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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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Wary of Fannie and Freddie
Hidden risks in the credit rally. |
Forbes.com - Oct. 12, 2009 - by Matthew - Craft
Robert Tipp, Prudential's fixed-income strategist, sees plenty of reasons for optimism. An economic recovery, however sluggish, should buff up companies balance sheets and prod Americans to stash more of their savings into investments that pay better than their savings accounts. All sorts of bond markets – corporate, emerging market, asset-backed securities – would rise higher.
But Tipp sees trouble spots. In his recent outlook for the fourth quarter, he points to two: deeply indebted companies and the government-sponsored mortgage buyers, Fannie Mae ( FNM - news - people ) and Freddie Mac ( FRE - news - people )
Since January, the Federal Reserve has been buying securities guaranteed by these mortgage-finance giants in an effort to support the housing market. Fannie and Freddie buy mortgages from banks then package them into securities and sell them off. So far, Tipp says, the Fed's program seems to have succeeded in stabilizing mortgage rates by sopping up new supply.
Bond buyers are even beginning to call agency mortgage-backed securities expensive. These bonds have returned 5.4% this year and 10.2% over the past 12 months, as measured by a Bank of America-Merrill Lynch index. They now yield 2.9% on average, a mere 0.17 percentage points more than similar Treasuries.
The Fed plans to wrap up the $1.25 trillion program by the end of next March. What happens to residential mortgage bonds, when the dominant buyer exits? Tipp questions whether the market will be able to stand on its own.
To judge by one portfolio, Prudential's money managers aren't betting on another crisis. Prudential Financial ( PRU - news - people ) handles the JennisonDryden mutual funds. The Dryden Total Return Bond Fund, which Tipp helps run, has sold off some government-backed mortgage securities but still has $122 million, or 27% of its holdings, in mortgage-backed notes from Freddie Mac, Ginnie Mae and Fannie Mae, according to regulatory filings made in late September. It has also sold short $8.2 million in Fannie Mae 30-year mortgage-backed securities.
In the corporate credit rally, bonds from the companies with the most tattered balance sheets have turned in the best performance. Junk bonds from the lowest rungs on the credit-ratings scale, CCC-ratings or worse, have returned 78% this year, compared with 49% for the broader high-yield market. Investors' willingness to buy them has helped companies with credit ratings in the CCC range – such as Standard Pacific ( SPF - news - people ), Beazer Homes ( BZH - news - people ) and Delta Air Lines ( DAL - news - people ) -- sell new bonds last month (see "Better-Off Debt".)
The effect works both ways. If the economy runs into more trouble, Tipp cautions, these same bonds would get hurt the worst. He's especially wary of low-rated retailers and companies that rely on consumers' spending on discretionary goods – objects they don't need.
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| Stuff to look at |
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S&P Commentary and Newsletters: S&P
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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