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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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Don't Fear Inflation -- Yet |
Forbes.com - Oct 14, 2009 - by Matthew Craft
Analyst expects bond investors to prepare for inflation next spring. But their worry will be premature.
The biggest threat to the bond markets isn't inflation, says Paul Lefurgey, fixed income manager at Madison Investment Advisors. It's the fear of it.
On a quarterly conference call, Lefurgey says he expects bond investors to start readying for inflation next spring, a year ahead of when he thinks rising prices could pose a real problem. That would lead to a drop in Treasurys, and longer-dated bonds would get hit the hardest, he says. Falling prices mean higher interest rates, as bond prices move in the opposite direction from yields.
The Labor Department will release the consumer price index on Thursday. Bond traders currently expect annual inflation of 1.95% over the next decade, to use yield spreads on 10-year Treasury inflation-protected securities as a guide. A rise in inflation fears would cause yields on 10-year Treasurys to rise. They currently pay 3.38%.
Lefurgey, like others managing fixed-income funds, has started to prepare for rising interest rates, a sure result of economic growth. Current rates still reflect an ongoing recession. Since 1989, for instance, the average 10-year paid a 5.7% yield. The Federal Reserve's near-zero target rate for overnight lending is unprecedented. (See "What's Next For Bonds?")
"The trade now is aggressively managing interest-rate risk," he says. In general, the longer you have to wait until a bond matures, the greater the interest-rate risk, so Lefurgey avoids longer-dated bonds. Take his firm's Mosaic Institutional Bond Fund ( MIIBX - news - people ). According to its most recent regulatory filings, no bond matures beyond 10 years from now. The two holdings with the longest maturities come from drugstore chain Walgreens ( WAG - news - people ) and Coca-Cola ( KO - news - people ).
Lefurgey sold off some Treasurys early this year in favor of investment-grade corporate bonds. In July, he sold more than 4% of his 10-year Treasurys when they were trading in the 3.3% yield range with the idea of restocking his 10-year holdings when yields climb to 4%.
For the rest of the year, expect to see "the risk and greed trade" continue, with investors bidding up risky assets, Lefurgey says. The lowest-rated bonds have performed the best in the credit market rally, but Lefurgey steers clear of them. He plans on adding to his portfolio of high-grade corporate names because he says there's no reason that companies with cash-rich balance sheets and improving earnings should struggle.
In addition to bonds from Walgreens and Coca-Cola, the Madison Mosaic Institutional fund holds debt from American Express ( AXP - news - people ), JPMorgan ( JPM - news - people ), Goldman Sachs ( GS - news - people ), McDonalds ( MCD - news - people ) and IBM ( IBM - news - people ).
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| Stuff to look at |
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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