| Bonds Online |
 |
|
| 5/10/2013Market Performance |
| Municipal Bonds |
|---|
|
S&P National Bond Index
|
3.00% |
|
|
S&P California Bond Index
|
2.96% |
|
|
S&P New York Bond Index
|
3.13% |
|
|
S&P National 0-5 Year Municipal Bond Index
|
0.70% |
|
|
| S&P/BGCantor US Treasury Bond |
400.09 |
|
| More |
|
| Income Equities: |
|---|
| Preferred Stocks |
|---|
|
S&P U.S. Preferred Stock Index
|
848.03 |
|
|
S&P U.S. Preferred Stock Index (CAD)
|
636.26 |
|
|
S&P U.S. Preferred Stock Index (TR)
|
1,701.05 |
|
|
S&P U.S. Preferred Stock Index (TR) (CAD)
|
1,276.26 |
|
|
| REITs |
|---|
|
S&P REIT Index
|
174.07 |
|
|
S&P REIT Index (TR)
|
425.30 |
|
|
| MLPs |
|---|
|
S&P MLP Index
|
2,469.58 |
|
|
S&P MLP Index (TR)
|
5,428.50 |
|
|
See Data
|
|
|
|
 |
|
|
|
|
|
|
The Education of a Corporate Bond Manager, Part VIII |
The Market Financial - Aug. 4, 2010 - by the Staff and Wire Reports
“Price discovery is the toughest part of managing bonds,” one of my brokers told me early on. Right he was. There may be 7000 or so stacks that trade with some regularity in the US, but there might be one million different bonds. The last trade on a given bond that you might consider might be weeks or months ago, if you could find it at all. I was managing pre-TRACE, where reporting got standardized.
I dealt in more illiquid bonds than most managers would. Part of that was inexperience, another part was knowing that I had a balance sheet behind me that could handle it, and the last part was knowing that my credit analysts were usually right, so if I could find bonds that were off the beaten track and could be held to maturity, we could make some extra money. Pay us with a good yield, and I will eat the illiquidity risk on behalf of my client.
One of the dirty secrets of bond management is that after adjusting for default risk, the #1 predictor of the return you will get is the yield on the portfolio. If you do default risk right, that’s almost a tautology — default risks should be lowered after the bust phase of the credit cycle, and raised as the credit cycle gets long in the tooth. The tighter spreads get, the more you should raise your default loss estimates.
But how to come to the right price/yield/spread? I had a few trades, but they were dated. I knew the spreads then, and used the spreads of more liquid similar credits to adjust it to a likely yield spread today. I put in a fudge factor because illiquid bonds are higher beta, and then studied which of my brokers might have a bead on the bonds in question. I would ask them their opinion, and if they were in my ballpark, I would back up my bid some, and bid for $1 or $2 million of the bonds. The response would come back, and I would have a trade, or nothing, but maybe some color on where they would be willing to sell. If a trade, I would back up my bid a little more, and offer to buy more. If no trade, I would offer 50-70% of the distance between our bid/offer, and see what they would do.
I never thought I would be good at haggling. I’m a quiet person for the most part, and I was surprised at how much I enjoyed being on the phone with my brokers most of the day, buying deals, setting up trades, discussing market color, etc. But I was good at haggling, and I carried tools in my bag that many did not.
For the complete article visit The Market Financial
|
|
|
|
|
|
| Partner Market Place |
|
|
|
| Stuff to look at |
Yield and Income Newsletter: A must have for income investors. subscribe NOW
S&P Commentary and Newsletters: S&P
|
|
| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
Keep up with monthly, in-depth coverage of fixed income market strategies, commentary, and insights as seen by our sources. Sign up for the free BondsOnline Advisor now!
Unsubscribe here [+] |
|
|
|
|
