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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
|
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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Zero-Coupon Bonds See Pop in Demand |
Funds With Such a Focus Log Solid Gains
By MIN ZENG, WSJ.com, December 4, 2008
Long-dated zero-coupon Treasury securities are a hot commodity as interest rates fall and inflation wanes.
Once the playing field of pension funds and insurance companies which need assets to match their long-term obligations, these securities are luring investors looking for additional returns in the low-risk government-bond market, where yields have fallen to historic lows. Demand also has been boosted by a drop in inflation, typically the chief threat to long-dated bonds as rising consumer prices erode fixed returns.
To create zero-coupon Treasurys, a security such as the 30-year bond is stripped into its principal and coupon payments. The principal is sold at a discount but is redeemed at face value. The difference between the price paid and the price at which the security is redeemed represents the accumulated interest.
Zero-coupon Treasury securities have no reinvestment risk for investors, which makes them more attractive than nominal Treasury securities in a falling rate environment. A 30-year bond pays interest twice a year, leaving investors with funds that have to be reinvested at lower yields.
"Zero-coupon bonds are the real story," said Lacy Hunt, chief economist at Hoisington Investment Management Co. in Austin, Texas. "They perform very strongly in the current environment."
Mr. Hunt's company runs the Wasatch-Hoisington U.S. Treasury Fund, which holds 50% in long-dated Treasurys and the rest in long-dated zero-coupon Treasurys. The fund has returned 20% this year through the end of November.
James Platz, a portfolio manager at American Century Investments in Mountain View, Calif., runs several funds that focus on zeros. The best-performing of its funds, the American Century Target Maturities Trust 2025, has returned about 16% this year through the end of November.
Mr. Platz expects zeros to continue to do well as investors shun stocks and other risky credit products.
Zero-coupon government bonds have been around since the early 1980s. Merrill Lynch & Co. was the first dealer to establish its own brand of zero-coupon government bond, known as Tigrs. Salomon Brothers, now part of Citigroup Inc., launched CATS, while now-defunct Lehman Brothers Holdings Inc. set up Lions. In 1985, the U.S. Treasury started its zero-coupon program, the Separate Trading of Registered Interest and Principal of Securities Program, or Strips.
Richard Bryant, a Treasury trader at Citigroup Global Markets Inc. who specializes in Strips, said that zeros have become expensive following the rally in Treasurys the past few weeks. Long-dated zeros now yield less than 4%, a drop from the beginning of November, when some 30-year zeros had yields above 5%. Returns on zeros are close to those on nominal 30-year bonds, making them less attractive on a relative-value basis.
Constrained supply is one factor that will continue to work in long-dated zeros' favor. Since the Treasury halted the sale of 30-year bonds in 2001 and only brought them back in 2006, there are now five issues that mature beyond 2031. Most of them have been stripped into zeros.
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Income Security Recommendation January 2013 Issue.
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