The only constant in the investment world is change. This basic truth has spread even into the bond world - a corner of the market that has the undeserved reputation for being a bit sleepy and conservative. In just a few short years many basic assumptions that underpinned bond investing have gone up in smoke, leaving investors to figure out what the new normal truly will be. (To get you started on the basics of bonds, check out 5 Basic Things To Know About Bonds.)
Sovereign Default - Not Just a Third World Phenomenon
Defaults on sovereign debt are hardly new; Africa and South America have struggled with them for years and they have long been part of the backdrop of emerging market bond investing. What is new, though, is the risk of these defaults spreading into the developed world and shaking up some of the fundamental assumptions about risk in bond investing.
Although there hasn't actually been a sovereign default in Europe yet (Iceland never defaulted on sovereign debt, and Greece and Ireland haven't yet), many investors feel it is only a matter of time. Even allowing for the reality that countries like Greece, Ireland and Spain were never thought to be as financially strong as Germany or Sweden, this is a fairly shocking turn of events. While the Eurozone will likely stay intact throughout this mess, it has clearly shaken investors and should lead them to revisit their basic assumptions about risk in that region.
To read the full column, please follow this link:
http://financialedge.investopedia.com/financial-edge/0611/A-New-World-For-Bond-Investors.aspx#axzz1QZh0jk00
Showing posts with label municipal bonds. Show all posts
Showing posts with label municipal bonds. Show all posts
Tuesday, June 28, 2011
Wednesday, February 9, 2011
FinancialEdge: What's Going On With Muni Bonds?
For some months now, the municipal bond market has been in turmoil over the possibility that multiple issuers could default on their obligations. Much like how the mortgage-backed bond market cracked and then shattered, spreading chaos throughout the credit markets, the worst-case fear is that there could be a cascade of defaults throughout the country. These defaults would not only be serious for those who depend upon municipal bonds to fund some portion of their retirement needs, but also for the states and state-sponsored agencies that depend upon the muni market for capital. (For a little background and history of this market, check out Fatal Seduction Of The Municipal Bond Insurers.)
Moreover, just as the collapse of the mortgage-backed bond market spread far beyond the debt markets and into the stock markets and economy at large, so too is the fear that a wave of muni defaults will rattle the economy and stocks once again. With all of the worry and anxiety, then, investors have been selling out of these bonds, pushing yields to two-year highs.
The question, though, is whether equity investors need to really worry about how the muni market may influence their portfolios.
Please continue on to the full article:
http://financialedge.investopedia.com/financial-edge/0211/Whats-Going-On-With-Muni-Bonds.aspx
Moreover, just as the collapse of the mortgage-backed bond market spread far beyond the debt markets and into the stock markets and economy at large, so too is the fear that a wave of muni defaults will rattle the economy and stocks once again. With all of the worry and anxiety, then, investors have been selling out of these bonds, pushing yields to two-year highs.
The question, though, is whether equity investors need to really worry about how the muni market may influence their portfolios.
Please continue on to the full article:
http://financialedge.investopedia.com/financial-edge/0211/Whats-Going-On-With-Muni-Bonds.aspx
Wednesday, June 23, 2010
Muni-phobia
Wish I would have had more space to deal a bit with the bond insurers who also stand to be on the hook if/when these munis start melting down... Who knows, maybe that's another article all on its own!
The ticking clock is a great device for creating dramatic tension on screen. You might get up to go get a snack when the lead actors are emoting, but nobody leaves when there is three seconds left on the device that is going to explode. Maybe that is why there is so much fuss in the financial media about the impending detonation of the municipal bond market.
Safe and Sleepy... UsuallyIn normal days, municipal bonds are arguably one of the sleepiest and most boring segments of the financial marketplace. Munis are bonds issued by communities or enterprises to pay for things like roads, hospitals and schools. So dull are they that there is typically no active quotation system for them - they trade seldom enough that you have to call your broker, who will then call around to get bid/ask quotes on the bond. (For a quick refresher, check out The Basics Of Municipal Bonds.)
Now, though, that may be changing.
For the complete column:
http://stocks.investopedia.
The ticking clock is a great device for creating dramatic tension on screen. You might get up to go get a snack when the lead actors are emoting, but nobody leaves when there is three seconds left on the device that is going to explode. Maybe that is why there is so much fuss in the financial media about the impending detonation of the municipal bond market.
Safe and Sleepy... UsuallyIn normal days, municipal bonds are arguably one of the sleepiest and most boring segments of the financial marketplace. Munis are bonds issued by communities or enterprises to pay for things like roads, hospitals and schools. So dull are they that there is typically no active quotation system for them - they trade seldom enough that you have to call your broker, who will then call around to get bid/ask quotes on the bond. (For a quick refresher, check out The Basics Of Municipal Bonds.)
Now, though, that may be changing.
For the complete column:
http://stocks.investopedia.
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