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| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Bill Gross: Cutting Budgets No Panacea |
Forbes.com - May 26, 2010 - by Matthew Craft
If a country has too much debt, a default may look like the only way out.
How should a country tackle an enormous pile of debt? When the European Union crafted its bailout of troubled Greece, the first step seemed obvious enough: cut government budgets. That way, Greece stops adding to its debt.
For Greece and other countries, however, austerity programs aren't enough, says Bill Gross, manager of the world's largest bond fund at Pacific Investment Management Co. The problem is that trimming spending also pares economic growth, making debt burdens even heavier. "In many cases, therefore, it may not be possible for a country to escape a debt crisis by reducing deficits!"
Despite the 110 billion euro loan package for Greece assembled by the E.U. and International Monetary Fund earlier this month, the country may find a default offers the only escape. Given current lending rates, Gross says, "There is no reasonable scenario which would allow Greece to 'grow' its way out."
In his monthly investment outlook posted on Pimco's website Wednesday, Gross returns to the subject of debt and economic growth. Too much debt can stunt growth, Gross argues, relying on the work of Harvard economist Kenneth Rogoff. And slower growth makes debts harder to bear. That's one reason why economists focus on the ratio of government debt to a measure of economic output, gross domestic product.
Government officials in France, Japan and the United Kingdom have recently started "saying all the right things," Gross says. This week, for instance, the U.K.'s new coalition government laid out 6.2 billion pounds in spending cuts. While all this reassures bond markets, it's a path to slower growth for deeply indebted countries. Cutting spending trims the numerator in the debt-to-GDP ratio as well as the denominator.
"Tougher sovereign budgets produce government worker layoffs, pay cuts, reduced pension benefits and a drag on consumption and the ability of the private sector to accept an attempted handoff from fiscal authorities," Gross says. "Recession becomes the fait accompli, and the deficit/GDP ratio moves ever higher because of skyrocketing risk premiums and a plunging GDP denominator."
So where do you hide? Gross, like many bond managers, has recommended emerging markets, where countries carry lower debt burdens and have greater prospects for growth. The International Monetary Fund calculates the developing world has a debt to GDP below 40%. Countries considered developed--Japan, Spain, the U.S. and 30 others--shoulder an average closer to 80%.
In a report released Wednesday the Organisation for Economic Co-operation and Development raised its estimates for developing countries' growth. The OECD expects Brazil to expand 6.5% this year, India 8.3% and China 11%. Euro zone countries should grow 1.2%.
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Income Security Recommendation January 2013 Issue.
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