reacts to the pace of the hikes, Lawrence says.

A strong dollar acts as a headwind for investors in international bonds unless they hedge that currency exposure, he says, but this year, declines in the U.S. dollar have made it more sensible to buy securities denominated in other currencies.

Stein thinks the Fed will raise rates a little more than expected over the next two years, providing a slight headwind to some emerging market currencies.

For those looking for yield, Lawrence points to Brazil, where the 10-year bond is yielding around 12 percent. He also likes Mexico because of its correlation with the slowly improving U.S. economy and its Treasury market but much higher yield. South Africa is also attractive, with its 10-year bonds yielding about 9 percent and a slowly improving fiscal picture.

Both Lawrence and Stein point to Indonesia because of its reform agenda.

They also cite New Zealand as a niche of the developed world economies where investors can get higher yields without taking a lot of credit risk. However, Stein is bearish on the New Zealand dollar.





Mortgages Unlimited #mn #mortgages, #mortgages #unlimited, #minnesota #mortgage, #minnesota #mortgages, #mortgage #rates


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RBI opens up bond market #business #help

#bond market news

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RBI opens up bond market

The Reserve Bank of India (RBI) on Thursday announced a comprehensive set of measures to change India s lacklustre bond market and provide a push to the currency market as well, completing the agenda of Raghuram Rajan, the outgoing governor of the central bank.

The RBI proposed to allow banks to raise capital through masala (rupee) bonds in the overseas market and liberalised the currency market by allowing customers residents and non-residents to maintain big open positions.

Among a series of blockbuster measures, the RBI also proposed to allow listed companies to lend money to banks through repo market mechanism, essentially overnight money, something that can have wide ranging ramifications for call money rates, short-term money market rates as well as the banking system liquidity.

The central bank also proposed allowing listed companies to lend longer tenure money to banks through the repo market mechanism. This will have an impact on interest rates, the bond market, and liquidity in the banking system.

The RBI said it would also seek legal amendments to allow banks to borrow from it by pledging corporate bonds. This should raise demand for rated corporate paper and make secondary trade possible. Currently, 95 per cent of corporate bonds are privately placed.

The proposal to allow foreign portfolio investors direct access to bond trading platforms for government and corporate paper will widen the investor base. The central bank has also proposed that banks nudge corporate clients to borrow from the bond market. Final guidelines on most of today s proposals will be issued after Rajan s departure, but some measures come into effect immediately. For example, the steps taken in the currency market essentially opened up India s closely-guarded currency market, perhaps bringing an element of speculation in the exchange rate. The Reserve Bank will now permit entities exposed to exchange rate risk, whether resident or non-resident, to undertake hedge transactions with simplified procedures, up to a limit of $30 million at any given time. The exposed person will be free to access any market (over the counter or exchange) and use any of the permissible products, the RBI said in its statement on its website.

In addition, banks might, based on their assessment of the risk management capabilities of a customer, allow an open position limit of up to $5 million, the RBI said. The currency market move was intended to improve liquidity and depth, the RBI said, adding the limit would be revised according to experience. Guidelines on this will be issued by November. Another critical change is allowing companies to lend money to banks through a market repo mechanism. So far, listed companies could only lend a maximum of 7-day money, taking government securities as mortgage, also known as repo. The RBI said this constrains their participation . It is proposed to allow such companies to lend through the repo market, without any tenor or counterparty restrictions. Guidelines based on a comprehensive review of regulations on market repo in G-secs are being issued today, it added.

Analysts hailed the measures taken by RBI. These are all critical reforms from short-to-long term perspective. Opening up of global markets for AT1 and Tier-II bonds in negative rate condition prevailing globally will be beneficial for banks, said Soumyajit Niyogi, associate director, India Ratings and Research. Listed corporates are encouraged to park short-term surplus fund through repo in G-Sec. FPI s and Individual s direct presence in bond markets and inclusion of corporate bond in LAF window will strengthen market activities, Niyogi said. Gaurav Pradhan, co-head of investment banking & capital markets for Credit Suisse in India said RBI s proactive steps acknowledged the potential of the masala bond market. Further issuance from banks will help broaden and deepen the market for masala bonds, making the product more sustainable in the long run as a financing option. From a macro perspective, we expect the RBI s move will help banks to better manage their balance sheets and lower their cost of funds, and should have a positive impact on local interest rates, Pradhan said.

Karthik Srinivasan, co-head, financial sector ratings, ICRA said RBI measures will encourage greater participation from issuers, investors and intermediaries while the permission to banks to raise masala bonds can develop the overseas market for rupee denominated bonds.

Many of the measures for the corporate bond market were built on recommendations in a report by the HR Khan committee released a week ago by the Securities and Exchange Board of India. These measures are intended to further market development, enhance participation, facilitate greater market liquidity and improve communication, the central bank said.

The RBI also decided to enhance the aggregate limit of partial credit enhancement provided by banks to corporate bonds to 50 per cent of the bond issue size from 20 per cent earlier, provided a single bank restricted its enhancement to 20 per cent of the issue size. It also proposed to permit brokers in corporate bond repos, authorise the platform for repo in corporate bonds, and encourage credit supply for large borrowers through the market mechanism. To further encourage the overseas rupee bond market, banks are being permitted to issue rupee bonds overseas (masala bonds) for their capital requirements and for financing infrastructure and affordable housing, the central bank said.

The bonds should be perpetual debt instruments used to shore up additional Tier 1 and Tier II capital of banks. Masala bonds to be issued for financing infrastructure and affordable housing can be of the nature of any long-term debt. The central bank said it had worked out a market making scheme in government securities by primary dealers (underwriters of government bonds) in consultation with the government which might help in increasing the liquidity of semi-liquid securities. The central bank will soon comprehensively review the framework for hedging of commodity price risks in the overseas markets by Indian companies.





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The bond market looks like a classic bubble – Business Insider #business

#bond market news

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The bond market looks like a ‘classic bubble’

Bond yields are low. Historically low.

Yields on government bonds in the US, Europe, Japan, and beyond are at seriously depressed levels. Even corporate bonds are reaching multi-decade lows as more investors pour into the asset class.

While the serious flows into these debt instruments continue seemingly unabated, Scott Colyer, CEO and CIO at Advisors Asset Management thinks that the continued support for the asset makes no sense.

“Bond prices are the highest they’ve ever been, yields are the lowest they’ve ever been and we go back to 1776,” said Colyer. “This is such an anomaly it’s not even funny.”

Remember that the price of bonds increases as the yield decreases, so the cost of these notes is getting only more expensive. To Colyer, this increase looks like a bubble and smells like a bubble, meaning that it most likely is.

“We have record demand for an asset class in a time period where the expected future return for that asset are the lowest they’ve ever been in history,” said Colyer. “That to me defines a classic bubble. Money is being forced into an asset class not because of value, but because there is a perception of protection there.”

The idea is that investors and central banks are pushing the price of bonds upward unnaturally, so that might be a problem.

Colyer said that just because there is a bubble, it doesn’t mean that it has to pop. The biggest danger, according to Colyer, is the Federal Reserve raising interest rates too fast, which the central bank is trying not to do.

“That’s why the Fed is trying to let the air out of the balloon as slowly as possible, and you get all of the jawboning over the ‘slow path of rates,'” said Colyer.

To be fair, much of the demand for bonds — especially outside of the US — is being driven by central banks, and that may affect the settlement of the issue.

Colyer has some advice for investors, though it was not very self-serving.

“You should sell everything you have that’s related to bonds, and I’m a bond guy,” he said.

SEE ALSO: Everyone should stop acting like the world is going to end

The bond market looks like a ‘classic bubble’





The High Yield Bond Market Has Never Been This Decoupled From Reality

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The High Yield Bond Market Has Never Been This Decoupled From Reality

Recovery rates in 2016 are extremely low.. for high-yield bonds, the recovery rate YTD is 10.3% (10.5% senior secured and 0.5% senior subordinate), which is well below the 25-year annual average of 41.4%. Final recovery rates in 2015 for high-yield bonds were 25.2%, compared with recoveries of 48.1%, 52.7%, 53.2%, 48.6%, and 41.0% in full-years 2014, 2013, 2012, 2011, and 2010, respectively. Notably, average recoveries for Energy and Metals/Mining bonds were 18.3% and 20.0%, respectively, which weighed down overall high-yield recovery rates. Excluding the troubled commodity sectors, high-yield recoveries were a more respectable 46.1% (32.1% Ex-Energy only ). As for loans, recovery rates for first-lien loans thus far in 2016 are 24.5%, compared with their 18-year annual average of 67.2%. Final 2015 1st lien recoveries were 48.2%, while average recoveries for Energy and Metals/Mining 1st lien loans were 44.1% and 38.4%, respectively.

The record collapse in recovery rates is shown below.

It is not just JPM who points out what we first noticed in January: in an interview with Goldman s Allison Nathan, credit guru Edward Altman reiterates that same warning, although he focuses on the 2015 recovery rate which already is more than two times higher than that seen in 2016 defaults:

Allison Nathan: What is your view on recovery rates?

Edward Altman: Our approach to recovery rates is not centered on sectors. What we ve looked at carefully over 25 years is the correlation between default rates and recovery rates. As you would expect, when the former rise to high or above-average levels, you always observe the latter dropping to below-average levels. This strong inverse relationship is as much a function of supply and demand as it is of company fundamentals. So if we are expecting a higher default rate in 2016 and even 2017, then we would expect a lower recovery rate. Already in 2015, the recovery rate dropped dramatically relative to 2014 even though the default rate was below average; we saw a 33-34% recovery rate versus the historical average of 45%, measured as the price just after default. This is primarily due to the heavy concentration of energy companies whose recovery rates depend on their ability to liquidate their assets at reasonable prices, which in turn depends on the price of oil. Low oil prices have pushed recovery rates in the energy sector below 25% and even into the single digits for some companies. And that s going to continue. So this year I expect recovery rates much below average, producing a double-whammy of high default rates and low recovery rates for credit investors.

Since then recovery rates have dropped even further. BUT high-yield bond prices have surged on the back of ECB, BOE buying and the knock-on effects of $200 billion per month of experimentation by the world s central-planners.

Simply put, the revelation of a default event exposes the vast gap between real asset values (upon liquidation or bankruptcy) and the artificially supported prices seen in bond markets .

In the 30 year life of the so-called junk bond market, the chasm between reality and central-planner-created markets has never been wider.





Stock Market, Market Sector, Bond Market, Indexes, Total Market Index, Market Barometer,

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Top News

Upcoming Earnings and Data Releases

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Bond Market Update

The Market at 15:29 ET

10-Year: -9/32 1.60 EUR/USD: 1.1160USD/JPY: 103.95

Treasury Market Stands Its Ground

  • August Employment Situation Report:
  • Nonfarm payrolls: Actual 151K, Briefing.com consensus 180K, Prior 275K (revised from 255K)
  • Nonfarm private payrolls: Actual 126K, Briefing.com consensus 175K, Prior 217K
  • Unemployment rate: Actual 4.9%, Briefing.com consensus 4.8%, Prior 4.9%
  • Average hourly earnings: Actual 0.1%, Briefing.com consensus 0.2% Prior 0.3%
  • Average workweek: Actual 34.3, Briefing.com consensus 34.5, Prior 34.5
  • July TradeBalance: Actual -$39.5 bln, Briefing.com consensus -$43.0 bln, Prior -$44.5 bln
  • July Factory Orders: Actual +1.9%, Briefing.com consensus 2.0%, Prior -1.8% (revised from -1.5%)
  • Richmond Fed PresidentLacker (non-FOMC voter): U.S. economic data is consistent with CPI growth moving up to 2%

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Goldberg s Picks: The 7 Best Bond Funds for 2016 #short-term #corporate


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7 Best Bond Funds for 2016

It’s hard to be bullish on bonds. The Federal Reserve is expected to raise short-term interest rates on December 16, its first hike in nine years. That can’t be good for bonds, whose prices move in the opposite direction of rates. European government bonds actually sport negative yields—that means investors have to pay the government to hold their money. The 10-year U.S. Treasury bond yields just 2.27%. On top of that, low-quality “junk bonds” have sold off sharply of late.

See Also: The Best Bonds for 2016

I’ll be surprised if bond funds produce returns of more than 2% on average in the coming year. But 2% is better than nothing. And you need bonds in your portfolio, not so much for income as to reduce the volatility of your overall investments. High-quality bonds almost always hold up well in stock bear markets. But pay little or no attention to bond funds’ long-term returns; for bond funds in particular, what’s past is not prologue.

The number to focus on is a fund’s duration. Duration gives you an idea of how much a bond fund will lose in value as interest rates rise. For example, if a fund has an average duration of 5 years, you can expect it to decline by 5% in value if interest rates rise by one percentage point. Duration considers price only. When rates rise, you’ll still collect the interest income, which is expressed as a fund’s yield—in fact, as a fund falls in price, its yield will, of course, rise.

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Don’t overlook credit quality. Debt rated below triple-B-minus is considered junk. I wouldn’t avoid all junk bonds, but be aware of what you own, and don’t overdo high-yield, particularly the lower-rated tiers of junk bonds.

With that dose of caution in mind, here are my seven best picks for 2016. (Five of the seven are members of the Kiplinger 25 .)

Jeffrey Gundlach, one of the nation’s most highly regarded bond investors, and comanager Philip Barach have produced top-notch results at DoubleLine Total Return Bond (symbol DLTNX ) by holding a mix of government-guaranteed mortgages and riskier privately backed mortgages. The government mortgages should do well in a slow-growth environment; the private mortgages, Gundlach argues, will hold up well if the economy strengthens. Roughly 20% of the fund’s assets are in securities with junk ratings. The fund, which yields 3.5%, has an average duration of 3.5 years. That suggests that the fund would break even on a total-return basis if rates rose by one point. The fund, a member of the Kip 25, charges 0.72% annually.

Fidelity has quietly built a first-rate bond lineup. Although its funds’ fees are not as low as those of Vanguard’s funds, some Fidelity funds are, in my view, better than comparable Vanguard funds. Take Fidelity Total Bond (FTBFX ), which charges 0.45% annually. The fund yields 3.0%. Most of the fund’s bonds are investment-grade, but about 15% are junk-rated. The average duration is 5.3 years. That could hurt when rates rise, but this fund is a good middle-of-the-road choice to serve as the core of the tax-deferred portion of a bond portfolio. Total Bond is a member of the Kip 25.

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If you’re investing in a taxable account, you’ll be hard-pressed to find a better fund than Fidelity Intermediate Municipal Income (FLTMX ). Munis, which pay interest that is generally free of federal income tax, typically offer a bit less volatility than taxable bonds with similar characteristics. The fund’s average duration is 5 years, and its average credit quality is a relatively safe single-A. The fund, a Kip 25 member. charges 0.36% and yields 1.5%. That’s the equivalent of 2.1% for a taxpayer in the 28% bracket and 2.7% for one in the highest, 43.4% bracket.

In a taxable account, Vanguard Limited-Term Tax-Exempt (VMLTX ) gives you a low-risk muni option. The fund has a duration of 2.5 years and charges just 0.20%. Average credit quality is double-A. But the fund yields only 0.9% (that’s a tax-equivalent 1.6% for a taxpayer in the highest bracket).

Another Kip 25 member, Metropolitan West Unconstrained Bond (MWCRX ) is inoculated against rising rates. The fund’s average duration is a mere 1 year, making it an excellent choice to reduce the duration of your overall bond holdings. About 25% of the fund’s assets are in junk-rated bonds, which I see as the main risk. What gives me confidence is that the fund’s quartet of managers have steered Metropolitan West Total Return (MWTRX), a core bond fund, to solid returns since its inception in 1997. Unconstrained Bond, which was launched in 2011, charges 1.03% in annual fees and yields 2.1%.

They don’t call them junk bonds for nothing. Junk-rated bonds have a real risk of not paying what they’ve promised when the economy—or even a sector of the economy—loses steam. But Vanguard High-Yield Corporate (VWEHX ) provides a conservative approach to this risky portion of the bond market. The fund, managed by Wellington Management’s Michael Hong, has consistently held up better than its rivals in junk-bond sell-offs. For instance, this year through December 14, High-Yield Corporate lost 2.8%—less than half the decline of the average junk-bond fund. The fund charges just 0.23% annually and yields 5.9%. Average credit quality is B. Only 8% of the fund’s bonds are rated below B or unrated. By contrast, Third Avenue Focused Credit (TFCVX ), which recently barred investors from redeeming their shares, had more than 80% of assets in bonds rated below B or with no ratings at all. The Third Avenue fund has plunged 27.1% so far this year.

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Looking for a safe choice in a taxable bond fund? Consider Vanguard Short-Term Investment-Grade (VFSTX ). The fund, a Kip 25 member. has an average duration of 2.5 years and an average credit quality of single-A. It charges just 0.20% annually and yields 2.0%.

For the funds above, I’ve listed the retail symbol and expense ratio. For all but the Fidelity funds, an institutional share class sports a lower expense ratio. I’d urge you to always buy the cheaper fund, even if you have to pay a small transaction fee to buy the fund through a discount broker.

Next week, I’ll offer my favorite exchange-traded funds (ETFs) for 2016.

See Also: The 6 Best Stock Funds for 2016


Pasadena bail bond #pasadena #bail #bond


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The Pasadena Municipal Court has established policies and procedures for resolving traffic tickets and other fine-only misdemeanors in accordance with state law, but with a minimum of inconvenience. Before you attempt to resolve the case(s) against you, you should read carefully the content of the citation and handout that were given to you by the officer. You may want to seek the advice of a lawyer.
The full text of a traffic citation is reproduced below. In it, you will find a link to forms that you may download if you wish to apply for deferred disposition or a driving safety course. Additionally, you will find a list of window fines and cases that may be dismissed before court either in person or by mail. You will need an Acrobat Reader to access these files. (You may download a copy of the reader at no charge here .)
Click here for Municipal Court contact information and directions.

Allow ten days from the date of the violation before coming to or calling the court about the violations.

TO PAY IN PERSON: You may appear at the court in person during business hours stated above to make payment. The court will accept CASH (exact amount preferred), CHECK, MONEY ORDER, and ALL MAJOR BANK CARDS (either debit or credit cards). Please Note: There is a four percent (4%) convenience charge added to your payment to offset transaction costs when you use a debit or credit card for payment.

PAYMENT, DRIVING SAFETY COURSE AND DEFERRED DISPOSITION BY MAIL: You may pay your fine, request deferred disposition or a driving safety course by mail using the applications at these links. Complete information was offered to you at the time you received a citation. To pay your fine, detach the plea of guilty or no contest at the bottom of the citation and mail it to the Pasadena Municipal Court at the address noted on the ticket.

RESETTING YOUR COURT DATE: A court date may be reset one time without the Judge s approval. To reset a court date, you must do so in person at the Municipal Court during business hours stated above during business hours stated above, but before your appearance date. On your appearance day, the case must be reset by the judge in court.

APPEARANCE ON COURT DATE: If you have not previously appeared in writing or by attorney, paid or rescheduled, you are required to appear in court at the date and time stated on your ticket.

PROPER ATTIRE REQUIRED: Shorts, tank tops, halter tops and flip flops are not permitted in Court.

FAILURE TO APPEAR IN COURT: Failure to appear or failure to pay fines may result in 1. Denial of renewal of your Driver s License; 2. Denial of your renewal of your vehicle registration; 3. The filing of an additional charge of failure to appear and the issuance of a warrant for your arrest.

JUVENILES: If you are under age 17, you cannot pre-pay the fine. State law requires that you appear in court with a parent or legal guardian. A child under 17 and parent required to appear before the Court have the obligation to provide the court in writing with the current address and residence of the child. The obligation does not end when the child reaches the age 17. On or before the seventh day after the date the child or parent changes residence, the child or parent shall notify the court of the current address in the manner directed by the court. A violation may result in arrest and is a Class C misdemeanor. The obligation to provide notice terminates on discharge and satisfaction of the judgment or final disposition not requiring a finding of guilt. If an appellate court accepts an appeal for a trial de novo, the child and parent shall provide the notice to the appellate court.

ALCOHOL AND TOBACCO VIOLATIONS: Persons under the age of 18 charged with tobacco violations and persons under the age of 21 charged with alcohol violations may not pay prior to court by mail or in person, but must appear in court.

RENEWAL SURCHARGES: A conviction of an offense under a traffic law of this state or a political subdivision of this state may result in the assessment on your driver s license of a surcharge under the Driver Responsibility Program.

INSURANCE VIOLATIONS: A second or subsequent conviction of an offense under the Texas Motor Vehicle Safety Responsibility Act will result in the suspension of your driver s license and motor vehicle registration unless you file and maintain evidence of financial responsibility with the Department of Public Safety for two years from the date of the conviction. The department may waive the requirement to file evidence of financial responsibility if you file satisfactory evidence with the department showing that at the time this citation was issued, the vehicle was covered by a motor vehicle liability insurance policy or that you were otherwise exempt from the requirements to provide evidence of financial responsibility.

DRIVING SAFETY COURSE: You may be able to require that this charge be dismissed by taking a driving safety course. However, you will lose that right if you do not provide written notice to the court on or before your appearance date of your desire to do so. This right applies to one charge only and is subject to the further conditions on the enclosed information and application.

FAMILY VIOLENCE: If you are convicted of a misdemeanor offense involving violence where you are or were a spouse or intimate partner, parent, or guardian of the victim or are or were involved in another similar relationship with the victim, it may be unlawful for you to possess or purchase a firearm, including a handgun or long gun, or ammunition pursuant to federal law under 18 U.S.C. Section 922(g)(9) or Section 46.04(b) Texas Penal Code. If you have any questions whether these laws make it illegal for you to possess or purchase a firearm, you should consult an attorney.

WAIVER OF RIGHT TO JURY TRIAL AND GUILTY/NO CONTEST PLEA
You may download a brief form with a waiver of right to jury trial and plea of guilty/no contest here. Print out the form, fill out all required information, attach your check or money order in the correct amount, and mail to the address shown on the form.

DEFERRED DISPOSITION AND DRIVING SAFETY COURSE: Information on deferred disposition and the driving safety course is available here in Adobe PDF format so that you may review it online or download and print it out. It requires the free Acrobat Reader to access this file. (You may download a copy of the Reader at no charge here .) This information sheet also contains a schedule of window fines for common traffic and state law violations, and a list of cases that may be dismissed before court by mail or in person.

WARRANT COURT: Warrant Court takes place each Thursday at 8 a.m. in Court Room #1. Warrant Court affords the opportunity to clear your warrant by payment of at least $100 and acceptance of the terms of a payment plan for the balance of what may be owed. The $100 payment option, however, does not apply to persons for whom a capias pro fine has been issued for unpaid fines. You should call the warrant line at 713-475-5559 for assistance with this and other questions. Persons wishing to take advantage of this program should appear in person on a Thursday morning. Persons wishing to plead ‘not guilty’ will be required to post a bond to secure a trial date.

Traffic Ticket and Warrant Look-up: You may search for outstanding traffic tickets and warrants by clicking here and entering the required information. PLEASE NOTE There is a Payment option button on the page after you locate your outstanding citation(s). This option is NOT AVAILABLE and you will not be able to make a payment online at this time. Please make your payment by phone or in-person to assure you meet your ticket payment deadline.


Bond Market #bond #market #chart


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Bond Market

What is the ‘Bond Market’

The bond market – also called the debt market or credit market – is a financial market in which the participants are provided with the issuance and trading of debt securities. The bond market primarily includes government-issued securities and corporate debt securities, facilitating the transfer of capital from savers to the issuers or organizations requiring capital for government projects, business expansions and ongoing operations.

BREAKING DOWN ‘Bond Market’

In the bond market, participants can issue new debt in the market called the primary market or trade debt securities in the market called the secondary market. These products are typically in the form of bonds, but they may also come in the form of bills and notes. The goal of the bond market is to provide long-term financial aid and funding for public and private projects and expenditures.

Participants

The participants of the bond market are nearly the same as the participants in other financial markets. In bond markets, the participants are either buyers of funds (that is, debt issuers) or sellers of funds (institutions). Participants include institutional investors. traders, governments and individuals who purchase products provided by large institutions. These projects may be in the form of pension funds. mutual funds and life insurance. among many other product types.

Types of Bond Markets

The general bond market can be classified into corporate bonds. government and agency bonds. municipal bonds, mortgage-backed bonds, asset-backed bonds, and collateralized debt obligations .

Corporate Bond

Corporations provide corporate bonds to raise money for different reasons, such as financing ongoing operations or expanding businesses. The term “corporate bond” is usually used for longer-term debt instruments that provide a maturity of at least one year.

Government Bonds

National governments issue government bonds and entice buyers by providing the face value on the agreed maturity date with periodic interest payments. This characteristic makes government bonds attractive for conservative investors.

Municipal Bonds

Local governments and their agencies, states, cities, special-purpose districts, public utility districts, school districts, publicly owned airports and seaports, and other government-owned entities issue municipal bonds to fund their projects.

Mortgage Bonds

Pooled mortgages on real estate properties provide mortgage bonds. Mortgage bonds are locked in by the pledge of particular assets. They pay monthly, quarterly or semi-annual interest.

Bond Indices

Just like the S P 500 Index or Russell Indexes for equities. bond indices manage and measure bond portfolio performance. Big names include Barclays Capital Aggregate Bond Index, the Merrill Lynch Domestic Master and the Citigroup U.S. Broad Investment-Grade Bond Index. Many bond indices are members of broader indices that may be used to provide and measure the performances of global bond portfolios.


RBI opens up bond market #small #business #tools

#bond market news

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RBI opens up bond market

The Reserve Bank of India (RBI) on Thursday announced a comprehensive set of measures to change India s lacklustre bond market and provide a push to the currency market as well, completing the agenda of Raghuram Rajan, the outgoing governor of the central bank.

The RBI proposed to allow banks to raise capital through masala (rupee) bonds in the overseas market and liberalised the currency market by allowing customers residents and non-residents to maintain big open positions.

Among a series of blockbuster measures, the RBI also proposed to allow listed companies to lend money to banks through repo market mechanism, essentially overnight money, something that can have wide ranging ramifications for call money rates, short-term money market rates as well as the banking system liquidity.

The central bank also proposed allowing listed companies to lend longer tenure money to banks through the repo market mechanism. This will have an impact on interest rates, the bond market, and liquidity in the banking system.

The RBI said it would also seek legal amendments to allow banks to borrow from it by pledging corporate bonds. This should raise demand for rated corporate paper and make secondary trade possible. Currently, 95 per cent of corporate bonds are privately placed.

The proposal to allow foreign portfolio investors direct access to bond trading platforms for government and corporate paper will widen the investor base. The central bank has also proposed that banks nudge corporate clients to borrow from the bond market. Final guidelines on most of today s proposals will be issued after Rajan s departure, but some measures come into effect immediately. For example, the steps taken in the currency market essentially opened up India s closely-guarded currency market, perhaps bringing an element of speculation in the exchange rate. The Reserve Bank will now permit entities exposed to exchange rate risk, whether resident or non-resident, to undertake hedge transactions with simplified procedures, up to a limit of $30 million at any given time. The exposed person will be free to access any market (over the counter or exchange) and use any of the permissible products, the RBI said in its statement on its website.

In addition, banks might, based on their assessment of the risk management capabilities of a customer, allow an open position limit of up to $5 million, the RBI said. The currency market move was intended to improve liquidity and depth, the RBI said, adding the limit would be revised according to experience. Guidelines on this will be issued by November. Another critical change is allowing companies to lend money to banks through a market repo mechanism. So far, listed companies could only lend a maximum of 7-day money, taking government securities as mortgage, also known as repo. The RBI said this constrains their participation . It is proposed to allow such companies to lend through the repo market, without any tenor or counterparty restrictions. Guidelines based on a comprehensive review of regulations on market repo in G-secs are being issued today, it added.

Analysts hailed the measures taken by RBI. These are all critical reforms from short-to-long term perspective. Opening up of global markets for AT1 and Tier-II bonds in negative rate condition prevailing globally will be beneficial for banks, said Soumyajit Niyogi, associate director, India Ratings and Research. Listed corporates are encouraged to park short-term surplus fund through repo in G-Sec. FPI s and Individual s direct presence in bond markets and inclusion of corporate bond in LAF window will strengthen market activities, Niyogi said. Gaurav Pradhan, co-head of investment banking & capital markets for Credit Suisse in India said RBI s proactive steps acknowledged the potential of the masala bond market. Further issuance from banks will help broaden and deepen the market for masala bonds, making the product more sustainable in the long run as a financing option. From a macro perspective, we expect the RBI s move will help banks to better manage their balance sheets and lower their cost of funds, and should have a positive impact on local interest rates, Pradhan said.

Karthik Srinivasan, co-head, financial sector ratings, ICRA said RBI measures will encourage greater participation from issuers, investors and intermediaries while the permission to banks to raise masala bonds can develop the overseas market for rupee denominated bonds.

Many of the measures for the corporate bond market were built on recommendations in a report by the HR Khan committee released a week ago by the Securities and Exchange Board of India. These measures are intended to further market development, enhance participation, facilitate greater market liquidity and improve communication, the central bank said.

The RBI also decided to enhance the aggregate limit of partial credit enhancement provided by banks to corporate bonds to 50 per cent of the bond issue size from 20 per cent earlier, provided a single bank restricted its enhancement to 20 per cent of the issue size. It also proposed to permit brokers in corporate bond repos, authorise the platform for repo in corporate bonds, and encourage credit supply for large borrowers through the market mechanism. To further encourage the overseas rupee bond market, banks are being permitted to issue rupee bonds overseas (masala bonds) for their capital requirements and for financing infrastructure and affordable housing, the central bank said.

The bonds should be perpetual debt instruments used to shore up additional Tier 1 and Tier II capital of banks. Masala bonds to be issued for financing infrastructure and affordable housing can be of the nature of any long-term debt. The central bank said it had worked out a market making scheme in government securities by primary dealers (underwriters of government bonds) in consultation with the government which might help in increasing the liquidity of semi-liquid securities. The central bank will soon comprehensively review the framework for hedging of commodity price risks in the overseas markets by Indian companies.





What Are the Best International Bond Markets? #sba #business #loan

#bond market news

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What Are the Best International Bond Markets?

What Are the Best International Bond Markets?

With low interest rates in the U.S. and outright negative rates in some overseas markets, the bond market probably isn’t the first thing to come to mind when investors are looking for yield.

But experts are pointing to some niches of the international bond arena that are yielding well above what can be had domestically, albeit with more risk.

Both high-quality and lower-quality bonds have been performing well in terms of price. High-quality developed market bonds have rallied with demand from risk-averse investors, such as those worried about Britain voting to leave the European Union .

But of course as bond prices rise, their yields decline. So, needing to make money, investors have also been turning to lower-quality emerging market bonds. That also drives their price up, but these bonds simply yield more because they are riskier.

It can be tempting to stay within the U.S. in terms of bonds, says Richard Lawrence, senior vice president of portfolio management at Brandywine Global Investment Management, which is a subadvisor for the Legg Mason BW Global Opportunities Bond Fund (ticker: GOBIX ). But that would be eschewing higher yields in emerging markets and some developed world bonds.

“You have to look beyond the headlines,” he says.

Emerging markets can be a good place to look for yield, but that’s because they are associated with certain risks, says Eric Stein, co-director of global income at Eaton Vance Management, which has the Global Macro Absolute Return Fund (EIGMX ), the Emerging Markets Local Income Fund (EEIAX ) and the Emerging Markets Debt Opportunities Fund (EIDOX ). The three main risks for foreign bonds are currency, interest rates and default, he says.

International bonds also move in step with the Federal Reserve and U.S. Treasurys. If the Fed raises rates, that would cause bond yields elsewhere to rise, meaning their value would fall in the short term. This would only create a headwind for international bonds if the Fed raises rates more than expected and Treasurys sell off, Stein says.

If U.S. rates rise more quickly than expected, this could strengthen the U.S. dollar and cause some emerging market currencies to weaken.

Demand from China is also a risk as many emerging market countries are commodities producers and China is a large consumer, he says. A sell off in the Chinese currency can also send shockwaves through global risk markets, he says.

Oil prices are also a risk, since many emerging market countries are oil exporters, he says.

With the top five global bond issuers – the U.S. France, Germany, the United Kingdom and Japan – all yielding low or negative rates, emerging market countries are “last bastions of yield,” says Meb Faber, a co-founder and chief investment officer of Cambria Investment Management.

Rising interest rates in the U.S. would lead to higher rates elsewhere. So in the short term, that would cause international bond prices to decline and their yield to go up, Faber says.

Whether international bonds will face a strong headwind as the Fed raises rates depends on how the market reacts to the pace of the hikes, Lawrence says.

A strong dollar acts as a headwind for investors in international bonds unless they hedge that currency exposure, he says, but this year, declines in the U.S. dollar have made it more sensible to buy securities denominated in other currencies.

Stein thinks the Fed will raise rates a little more than expected over the next two years, providing a slight headwind to some emerging market currencies.

For those looking for yield, Lawrence points to Brazil, where the 10-year bond is yielding around 12 percent. He also likes Mexico because of its correlation with the slowly improving U.S. economy and its Treasury market but much higher yield. South Africa is also attractive, with its 10-year bonds yielding about 9 percent and a slowly improving fiscal picture.

Both Lawrence and Stein point to Indonesia because of its reform agenda.

They also cite New Zealand as a niche of the developed world economies where investors can get higher yields without taking a lot of credit risk. However, Stein is bearish on the New Zealand dollar.





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10-Year: -9/32 1.60 EUR/USD: 1.1160USD/JPY: 103.95

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  • August Employment Situation Report:
  • Nonfarm payrolls: Actual 151K, Briefing.com consensus 180K, Prior 275K (revised from 255K)
  • Nonfarm private payrolls: Actual 126K, Briefing.com consensus 175K, Prior 217K
  • Unemployment rate: Actual 4.9%, Briefing.com consensus 4.8%, Prior 4.9%
  • Average hourly earnings: Actual 0.1%, Briefing.com consensus 0.2% Prior 0.3%
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  • July Factory Orders: Actual +1.9%, Briefing.com consensus 2.0%, Prior -1.8% (revised from -1.5%)
  • Richmond Fed PresidentLacker (non-FOMC voter): U.S. economic data is consistent with CPI growth moving up to 2%

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Definition – Anleihe #anleihe,auslandsanleihe,bundesanleihe,bundesobligation,deutsche #finanzagentur,disagio,doppelwährungsanleihe,eurobond,floating #rate #note #(frn),junk #bond,kommunalobligation,kreditanstalt #für #wiederaufbau #(kfw),marktzins,pfandbrief,sammelurkunde,schatzanweisungen,tilgungsanleihe,zerobond,schuldverschreibung,


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Gabler Wirtschaftslexikon

ANZEIGE

Viele Handelsunternehmen agieren heutzutage beschaffungsseitig international, indem sie Güter direkt oder indirekt importieren; abgestufter international ist der Wissenstransfer im Handel, so bei Führungskräften oder Informationssystemen. Absatzseitig allerdings wird die internationale Expansion aggressiv vor allem von führenden Handelsunternehmen in diversen Handelsbranchen. mehr

von Prof. Dr. Prof. h. c. Bernhard Swoboda, Prof. Dr. Thomas Foscht

Electronic Business nutzt digitale Informationstechnologien zur Unterstützung von Geschäftsprozessen mit dem Ziel der Generierung eines elektronischen Mehrwerts. Information, Kommunikation und Transaktion als die zentralen Bausteine des Electronic Business werden dabei über digitale Netzwerke transferiert bzw. abgewickelt. In der Konsequenz sind. mehr

von Prof. Dr. Tobias Kollmann

Anleihe

ANZEIGE

Anleihen sind Forderungspapiere, durch die ein Kredit am Kapitalmarkt aufgenommen wird. Im Unterschied zu Privatkrediten werden Anleihen öffentlich und nur von juristischen Personen begeben. Sie unterscheiden sich durch abweichende Konditionen wie verschieden lange Laufzeiten, Emissionswährungen und Verzinsungen. Letztere kann entweder fest, variabel oder strukturiert (abhängig von bestimmten Ereignissen) sein. Ihr Kurs wird in Prozent des Nominalwertes angegeben.

Schuldverschreibung, Obligation, Bond. 1. Begriff: Als Anleihen werden Effekten (Wertpapiere) bezeichnet, die Gläubigerrechte, insbesondere das Recht auf Verzinsung und das Recht auf Tilgung, verbriefen. Die Begebung erfolgt i.d.R. zur langfristigen Fremdkapitalaufnahme in größerem Umfang am in- und ausländischen Kapitalmarkt.

2. Ausstattung: a) Verzinsung: Anleihen sind i.d.R. festverzinslich, daneben gibt es auch Anleiheformen mit Zinsanpassungen, d.h. mit variabler Verzinsung (Floating Rate Note). Zinszahlungen erfolgen i.d.R. jährlich. Durch Konvertierung können über dem Marktzins verzinste Anleihen in niedriger verzinsliche umgewandelt werden. Wesentlich für den Platzierungserfolg einer Anleihe ist nicht die Nominal-, sondern die Effektivverzinsung.
b) Laufzeit und Tilgung: Die Laufzeit beträgt fünf bis dreißig Jahre, in Hochzinsperioden auch darunter. Die Schuldner behalten sich i.d.R. das Recht auf Kündigung vor (meist nach Ablauf einer Sperrfrist). Bei Tilgungsanleihen erfolgt entweder die Gesamtrückzahlung am Ende der Laufzeit oder eine Rückzahlung in Teilabschnitten für einzelne Anleiheserien nach festem Plan oder durch Auslosung. Die Tilgung kann auch durch freihändigen Rückkauf durch den Emittenten erfolgen. Die strukturierte Anleihe hat in den letzten Jahren immer mehr an Bedeutung gewonnen. Strukturierte Anleihen sind verzinsliche Wertpapiere, die sich durch individuelle Gestaltungsmerkmale auszeichnen, welche die Rückzahlung oder auch die Zinszahlung der Anleihen beeinflussen.
c) Emissions- und Rückzahlungskurs: Anleihen können zu pari (= 100%), aber auch mit einem Abschlag (Disagio ) oder einem Aufschlag (Agio) emittiert werden. Die Rückzahlung erfolgt i.d.R. zum Nennwert, selten über pari.
d) Stückelung: Die kleinste Stückelung liegt bei 0,01 Euro. Effektive Stücke sind üblicherweise mit Zinsscheinen und Erneuerungsschein ausgestattet. Heute werden fast nur noch Sammelurkunden ausgestellt und effektive Stücke nicht mehr ausgeliefert.

3. Emission: Die Emissionen erfolgen üblicherweise in einem der drei gängigen Verfahren: das Festpreisverfahren (Vorgabe eines festen Preises für das Wertpapier), das Bookbuilding-Verfahren (Angabe von Preisspannen in einer vorgegebenen Frist, zu denen Investoren zu kaufen bereit sind) und das Auktionsverfahren (Preis wird durch Gebote der Investoren bestimmt). Die Emission bei Bundesanleihen erfolgt i.d.R. über die Deutsche Bundesbank (Bietergruppe Bundesemission) im Auftrag der Bundesrepublik Deutschland – Finanzagentur GmbH (s. Deutsche Finanzagentur ).

4. Arten: a) Anleihen der öffentlichen Hand: Bund, Länder, Kommunen sowie Sondervermögen des Bundes geben zur Haushaltsfinanzierung Anleihen aus. Staatsanleihen sind fast immer festverzinsliche Inhaberschuldverschreibungen. Typische Arten sind Bundesobligationen. Bundesanleihen. Bundesschatzanweisungen (Schatzanweisungen ) sowie inflationsindexierte Bundeswertpapiere in Form von Anleihen oder Obligationen.
b) Schuldverschreibungen der Kreditinstitute: Dazu gehören Pfandbriefe und öffentliche Pfandbriefe (Kommunalobligationen ), die bes. besichert sind; Schuldverschreibungen von Kreditinstituten mit Sonderaufgaben (z.B. Kreditanstalt für Wiederaufbau (KfW) ) sowie sonstige Bankschuldverschreibungen.
c) Anleihen der gewerblichen Wirtschaft: Unternehmensanleihen (Industrieobligationen), Gewinnschuldverschreibungen, Wandelschuldverschreibungen, Optionsanleihen, Schuldscheindarlehen.
d) Internationale Anleihen: Der internationale Kapitalmarkt ist durch eine Vielzahl von innovativen Anleihetypen gekennzeichnet: Zerobond (Null-Coupon-Anleihe), Floating Rate Note (FRN). Eurobond. Doppelwährungsanleihe. Auslandsanleihe. Junk Bond .

ANZEIGE

Die Versicherungswirtschaft ist zum einen ein Wirtschaftszweig von großer volkswirtschaftlicher Bedeutung und zum anderen eine spezielle Betriebwirtschaftslehre – auch Versicherungsbetriebslehre genannt. Als Wirtschaftszweig mit Dienstleistungscharakter ist die Versicherungswirtschaft mit Aufgaben der Schadensverhütung und -regulierung und der Sammlung von Kapital betraut.. mehr

Durch eine internationale Rechnungslegung und damit internationale Harmonisierung der Rechnungslegung soll eine Vergleichbarkeit bzw. Interpretierbarkeit der Jahresabschlüsse international agierender Unternehmen, die ansonsten nach länderspezifischen, unterschiedlichen Rechtsnormen erstellt sind, erreicht werden. Diese Harmonisierung ist seit 2001 Aufgabe des IASB, des privatrechtlichen. mehr

Die Wirtschaftsinformatik als Wissenschaft von der Konzeption, Entwicklung und Anwendung computergestützter Informations- und Kommunikationssysteme (IKS) nimmt eine interdisziplinäre Schnittstellenfunktion zwischen der Betriebswirtschaftslehre und der Informatik ein. Jedoch bietet die Wirtschaftsinformatik auch zusätzliche Funktionen/Ergebnisse wie etwa Methoden und Modelle, anhand derer. mehr

I. Definition, Abgrenzung und Ziele Ein Mindestlohn ist ein via gesetzlicher oder tarifvertraglicher Regelung in der Höhe festgelegtes kleinstes rechtlich zulässiges Arbeitsentgelt. Eine Mindestlohnregelung kann sich auf den Stundensatz oder den Monatslohn bei Vollzeitbeschäftigung beziehen. Neben national wirkenden Mindestlöhnen gibt es. mehr

Schwerpunktbeitrag von Privatdozent Dr. Fred Henneberger, Prof. Dr. Berndt Keller

I. Begriff Umfassendes methodisch-quantitatives Instrumentarium zur Charakterisierung und Auswertung empirischer Befunde bei gleichartigen Einheiten („Massenphänomenen”) mit universellen Einsatzmöglichkeiten in Politik, Wirtschaft und Gesellschaft und allen Geistes-, Sozial- und Naturwissenschaften einschließlich Medizin und Technik, in denen mit Zahlen oder Bewertungen gearbeitet wird.. mehr

Schwerpunktbeitrag von Prof. Dr. Udo Kamps

I. Begriff Unter experimenteller Wirtschaftsforschung versteht man den Bereich der empirischen Wirtschaftswissenschaft, in dem kontrollierte Experimente durchgeführt werden, um Theorien zu überprüfen oder neue Regelmäßigkeiten zu entdecken. Die Experimente werden zumeist als Laborexperimente, mitunter jedoch auch als Feldexperimente oder in Form. mehr

Schwerpunktbeitrag von Prof. Dr. Mathias Erlei


The bond market looks like a classic bubble – Business Insider #business

#bond market news

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The bond market looks like a ‘classic bubble’

Bond yields are low. Historically low.

Yields on government bonds in the US, Europe, Japan, and beyond are at seriously depressed levels. Even corporate bonds are reaching multi-decade lows as more investors pour into the asset class.

While the serious flows into these debt instruments continue seemingly unabated, Scott Colyer, CEO and CIO at Advisors Asset Management thinks that the continued support for the asset makes no sense.

“Bond prices are the highest they’ve ever been, yields are the lowest they’ve ever been and we go back to 1776,” said Colyer. “This is such an anomaly it’s not even funny.”

Remember that the price of bonds increases as the yield decreases, so the cost of these notes is getting only more expensive. To Colyer, this increase looks like a bubble and smells like a bubble, meaning that it most likely is.

“We have record demand for an asset class in a time period where the expected future return for that asset are the lowest they’ve ever been in history,” said Colyer. “That to me defines a classic bubble. Money is being forced into an asset class not because of value, but because there is a perception of protection there.”

The idea is that investors and central banks are pushing the price of bonds upward unnaturally, so that might be a problem.

Colyer said that just because there is a bubble, it doesn’t mean that it has to pop. The biggest danger, according to Colyer, is the Federal Reserve raising interest rates too fast, which the central bank is trying not to do.

“That’s why the Fed is trying to let the air out of the balloon as slowly as possible, and you get all of the jawboning over the ‘slow path of rates,'” said Colyer.

To be fair, much of the demand for bonds — especially outside of the US — is being driven by central banks, and that may affect the settlement of the issue.

Colyer has some advice for investors, though it was not very self-serving.

“You should sell everything you have that’s related to bonds, and I’m a bond guy,” he said.

SEE ALSO: Everyone should stop acting like the world is going to end

The bond market looks like a ‘classic bubble’





Bond Basics #bond #coupon


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Bond Basics

To better understand bonds and bond funds, let’s start with some basic concepts.

What’s a Bond?

A bond is a loan that an investor makes to a corporation, government, federal agency or other organization. Consequently, bonds are sometimes referred to as debt securities. Since bond issuers know you aren’t going to lend your hard-earned money without compensation, the issuer of the bond (the borrower) enters into a legal agreement to pay you (the bondholder) interest. The bond issuer also agrees to repay you the original sum loaned at the bond’s maturity date, though certain conditions, such as a bond being called, may cause repayment to be made earlier.

The vast majority of bonds have a set maturity date—a specific date when the bond must be paid back at its face value, called par value. Bonds are called fixed-income securities because many pay you interest based on a regular, predetermined interest rate—also called a coupon rate—that is set when the bond is issued. Similarly, the term “bond market” is often used interchangeably with “fixed-income market.”

Bond Maturity

A bond’s term. or years to maturity, is usually set when it is issued. Bond maturities can range from one day to 100 years, but the majority of bond maturities range from one to 30 years. Bonds are often referred to as being short-, medium- or long-term. Generally, a bond that matures in one to three years is referred to as a short-term bond. Medium- or intermediate-term bonds are generally those that mature in four to 10 years, and long-term bonds are those with maturities greater than 10 years. The borrower fulfills its debt obligation typically when the bond reaches its maturity date, and the final interest payment and the original sum you loaned (the principal) are paid to you.

Callable Bonds

Not all bonds reach maturity, even if you want them to. Callable bonds are common. They allow the issuer to retire a bond before it matures. Call provisions are outlined in the bond’s prospectus (or offering statement or circular) and the indenture—both are documents that explain a bond’s terms and conditions. While firms are not formally required to document all call provision terms on the customer’s confirmation statement, many do so. When you buy municipal securities. firms are required to provide more call information on the customer confirmation than you will see for other types of debt securities.

You usually receive some call protection for a period of the bond’s life (for example, the first three years after the bond is issued). This means that the bond cannot be called before a specified date. After that, the bond’s issuer can redeem that bond on the predetermined call date, or a bond may be continuously callable, meaning the issuer may redeem the bond at the specified price at any time during the call period. Before you buy a bond, always check to see if the bond has a call provision, and consider how that might impact your investment strategy.

Bond Coupons

A bond’s coupon is the annual interest rate paid on the issuer’s borrowed money, generally paid out semiannually. The coupon is always tied to a bond’s face or par value, and is quoted as a percentage of par. For instance, a bond with a par value of $1,000 and an annual interest rate of 4.5 percent has a coupon rate of 4.5 percent ($45).

Many bond investors rely on a bond’s coupon as a source of income, spending the simple interest they receive.

You can also reinvest the interest, letting your interest gain interest. If the interest rate at which you reinvest your coupons is higher or lower, your total return will be more or less. Also be aware that taxes can reduce your total return.

The Power of Compounding

Regardless of the type of investment you select, saving regularly and reinvesting your interest income can turn even modest amounts of money into sizable investments through the remarkable power of compounding. If you save $200 a month and receive a 5 percent annual rate of return, you will have more than $82,000 in 20 years’ time.

Accrued Interest

Accrued interest is the interest that adds up (accrues) each day between coupon payments. If you sell a bond before it matures or buy a bond in the secondary market, you most likely will catch the bond between coupon payment dates. If you’re selling, you’re entitled to the price of the bond, plus the accrued interest that the bond has earned up to the sale date. The buyer compensates you for this portion of the coupon interest, which is generally handled by adding the amount to the contract price of the bond.

Use our Accrued Interest Calculator to figure out a bond’s accrued interest.

Bond Prices

Bonds are generally issued in multiples of $1,000, also known as a bond’s face or par value. But a bond’s price is subject to market forces and often fluctuates above or below par. If you sell a bond before it matures, you may not receive the full principal amount of the bond and will not receive any remaining interest payments. This is because a bond’s price is not based on the par value of the bond. Instead, the bond’s price is established in the secondary market and fluctuates. As a result, the price may be more or less than the amount of principal and the remaining interest the issuer would be required to pay you if you held the bond to maturity.

The price of a bond can be above or below its par value for many reasons, including:

  • interest rate adjustments to the bond;
  • whether a bond credit rating has changed;
  • supply and demand;
  • a change in the creditworthiness of a bond’s issuer;
  • whether the bond has been called or is likely to be (or not to be) called; or,
  • a change in the prevailing market interest rates.

If a bond trades above par, it is said to trade at a premium. If a bond trades below par, it is said to trade at a discount. For example, if the bond you desire to purchase has a fixed interest rate of 8 percent, and similar-quality new bonds available for sale have a fixed interest rate of 5 percent, you will likely pay more than the par amount of the bond that you intend to purchase, because you will receive more interest income than the current interest rate (5 percent) being attached to similar bonds.


The bond market looks like a classic bubble – Business Insider #small

#bond market news

#

The bond market looks like a ‘classic bubble’

Bond yields are low. Historically low.

Yields on government bonds in the US, Europe, Japan, and beyond are at seriously depressed levels. Even corporate bonds are reaching multi-decade lows as more investors pour into the asset class.

While the serious flows into these debt instruments continue seemingly unabated, Scott Colyer, CEO and CIO at Advisors Asset Management thinks that the continued support for the asset makes no sense.

“Bond prices are the highest they’ve ever been, yields are the lowest they’ve ever been and we go back to 1776,” said Colyer. “This is such an anomaly it’s not even funny.”

Remember that the price of bonds increases as the yield decreases, so the cost of these notes is getting only more expensive. To Colyer, this increase looks like a bubble and smells like a bubble, meaning that it most likely is.

“We have record demand for an asset class in a time period where the expected future return for that asset are the lowest they’ve ever been in history,” said Colyer. “That to me defines a classic bubble. Money is being forced into an asset class not because of value, but because there is a perception of protection there.”

The idea is that investors and central banks are pushing the price of bonds upward unnaturally, so that might be a problem.

Colyer said that just because there is a bubble, it doesn’t mean that it has to pop. The biggest danger, according to Colyer, is the Federal Reserve raising interest rates too fast, which the central bank is trying not to do.

“That’s why the Fed is trying to let the air out of the balloon as slowly as possible, and you get all of the jawboning over the ‘slow path of rates,'” said Colyer.

To be fair, much of the demand for bonds — especially outside of the US — is being driven by central banks, and that may affect the settlement of the issue.

Colyer has some advice for investors, though it was not very self-serving.

“You should sell everything you have that’s related to bonds, and I’m a bond guy,” he said.

SEE ALSO: Everyone should stop acting like the world is going to end

The bond market looks like a ‘classic bubble’





List of International Bond ETFs (Exchange Traded Funds) #international #bond #market


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List of International Bond ETFs

Tetra Images/Getty Images

Updated November 01, 2016

If you are interested in investing in foreign markets, one strategy is to consider international Bond ETFs. This category of funds can be a good way to gain exposure to foreign markets, hedge foreign interest rates, or create a revenue stream in your portfolio. Once you are well-versed in these types of bond ETFs you may want to look at some of the major funds and see how they perform and react to various market conditions.

So without further ado, here is a list of international bond ETFs.

For more information for each international bond ETF on the list, click on the link for each symbol.

  • ALD – Wisdom Tree Asia Local Debt Fund
  • AUD – Australia Bond Index Fund (recently closed)
  • AUNZ – Wisdom Tree Australian New Zealand Debt ETF
  • BONO – Market Vectors Latin American Aggregate Bond ETF
  • BUNT – PowerShares DB 3x German Bund Futures ETN
  • BUNL – PowerShares DB German Bund Futures ETN
  • CAD – Pimco Canada Bond Index Fund
  • BNDX – Vanguard Total International Bond ETF
  • BUND – Pimco Germany Bond Index Fund
  • BWX – SPDR Barclays Capital International Treasury Bond ETF
  • BWZ – SPDR Barclays Capital Short-Term International Treasury Bond ETF
  • CEMB – iShares Emerging Markets Corporate Bond ETF
  • CHLC – Market Vectors Renminbi Bond ETF
  • CBON – The Market Vectors China AMC China Bond ETF
  • CHNB – Global X GF China Bond ETF (recently closed)
  • DSUM – Power Shares Chinese Yuan Dim Sum Bond Portfolio
  • EBND – SPDR Barclays Capital Emerging Markets Local Bond ETF
  • EMB – iShares JP Morgan USD Emerging Markets Bond ETF
  • EMBH – iShares Interest Rate Hedged Emerging Markets Bond ETF
  • EMCB – WisdomTree Emerging Markets Corporate Bond ETF
  • EMLC – Market Vectors Emerging Markets Local Currency Bond ETF
  • FEMB – First Trust Emerging Markets Local Currency Bond ETF ETF
  • FWDB – Madrona Forward Global Bond ETF
  • GGOV – ProShares German Sovereign/Sub-Sovereign ETF
  • GTIP – iShares Global Inflation-Linked Bond Fund
  • HYEM – Market Vectors Emerging Markets High Yield Bond ETF
  • IAGG – iShares Core International Aggregate Bond ETF
  • ILB – Global Advantage Inflation Linked Bond Strategy ETF
  • ITIP – iShares International Inflation-Linked Bond Fund
  • IBND – Barclays Capital International Corporate Bond ETF
  • IGOV – iShares S P / Citi International Treasury Bond ETF
  • ISHG – iShares S P / Citi 1-3 Year International Treasury Bond ETF
  • ITLT – PowerShares DB 3x Italian Treasury Bond Futures ETN
  • ITLY – PowerShares DB Italian Treasury Bond Futures ETN
  • JGBS – PowerShares DB Inverse Japanese Government Bond Futures ETN (recently closed)
  • JGBD – PowerShares DB 3x Inverse Japanese Government Bond Futures ETN (recently closed)
  • JGBT – PowerShares DB 3x Japanese Govt Bond Futures ETN (recently closed)
  • JGBL – PowerShares DB Japanese Govt Bond Futures ETN (recently closed)
  • LEMB – iShares Emerging Markets Local Currency Bond Fund
  • PCY – PowerShares Emerging Markets Sovereign Debt Bond ETF
  • PICB – International Corporate Bond Portfolio
  • PXR – PowerShares Emerging Markets Infrastructure Bond ETF
  • RMB – Guggenheim Yuan Bond ETF
  • PFEM – PowerShares Fundamental Emerging Markets Local Debt Portfolio
  • WIP – SPDR DB International Government Inflation Protected Bond ETF
  • EMHY – iShares Emerging Markets High Yield Bond ETF
  • GYHG – iShares Global HighYield Corporate Bond Fund
  • GLCB – The WisdomTree Global Corporate Bond Fund
  • HYXU – iShares Global ex USD High Yield Corporate Bond ETF
  • IHY – International High Yield Bond ETF
  • PGHY – Power Shares Global Short Term High Yield Bond Portfolio ETF
  • EMIH – Deutsche X-trackers Emerging Markets Bond – Interest Rate Hedged ETF
  • IAGG – iShares Core International Aggregate Bond ETF
  • HHYX – iShares Currency Hedged Global ex USD High Yield Bond ETF (Recently Closed)
  • GTIP – iShares Global Inflation-Linked Bond ETF (Recently Closed)
  • ITIP – iShares International Inflation-Linked Bond ETF (recently closed)
  • IJNK – SPDR Barclays International High Yield Bond ETF (recently closed)

As with any foreign ETF. it is important to understand both the risks and advantages. There are many aspects to consider such as rates, historical results and what is actually in the fund. So be sure to conduct thorough research and if you have any questions or concerns, consult a professional such as a licensed broker or a financial advisor. Then, once ready, you have a look at some of the funds on this list of international bond ETFs. you may find the perfect fit for your investment strategy .

If you d like to learn more about other kinds of bond ETFs, look no further than the 14 Types of Bond ETFs or check out our list of of bond ETFs

Show Full Article


Stock Market, Market Sector, Bond Market, Indexes, Total Market Index, Market Barometer,

#stock market results

#

Top News

Upcoming Earnings and Data Releases

Popular Stock Quotes

Popular Fund Quotes

News Archives

Bond Market Update

The Market at 15:29 ET

10-Year: -9/32 1.60 EUR/USD: 1.1160USD/JPY: 103.95

Treasury Market Stands Its Ground

  • August Employment Situation Report:
  • Nonfarm payrolls: Actual 151K, Briefing.com consensus 180K, Prior 275K (revised from 255K)
  • Nonfarm private payrolls: Actual 126K, Briefing.com consensus 175K, Prior 217K
  • Unemployment rate: Actual 4.9%, Briefing.com consensus 4.8%, Prior 4.9%
  • Average hourly earnings: Actual 0.1%, Briefing.com consensus 0.2% Prior 0.3%
  • Average workweek: Actual 34.3, Briefing.com consensus 34.5, Prior 34.5
  • July TradeBalance: Actual -$39.5 bln, Briefing.com consensus -$43.0 bln, Prior -$44.5 bln
  • July Factory Orders: Actual +1.9%, Briefing.com consensus 2.0%, Prior -1.8% (revised from -1.5%)
  • Richmond Fed PresidentLacker (non-FOMC voter): U.S. economic data is consistent with CPI growth moving up to 2%

Market Barometer

Stock Market Updates

Market Calendars

Market Valuation

Performance Tables

Quarter End Data

Insider Activity

Sponsor Center

Market Indexes





A new zoo #bond #park


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A new zoo

Big changes are happening at your zoo.

The transformation is under way. Thanks to your support, the zoo’s vision for a better future for wildlife is taking shape, with nearly half the zoo grounds getting an upgrade. Scroll down to explore visionary new habitats like Elephant Lands and Condors of the Columbia. Discover how these changes will advance the zoo’s world leadership in animal welfare and sustainability. And follow our New Zoo blog for information on what’s happening and how to get involved.

Penguin filtration upgrade

To keep the penguins’ water clean and clear, the zoo historically filled, dumped and refilled their pool. In 2011, the zoo installed a new modern life-support system that recycles water in the penguin pool and reduces water usage by more than 80 percent, saving millions of gallons annually.

Veterinary Medical Center

Equipped to meet the medical needs of animals ranging from newts to bears, the LEED Gold-certified VMC building also includes a rainwater capture system, solar-heated water and an energy-efficient electrical system. The center provides comforting, climate-controlled spaces that support animals’ health and healing.

Condors of the Columbia

The three-story Condors of the Columbia aviary includes an elevated viewing area offering visitors a rare up-close look at these massive birds – the largest in North America. Interactive displays guide visitors through the Oregon Zoo’s decade-long effort with partners to recover these critically endangered birds.

Elephant Lands

This world-class habitat provides the entire herd great health and welfare, along with opportunities to make their own choices. Visitors will discover these graceful giants moving through meadows, hills, mud wallows and pools. Join us in creating one of the most inspiring elephant experiences in the world.

Education Center

This beautiful and sustainably-built learning and activity center includes classrooms and meeting spaces, gardens and a Nature Exploration Station. Home to zoo camps, classes and fun programs offered by community conservation and education partners, the center will inspire you to get outside, learn about nature and take meaningful action on behalf of the natural world.

Polar Passage

This expansive, two-tiered habitat will include natural ground materials, shallow and deep pools and extraordinary viewing opportunities for visitors. Bears will be able to patrol their habitat as they would in the wild and take in views across the zoo.

Primate habitat

Design concepts for the new primate habitat include complex and stimulating outdoor areas and “treeway” thoroughfares – pathways that link one habitat within the exhibit to another, allowing primates freedom of movement overhead while providing guests with exciting views and observations.

Rhino habitat

The zoo’s master plan calls for construction of an African savanna habitat shared by a number of large grassland species. Rhinos can share habitat with gazelles and giraffes, and visitors will be able to explore an expanded rhino habitat from multiple angles.

Learn what we’ve accomplished in animal welfare, education and sustainability thanks to your support for the 2008 bond measure.


Cowboy Bail – #1 Dallas Bail Bonds – Also Garland – Irving


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Cowboy Bail Bonds is located in Dallas, Texas, and has been helping families since 1997. Our licensed bail bond agents have helped people in every situation imaginable statewide and nationwide.

At Cowboy Bail Bonds, we believe in going the extra mile to provide professional and courteous service. Our agency is unique in that it is staffed 24 hours a day, 7 days a week. What does this mean for our clients? This means that whenever you call us, there will always be a licensed bail bond agent available and ready to assist you.

Why Cowboy’s Dallas Bail Bonds?

How Do Over 300,000 SATISFIED CUSTOMERS Describe Cowboy Bail Bonds?

  • Knowledgeable
  • Professional
  • Discreet
  • Friendly
  • Helpful
  • Honest
  • Fast
  • Fair

To read more about why you should choose Cowboy Bail Bonds, click here. License #224

About Our Process

STEP ONE

We will go through and explain how bail bonds work. We will also work with you to find a solution that fits your financial situation.

STEP TWO

You will then pay a small portion of the full bail amount.

STEP THREE

We then work with you and with the jail facility to quickly secure your release, or that of a loved one, by presenting the full bail amount to the court.

This was the first time I had to bail out anyone and had no idea what to do. I went to Delta Bail first but they treated me shabbily read more

Shannon T. Dallas


Western asset core bond fund #western #asset #core #bond #fund


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Cadwalader Cadwalader: Oldest continuously operating law firms in the United States.

“The attorneys at Cadwalader have really mastered the art of securitization” – Chambers USA

Since 1985, Cadwalader has facilitated the issuance of billions of dollars of asset-backed securities. This practice, which has grown beyond traditional asset classes, now encompasses the entire range of emerging and niche asset classes, including: 12b-1 fees; airplane loans; annuity contracts; cell phone towers commercial loans; dealer notes and floor plan financing; equipment and automobile leases; franchise receivables; government receivables; insurance-related assets; manufactured housing; music and publishing royalties; pharmacy and health care receivables; solar assets; student loans; tax liens; taxi medallions; and trade receivables.

With unparalleled experience in securitization, garnered from participation in an exceptional number of transactions and industry leadership, Cadwalader attorneys have not only the legal expertise and judgment required for complex securitization matters but the sophisticated business perspective necessary in today’s constantly evolving economic environment. In recognition of Cadwalader’s level of experience in capital markets financings, the firm is consistently ranked by independent commentators and in league tables as one of the top securitization and structured finance law firms in the nation.

Whether in their capacities as issuers, underwriters or in other roles, banks, insurance companies and other financial institutions call upon Cadwalader to help them develop new products and structure and to devise cross-border structures in Europe, Asia and Latin America. Similarly, leading industry reporters and commentators – including those from Asset Backed Alert, Commercial Mortgage Alert, The Daily Deal, Derivatives Week, the Financial Times, Global Finance, International Securitisation Report, Securitization News, and others – seek the insight and perspective of our lawyers on complex legal issues.

Securitization requires the close cooperation of attorneys of numerous disciplines. Cadwalader’s securitization team integrates attorneys from other disciplines to advise clients concerning the issues that arise in the course of securitization transactions, including those with expertise in real estate, corporate, securities and commodities regulation, bankruptcy, tax, banking, pension plan regulation, and ERISA to name a few.

154 Attorneys


The High Yield Bond Market Has Never Been This Decoupled From Reality

#bond market news

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The High Yield Bond Market Has Never Been This Decoupled From Reality

Recovery rates in 2016 are extremely low.. for high-yield bonds, the recovery rate YTD is 10.3% (10.5% senior secured and 0.5% senior subordinate), which is well below the 25-year annual average of 41.4%. Final recovery rates in 2015 for high-yield bonds were 25.2%, compared with recoveries of 48.1%, 52.7%, 53.2%, 48.6%, and 41.0% in full-years 2014, 2013, 2012, 2011, and 2010, respectively. Notably, average recoveries for Energy and Metals/Mining bonds were 18.3% and 20.0%, respectively, which weighed down overall high-yield recovery rates. Excluding the troubled commodity sectors, high-yield recoveries were a more respectable 46.1% (32.1% Ex-Energy only ). As for loans, recovery rates for first-lien loans thus far in 2016 are 24.5%, compared with their 18-year annual average of 67.2%. Final 2015 1st lien recoveries were 48.2%, while average recoveries for Energy and Metals/Mining 1st lien loans were 44.1% and 38.4%, respectively.

The record collapse in recovery rates is shown below.

It is not just JPM who points out what we first noticed in January: in an interview with Goldman s Allison Nathan, credit guru Edward Altman reiterates that same warning, although he focuses on the 2015 recovery rate which already is more than two times higher than that seen in 2016 defaults:

Allison Nathan: What is your view on recovery rates?

Edward Altman: Our approach to recovery rates is not centered on sectors. What we ve looked at carefully over 25 years is the correlation between default rates and recovery rates. As you would expect, when the former rise to high or above-average levels, you always observe the latter dropping to below-average levels. This strong inverse relationship is as much a function of supply and demand as it is of company fundamentals. So if we are expecting a higher default rate in 2016 and even 2017, then we would expect a lower recovery rate. Already in 2015, the recovery rate dropped dramatically relative to 2014 even though the default rate was below average; we saw a 33-34% recovery rate versus the historical average of 45%, measured as the price just after default. This is primarily due to the heavy concentration of energy companies whose recovery rates depend on their ability to liquidate their assets at reasonable prices, which in turn depends on the price of oil. Low oil prices have pushed recovery rates in the energy sector below 25% and even into the single digits for some companies. And that s going to continue. So this year I expect recovery rates much below average, producing a double-whammy of high default rates and low recovery rates for credit investors.

Since then recovery rates have dropped even further. BUT high-yield bond prices have surged on the back of ECB, BOE buying and the knock-on effects of $200 billion per month of experimentation by the world s central-planners.

Simply put, the revelation of a default event exposes the vast gap between real asset values (upon liquidation or bankruptcy) and the artificially supported prices seen in bond markets .

In the 30 year life of the so-called junk bond market, the chasm between reality and central-planner-created markets has never been wider.





What Are the Best International Bond Markets? #business #phone #system

#bond market news

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What Are the Best International Bond Markets?

What Are the Best International Bond Markets?

With low interest rates in the U.S. and outright negative rates in some overseas markets, the bond market probably isn’t the first thing to come to mind when investors are looking for yield.

But experts are pointing to some niches of the international bond arena that are yielding well above what can be had domestically, albeit with more risk.

Both high-quality and lower-quality bonds have been performing well in terms of price. High-quality developed market bonds have rallied with demand from risk-averse investors, such as those worried about Britain voting to leave the European Union .

But of course as bond prices rise, their yields decline. So, needing to make money, investors have also been turning to lower-quality emerging market bonds. That also drives their price up, but these bonds simply yield more because they are riskier.

It can be tempting to stay within the U.S. in terms of bonds, says Richard Lawrence, senior vice president of portfolio management at Brandywine Global Investment Management, which is a subadvisor for the Legg Mason BW Global Opportunities Bond Fund (ticker: GOBIX ). But that would be eschewing higher yields in emerging markets and some developed world bonds.

“You have to look beyond the headlines,” he says.

Emerging markets can be a good place to look for yield, but that’s because they are associated with certain risks, says Eric Stein, co-director of global income at Eaton Vance Management, which has the Global Macro Absolute Return Fund (EIGMX ), the Emerging Markets Local Income Fund (EEIAX ) and the Emerging Markets Debt Opportunities Fund (EIDOX ). The three main risks for foreign bonds are currency, interest rates and default, he says.

International bonds also move in step with the Federal Reserve and U.S. Treasurys. If the Fed raises rates, that would cause bond yields elsewhere to rise, meaning their value would fall in the short term. This would only create a headwind for international bonds if the Fed raises rates more than expected and Treasurys sell off, Stein says.

If U.S. rates rise more quickly than expected, this could strengthen the U.S. dollar and cause some emerging market currencies to weaken.

Demand from China is also a risk as many emerging market countries are commodities producers and China is a large consumer, he says. A sell off in the Chinese currency can also send shockwaves through global risk markets, he says.

Oil prices are also a risk, since many emerging market countries are oil exporters, he says.

With the top five global bond issuers – the U.S. France, Germany, the United Kingdom and Japan – all yielding low or negative rates, emerging market countries are “last bastions of yield,” says Meb Faber, a co-founder and chief investment officer of Cambria Investment Management.

Rising interest rates in the U.S. would lead to higher rates elsewhere. So in the short term, that would cause international bond prices to decline and their yield to go up, Faber says.

Whether international bonds will face a strong headwind as the Fed raises rates depends on how the market reacts to the pace of the hikes, Lawrence says.

A strong dollar acts as a headwind for investors in international bonds unless they hedge that currency exposure, he says, but this year, declines in the U.S. dollar have made it more sensible to buy securities denominated in other currencies.

Stein thinks the Fed will raise rates a little more than expected over the next two years, providing a slight headwind to some emerging market currencies.

For those looking for yield, Lawrence points to Brazil, where the 10-year bond is yielding around 12 percent. He also likes Mexico because of its correlation with the slowly improving U.S. economy and its Treasury market but much higher yield. South Africa is also attractive, with its 10-year bonds yielding about 9 percent and a slowly improving fiscal picture.

Both Lawrence and Stein point to Indonesia because of its reform agenda.

They also cite New Zealand as a niche of the developed world economies where investors can get higher yields without taking a lot of credit risk. However, Stein is bearish on the New Zealand dollar.





RBI opens up bond market #grants #for #small #business

#bond market news

#

RBI opens up bond market

The Reserve Bank of India (RBI) on Thursday announced a comprehensive set of measures to change India s lacklustre bond market and provide a push to the currency market as well, completing the agenda of Raghuram Rajan, the outgoing governor of the central bank.

The RBI proposed to allow banks to raise capital through masala (rupee) bonds in the overseas market and liberalised the currency market by allowing customers residents and non-residents to maintain big open positions.

Among a series of blockbuster measures, the RBI also proposed to allow listed companies to lend money to banks through repo market mechanism, essentially overnight money, something that can have wide ranging ramifications for call money rates, short-term money market rates as well as the banking system liquidity.

The central bank also proposed allowing listed companies to lend longer tenure money to banks through the repo market mechanism. This will have an impact on interest rates, the bond market, and liquidity in the banking system.

The RBI said it would also seek legal amendments to allow banks to borrow from it by pledging corporate bonds. This should raise demand for rated corporate paper and make secondary trade possible. Currently, 95 per cent of corporate bonds are privately placed.

The proposal to allow foreign portfolio investors direct access to bond trading platforms for government and corporate paper will widen the investor base. The central bank has also proposed that banks nudge corporate clients to borrow from the bond market. Final guidelines on most of today s proposals will be issued after Rajan s departure, but some measures come into effect immediately. For example, the steps taken in the currency market essentially opened up India s closely-guarded currency market, perhaps bringing an element of speculation in the exchange rate. The Reserve Bank will now permit entities exposed to exchange rate risk, whether resident or non-resident, to undertake hedge transactions with simplified procedures, up to a limit of $30 million at any given time. The exposed person will be free to access any market (over the counter or exchange) and use any of the permissible products, the RBI said in its statement on its website.

In addition, banks might, based on their assessment of the risk management capabilities of a customer, allow an open position limit of up to $5 million, the RBI said. The currency market move was intended to improve liquidity and depth, the RBI said, adding the limit would be revised according to experience. Guidelines on this will be issued by November. Another critical change is allowing companies to lend money to banks through a market repo mechanism. So far, listed companies could only lend a maximum of 7-day money, taking government securities as mortgage, also known as repo. The RBI said this constrains their participation . It is proposed to allow such companies to lend through the repo market, without any tenor or counterparty restrictions. Guidelines based on a comprehensive review of regulations on market repo in G-secs are being issued today, it added.

Analysts hailed the measures taken by RBI. These are all critical reforms from short-to-long term perspective. Opening up of global markets for AT1 and Tier-II bonds in negative rate condition prevailing globally will be beneficial for banks, said Soumyajit Niyogi, associate director, India Ratings and Research. Listed corporates are encouraged to park short-term surplus fund through repo in G-Sec. FPI s and Individual s direct presence in bond markets and inclusion of corporate bond in LAF window will strengthen market activities, Niyogi said. Gaurav Pradhan, co-head of investment banking & capital markets for Credit Suisse in India said RBI s proactive steps acknowledged the potential of the masala bond market. Further issuance from banks will help broaden and deepen the market for masala bonds, making the product more sustainable in the long run as a financing option. From a macro perspective, we expect the RBI s move will help banks to better manage their balance sheets and lower their cost of funds, and should have a positive impact on local interest rates, Pradhan said.

Karthik Srinivasan, co-head, financial sector ratings, ICRA said RBI measures will encourage greater participation from issuers, investors and intermediaries while the permission to banks to raise masala bonds can develop the overseas market for rupee denominated bonds.

Many of the measures for the corporate bond market were built on recommendations in a report by the HR Khan committee released a week ago by the Securities and Exchange Board of India. These measures are intended to further market development, enhance participation, facilitate greater market liquidity and improve communication, the central bank said.

The RBI also decided to enhance the aggregate limit of partial credit enhancement provided by banks to corporate bonds to 50 per cent of the bond issue size from 20 per cent earlier, provided a single bank restricted its enhancement to 20 per cent of the issue size. It also proposed to permit brokers in corporate bond repos, authorise the platform for repo in corporate bonds, and encourage credit supply for large borrowers through the market mechanism. To further encourage the overseas rupee bond market, banks are being permitted to issue rupee bonds overseas (masala bonds) for their capital requirements and for financing infrastructure and affordable housing, the central bank said.

The bonds should be perpetual debt instruments used to shore up additional Tier 1 and Tier II capital of banks. Masala bonds to be issued for financing infrastructure and affordable housing can be of the nature of any long-term debt. The central bank said it had worked out a market making scheme in government securities by primary dealers (underwriters of government bonds) in consultation with the government which might help in increasing the liquidity of semi-liquid securities. The central bank will soon comprehensively review the framework for hedging of commodity price risks in the overseas markets by Indian companies.





RBI opens up bond market #at #home #business #ideas

#bond market news

#

RBI opens up bond market

The Reserve Bank of India (RBI) on Thursday announced a comprehensive set of measures to change India s lacklustre bond market and provide a push to the currency market as well, completing the agenda of Raghuram Rajan, the outgoing governor of the central bank.

The RBI proposed to allow banks to raise capital through masala (rupee) bonds in the overseas market and liberalised the currency market by allowing customers residents and non-residents to maintain big open positions.

Among a series of blockbuster measures, the RBI also proposed to allow listed companies to lend money to banks through repo market mechanism, essentially overnight money, something that can have wide ranging ramifications for call money rates, short-term money market rates as well as the banking system liquidity.

The central bank also proposed allowing listed companies to lend longer tenure money to banks through the repo market mechanism. This will have an impact on interest rates, the bond market, and liquidity in the banking system.

The RBI said it would also seek legal amendments to allow banks to borrow from it by pledging corporate bonds. This should raise demand for rated corporate paper and make secondary trade possible. Currently, 95 per cent of corporate bonds are privately placed.

The proposal to allow foreign portfolio investors direct access to bond trading platforms for government and corporate paper will widen the investor base. The central bank has also proposed that banks nudge corporate clients to borrow from the bond market. Final guidelines on most of today s proposals will be issued after Rajan s departure, but some measures come into effect immediately. For example, the steps taken in the currency market essentially opened up India s closely-guarded currency market, perhaps bringing an element of speculation in the exchange rate. The Reserve Bank will now permit entities exposed to exchange rate risk, whether resident or non-resident, to undertake hedge transactions with simplified procedures, up to a limit of $30 million at any given time. The exposed person will be free to access any market (over the counter or exchange) and use any of the permissible products, the RBI said in its statement on its website.

In addition, banks might, based on their assessment of the risk management capabilities of a customer, allow an open position limit of up to $5 million, the RBI said. The currency market move was intended to improve liquidity and depth, the RBI said, adding the limit would be revised according to experience. Guidelines on this will be issued by November. Another critical change is allowing companies to lend money to banks through a market repo mechanism. So far, listed companies could only lend a maximum of 7-day money, taking government securities as mortgage, also known as repo. The RBI said this constrains their participation . It is proposed to allow such companies to lend through the repo market, without any tenor or counterparty restrictions. Guidelines based on a comprehensive review of regulations on market repo in G-secs are being issued today, it added.

Analysts hailed the measures taken by RBI. These are all critical reforms from short-to-long term perspective. Opening up of global markets for AT1 and Tier-II bonds in negative rate condition prevailing globally will be beneficial for banks, said Soumyajit Niyogi, associate director, India Ratings and Research. Listed corporates are encouraged to park short-term surplus fund through repo in G-Sec. FPI s and Individual s direct presence in bond markets and inclusion of corporate bond in LAF window will strengthen market activities, Niyogi said. Gaurav Pradhan, co-head of investment banking & capital markets for Credit Suisse in India said RBI s proactive steps acknowledged the potential of the masala bond market. Further issuance from banks will help broaden and deepen the market for masala bonds, making the product more sustainable in the long run as a financing option. From a macro perspective, we expect the RBI s move will help banks to better manage their balance sheets and lower their cost of funds, and should have a positive impact on local interest rates, Pradhan said.

Karthik Srinivasan, co-head, financial sector ratings, ICRA said RBI measures will encourage greater participation from issuers, investors and intermediaries while the permission to banks to raise masala bonds can develop the overseas market for rupee denominated bonds.

Many of the measures for the corporate bond market were built on recommendations in a report by the HR Khan committee released a week ago by the Securities and Exchange Board of India. These measures are intended to further market development, enhance participation, facilitate greater market liquidity and improve communication, the central bank said.

The RBI also decided to enhance the aggregate limit of partial credit enhancement provided by banks to corporate bonds to 50 per cent of the bond issue size from 20 per cent earlier, provided a single bank restricted its enhancement to 20 per cent of the issue size. It also proposed to permit brokers in corporate bond repos, authorise the platform for repo in corporate bonds, and encourage credit supply for large borrowers through the market mechanism. To further encourage the overseas rupee bond market, banks are being permitted to issue rupee bonds overseas (masala bonds) for their capital requirements and for financing infrastructure and affordable housing, the central bank said.

The bonds should be perpetual debt instruments used to shore up additional Tier 1 and Tier II capital of banks. Masala bonds to be issued for financing infrastructure and affordable housing can be of the nature of any long-term debt. The central bank said it had worked out a market making scheme in government securities by primary dealers (underwriters of government bonds) in consultation with the government which might help in increasing the liquidity of semi-liquid securities. The central bank will soon comprehensively review the framework for hedging of commodity price risks in the overseas markets by Indian companies.





What Are the Best International Bond Markets? #t #shirt #business

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What Are the Best International Bond Markets?

What Are the Best International Bond Markets?

With low interest rates in the U.S. and outright negative rates in some overseas markets, the bond market probably isn’t the first thing to come to mind when investors are looking for yield.

But experts are pointing to some niches of the international bond arena that are yielding well above what can be had domestically, albeit with more risk.

Both high-quality and lower-quality bonds have been performing well in terms of price. High-quality developed market bonds have rallied with demand from risk-averse investors, such as those worried about Britain voting to leave the European Union .

But of course as bond prices rise, their yields decline. So, needing to make money, investors have also been turning to lower-quality emerging market bonds. That also drives their price up, but these bonds simply yield more because they are riskier.

It can be tempting to stay within the U.S. in terms of bonds, says Richard Lawrence, senior vice president of portfolio management at Brandywine Global Investment Management, which is a subadvisor for the Legg Mason BW Global Opportunities Bond Fund (ticker: GOBIX ). But that would be eschewing higher yields in emerging markets and some developed world bonds.

“You have to look beyond the headlines,” he says.

Emerging markets can be a good place to look for yield, but that’s because they are associated with certain risks, says Eric Stein, co-director of global income at Eaton Vance Management, which has the Global Macro Absolute Return Fund (EIGMX ), the Emerging Markets Local Income Fund (EEIAX ) and the Emerging Markets Debt Opportunities Fund (EIDOX ). The three main risks for foreign bonds are currency, interest rates and default, he says.

International bonds also move in step with the Federal Reserve and U.S. Treasurys. If the Fed raises rates, that would cause bond yields elsewhere to rise, meaning their value would fall in the short term. This would only create a headwind for international bonds if the Fed raises rates more than expected and Treasurys sell off, Stein says.

If U.S. rates rise more quickly than expected, this could strengthen the U.S. dollar and cause some emerging market currencies to weaken.

Demand from China is also a risk as many emerging market countries are commodities producers and China is a large consumer, he says. A sell off in the Chinese currency can also send shockwaves through global risk markets, he says.

Oil prices are also a risk, since many emerging market countries are oil exporters, he says.

With the top five global bond issuers – the U.S. France, Germany, the United Kingdom and Japan – all yielding low or negative rates, emerging market countries are “last bastions of yield,” says Meb Faber, a co-founder and chief investment officer of Cambria Investment Management.

Rising interest rates in the U.S. would lead to higher rates elsewhere. So in the short term, that would cause international bond prices to decline and their yield to go up, Faber says.

Whether international bonds will face a strong headwind as the Fed raises rates depends on how the market reacts to the pace of the hikes, Lawrence says.

A strong dollar acts as a headwind for investors in international bonds unless they hedge that currency exposure, he says, but this year, declines in the U.S. dollar have made it more sensible to buy securities denominated in other currencies.

Stein thinks the Fed will raise rates a little more than expected over the next two years, providing a slight headwind to some emerging market currencies.

For those looking for yield, Lawrence points to Brazil, where the 10-year bond is yielding around 12 percent. He also likes Mexico because of its correlation with the slowly improving U.S. economy and its Treasury market but much higher yield. South Africa is also attractive, with its 10-year bonds yielding about 9 percent and a slowly improving fiscal picture.

Both Lawrence and Stein point to Indonesia because of its reform agenda.

They also cite New Zealand as a niche of the developed world economies where investors can get higher yields without taking a lot of credit risk. However, Stein is bearish on the New Zealand dollar.





Bond Market’s Big Illusion Revealed as U #sba #loan #rates

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Bond Market’s Big Illusion Revealed as U.S. Yields Turn Negative

For Kaoru Sekiai, getting steady returns for his pension clients in Japan used to be simple: buy U.S. Treasuries.

Compared with his low-risk options at home, like Japanese government bonds, Treasuries have long offered the highest yields around. And that’s been the case even after accounting for the cost to hedge against the dollar’s ups and downs — a common practice for institutions that invest internationally.

It’s been a “no-brainer since forever,” said Sekiai, a money manager at Tokyo-based DIAM Co. which oversees about $166 billion.

That truism is now a thing of the past. Last month, yields on U.S. 10-year notes turned negative for Japanese buyers who pay to eliminate currency fluctuations from their returns, something that hasn’t happened since the financial crisis. It’s even worse for euro-based investors, who are locking in sub-zero returns on Treasuries for the first time in history.

For a detailed description of how this index was created, click here.

For an analysis of hedging costs for Japanese investors, click here.

That quirk means the longstanding notion of the U.S. as a respite from negative yields in Japan and Europe is little more than an illusion. With everyone from Jeffrey Gundlach to Bill Gross warning of a bubble in bonds, it could ultimately upend the record foreign demand for Treasuries, which has underpinned their seemingly unstoppable gains in recent years.

“People like a simple narrative,” said Jeffrey Rosenberg, the chief investment strategist for fixed income at BlackRock Inc. which oversees $4.6 trillion. “But there isn’t a free lunch. You can’t simply talk about yield differentials without talking about currency differentials.”

DIAM’s Sekiai has been shunning Treasuries since April, a month after foreign holdings of U.S. debt hit a record. Instead, he favors bonds of France and Italy because they “offer some degree of yield and the currency-hedging costs are cheap.” That shift lines up with the latest available Treasury Department data, which showed that demand from non-U.S. investors in April and May was the weakest in a two-month stretch since 2013.

The fact that yields on 10-year Treasuries are still way higher than those in Japan or Germany is part of the reason foreigners are having such a hard time actually profiting from the difference. Negative interest rates outside the U.S. have caused a surge in demand for dollars and dollar assets, pushing up the cost to get into and out of the greenback at the same exchange rate to levels rarely seen in the past.

Ten-year yields in the U.S. are currently about 0.23 percentage point below a basket of bonds from Australia, France, Germany, Italy, Japan, Spain and Switzerland on a hedged basis, versus 1.4 percentage points above on an unhedged basis, according to data compiled by BlackRock. At the start of the year, hedged Treasuries yielded over a half-percentage point more.

In Japan, where 10-year government bonds yield less than zero, the advantage for Treasuries has dwindled from a percentage point at the start of the year to less than 0.1 percentage point now. Without much added value for overseas investors, it’s harder to see foreign demand driving Treasuries to new records, especially as the Federal Reserve moves toward gradually raising rates.

Since falling to a record 1.318 percent on July 6, yields on 10-year notes have backed up as a string of economic reports such as last week’s jobs data bolstered the case for higher rates. They were at 1.58 percent today.

For a large swathe of institutional investors, especially those with conservative mandates, hedging is the norm when they go abroad. It eliminates the need to worry about the daily ebbs and flows in exchange rates and how that might affect their returns. When it comes to Treasuries, overseas buyers usually lock in a fixed exchange rate on the interest payments they get in dollars.

Conversion Costs

In that trade, the cost to convert payments from one currency to another is determined by the cross-currency basis swap. Take Japanese insurers as an example. Under normal circumstances, they would swap their yen for dollars and get interest on the yen they loaned out over the course of the contract.

But now, because the rate has turned negative, they’re effectively paying interest to lend the yen, which eats into their bond returns. That’s on top of the Libor rate they’ll need to pay for borrowing the dollars, which currently stands at 0.79 percent over three months.

The basis, as it’s known, was at minus 0.6425 percentage point for yen-based investors, which is close to the most expensive in five years. For those with euros, the basis is minus 0.43 percentage point. That’s more than twice as costly as the average over the past three years.

In a perfectly efficient market, none of this would matter. Differences in interest rates would be perfectly offset by the cost of exchanging two different currencies over time. But in the real world, things are far messier.

As unconventional monetary policies in Japan and Europe pushed yields lower and lower in recent years, demand for dollars has soared in tandem with the currency’s appreciation. Banks responded by demanding stiffer terms to swap into dollars as supply diminished, cutting into profits on the “carry trade” in Treasuries.

Treasuries will remain a better alternative for many overseas investors as long as an advantage exists, no matter how small the hedged yield pickup has become, according to Ralph Axel, a bond analyst at Bank of America Corp.

“They’ll just keep buying,” Axel said. Because of forces like negative rates and quantitative easing outside the U.S. “you clearly have a long-lasting bid.”

Of course, there’s the flip side. The overwhelming demand for U.S. currency is proving to be a boon for American investors and foreign central banks sitting on billions of dollars. Pacific Investment Management Co. also says there’s profit to be made by getting paid to swap dollars into yen.

Interest-Rate Swaps

Overseas money managers, though, have had to turn to more novel solutions to avoid the onerous hedging costs. Jack Loudoun, who helps oversee about $88 billion for Vontobel Asset Management in Zurich, says he prefers interest-rate swaps and futures on Treasuries to get exposure to the U.S. market because lower upfront costs help reduce foreign-exchange risk.

“We’re using derivatives to get access,” he said. “If you’re worried about hedging cost, swaps and futures are the avenues to go down.”

Whatever the strategy, there’s little debate over how important foreign demand is for the $13.4 trillion market for Treasuries.

“We’re at a point now where investors have to start thinking about this,” said Sachin Gupta, a foreign-bond fund manager at Pimco, which oversees $1.51 trillion. “As the cost of hedging rises to such an extent, there’s no extra carry to be had. That itself will slow down the demand — and, at some point, even reverse the demand — for Treasuries.”

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