Daily Investment Tips

Despite the high risk in Junk Bonds investment, investors who invested in Junk Bonds sinces 2007 have seen high yield returns. According to Bloomberg analysis, Junk Bonds have returned 34 percent, including price gains and interest, since October 2007.

Junk Bonds have performed better than S&P 500 index

Bonds rated below investment grade have beaten the Standard & Poor’s 500-stock index by 53 percentage points since October 2007, returning 34 percent through Nov. 25, while stocks fell 19 percent.

Investors who invested in Junk Bonds of companies instead of buying shares of the companies have seen better return

The contrast is even more striking in the case of several well-known companies. Ford Motor’s 7.125 percent notes due in 2025 have risen 129 percent since Oct. 9, 2007, well ahead of the 17 percent gain by shares of the second-biggest U.S. automaker

Why Junk Bonds are Returning higher yields

Junk bonds have remained buoyant because “the bond market doesn’t believe we will have a meaningful increase in default rates,” Says Junk Bond Analyst.

have returned 34 percent, including price gains and interest, since October 2007.

written by Constantine Njeru \\ tags: Bloomberg, Bond Market, Bonds Investment, Default Rates, High Risk, High Yields, Junk Bond, Junk Bonds, Stock Index, Stocks

Bill Gross, Fund manager of PIMCO, announced in March 2011 that the world’s biggest bond fund has cut its holdings of US government-related debt to zero.

The move to exit US government debt is because the fund is forecasting a rise in US bond yield. Such rises would hit the value of holdings of bonds as their price move inversely to their yields.

This was the quote from Bill Gross:-

“Yields may have to go higher, maybe even much higher to attract buying interest,”

written by Constantine Njeru \\ tags: Bill Gross, Bond Fund, Bond Yield, Bonds, Government Debt, Pimco, Price Move, Quote

According to a bond report by investment company institute, investors pulled a net $4.78 billion from tax-free municipal bond mutual funds in the seven days ended Nov. 17, about 1% of total fund assets, as falling bond prices and rising yields depressed muni fund share values.

The fall in Municipal bond prices is being caused by a rise in market interest rates in general, and a surge in the supply of new muni bonds from California and other issuers. This new bond issues are being offered with a higher coupon rate.

written by Constantine Njeru \\ tags: Bond Funds, Bond Investing, Bond Investment, Bond Issues, Bond Prices, Bond Report, Coupon Rate, Fund Assets, Investment Company Institute, Investors, Issuers, Market Interest Rates, Muni Bonds, Municipal Bond, Mutual Funds, New Bond, Seven Days, Share Values

Bill Gross, director of Pimco, best known as the most successful bond investor of his generation, has given his thoughts on how Federal Reserve plan to pump money into the US Economy will affect the bond market in the future.

He has termed the move by Federal Reserve bank a giant ponzi scheme. Yes, the entire federal money system is a Ponzi scheme, but this isn’t news. This system has been in place for about 100 years.

The Future of Bond Market Prices and Interest Rates

The actions of the Fed, led by Chairman Ben Bernanke, will “likely signify the end of a great 30-year bull market in bonds and the necessity for bond managers and, yes, equity managers to adjust to a new environment,” he wrote in a commentary posted on Pimco’s website Wednesday. See Gross’s full commentary.

Check writing in the trillions is not a bondholder’s friend; it is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme,” he said.

The End Game

Such a plan “raises bond prices to create the illusion of high annual returns, but ultimately it reaches a dead-end where those prices can no longer go up,” Gross wrote. “Having arrived at its destination, the market then offers near 0% returns and a picking of the creditor’s pocket via inflation and negative real interest rates.”

written by Constantine Njeru \\ tags: 100 Years, Ben Bernanke, Bill Gross, Bond Market, Bond Prices, Bondholder, Bonds, Creditor, End Game, Equity Managers, Federal Money, Federal Reserve, Federal Reserve Bank, Illusion, Inflation, Interest Rates, Money System, Ponzi scheme, T News, Trillions

We know Greece in a financial hole and investors are already betting that Greece will default on its bonds sooner or later. The investosr who think a default akin to Russian default in the 1990s is on the cards are shorting Greece bonds.

When Greece Economic minister was asked by a BBC report about the possibility of a default this is what he said, They will lose their shirt!

But the reality on the ground is that Greece is a sinking ship. They are running out of time, they need to find 9 billion euros by 19th May just to pay off due debt. The public is strongly opposed to any attempts by the Government to cut spending to raise funds. They cant borrow money, lenders are demanding reforms first before any new lending. The greece government is dead broke.

Worse still, on April 26, Greece debt was downgraded to junk status by rating agency standard & poor.  In the report S &Pwarned holders of Greek debt that they only had an “average chance” of between 30% and 50% of getting their money back in the event of a debt restructuring or default.

written by Constantine Njeru \\ tags: 1990s, Amp, Attempts, Bbc, Bbc Report, Betting, Bonds, Cards, Debt Restructuring, Financial Hole, Greece, Greece Government, Investor, Investors, Junk Status, Money Lenders, Running Out Of Time, Russian Default, Sinking Ship