The Great bond bubble...

[selkirk]

here is some proof

cdn. 2yr 1.50%
cdn. 5 year 2.25%
cdn. 10 year 2.96%

US 2 year .48%
US 5 year 1.45%
US 10 2.72% now that is crazy, I mean...wow...

Black Decker which is 4.5 billion in debt did an issue for 5.2% for 30 year, yes plenty of debt, and more and more competition and yet investors are more than happy to borrow them money at 5.2%....that is up there with the US 10 year.

IBM issues 1.5% notes 3 years. now you will get your money back and sometimes below 125 I buy the stock. however if you buy this you get 1.5% every year for 3 years....

the worse is probably the preptual Preferreds, which I found out at my monthly shareclub are very popular.

many of these have no date in which they are redeemed, they should be looked apon the same as long term corporate debt, ie. 30yr. +. now if you are happy with the company and the rate in most cases in Canada these trade for 6-6.5% then that is great.

however I would buy preferred that reset, ie. change the interest rate they pay every five years, more like short term debt.. ussualy 1.5% - 2% over bank of Canada rates...

one example is fts.pr.h which yields 4.20%, and trades at 25.30 (note:bought some at 25, 25.05, and 25.10), these are much safer.

either the economy will grow at 1% or negative growth, and there will now longer be something called inflation.

chances your taxes will rise more than 2% per annum, another prediction.

so if you want to park some money, but I know many who are overweight debt, that should have been done in 2008, not now...even know some who are using margin to buy prepetual preferreds,

borrow at 3.75 -4%, and buy preferreds yielding 6-6.5%, this will end badly.

thanks
selkirk

 

[DOGS THAT BARK]

What's you take on bonds in general Kirk

I have these 3 I mention previously and I am thrilled with results--In fact might increase positions next year even if market turns favorable. I know I can't expect same reurn,but would not cry if I got 1/2--
Sure is an anxiety stopper in current market conditions.

AGG
<TABLE class=yfnc_mod_table_title1 border=0 cellSpacing=0 cellPadding=2 width="100%"><TBODY><TR><TH align=left>Performance Overview</TH><TH align=right> </TH></TR></TBODY></TABLE><TABLE class=yfnc_datamodoutline1 border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR><TD><TABLE border=0 cellSpacing=1 cellPadding=2 width="100%"><TBODY><TR><TD class=yfnc_datamodlabel1>Year to Date Return (Mkt):</TD><TD class=yfnc_datamoddata1>5.54%</TD></TR><TR><TD class=yfnc_datamodlabel1>1-Year Total Return (Mkt):</TD><TD class=yfnc_datamoddata1>9.04%</TD></TR><TR><TD class=yfnc_datamodlabel1>3-Year Total Return (Mkt):</TD><TD class=yfnc_datamoddata1>7.51%</TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE>
TIP
<TABLE class=yfnc_mod_table_title1 border=0 cellSpacing=0 cellPadding=2 width="100%"><TBODY><TR><TH align=left>Performance Overview</TH><TH align=right> </TH></TR></TBODY></TABLE><TABLE class=yfnc_datamodoutline1 border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR><TD><TABLE border=0 cellSpacing=1 cellPadding=2 width="100%"><TBODY><TR><TD class=yfnc_datamodlabel1>Year to Date Return (Mkt):</TD><TD class=yfnc_datamoddata1>4.23%</TD></TR><TR><TD class=yfnc_datamodlabel1>1-Year Total Return (Mkt):</TD><TD class=yfnc_datamoddata1>9.27%</TD></TR><TR><TD class=yfnc_datamodlabel1>3-Year Total Return (Mkt):</TD><TD class=yfnc_datamoddata1>7.54%</TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE>

KYTFX Muni Tax free bond fund

<TABLE class=yfnc_mod_table_title1 border=0 cellSpacing=0 cellPadding=2 width="100%"><TBODY><TR><TH align=left>Load Adjusted Returns</TH><TH align=right> </TH></TR></TBODY></TABLE><TABLE class=yfnc_datamodoutline1 border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR><TD><TABLE border=0 cellSpacing=1 cellPadding=2 width="100%"><TBODY><TR><TD class=yfnc_datamodlabel1>1-Year:</TD><TD class=yfnc_datamoddata1>7.86%</TD></TR><TR><TD class=yfnc_datamodlabel1>3-Year:</TD><TD class=yfnc_datamoddata1>6.44%</TD></TR><TR><TD class=yfnc_datamodlabel1>5-Year:</TD><TD class=yfnc_datamoddata1>4.79%</TD></TR><TR><TD class=yfnc_datamodlabel1>10-Year:</TD><TD class=yfnc_datamoddata1>5.19%</TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE>

 

[baby johnson]

boom goes the bubble

 

[selkirk]

BJ this bond bubble probably does not go boom but maybe like a ballon with a slow leak. except for people on the long end of the curve ie. 10+ years, then that might be trouble.

DTB every investor should have some holdings in bonds, probably you will get returns similar, and maybe one year you get a flat to small negative return. believe every US investor should have (long term) some exposure to the US muni market as part of their fixed income porfolio, in Canada there is no tax free munis, and the market for muni is very small, so different north of the border.

AGG is a good general etf for bonds, and TIP is good to have in an income portfolio as a hedge against inflation which can cause damage to income bond (ficed income portfolios)...have thought that TIP are expensive but thought that last year they were not cheap, however would still have a holding. as they are still performing well.

the bond market is telling us that we are in a long period of slow growth ie. 1-2% if that, then equity markets will be range bound.

if the economy looks like 4-5% growth then many of these long term preferred and bonds, tbill will drop sharply.

believe rates will not rise quickly and we will have growth just very low levels, would still avoid preputual preferred now yielding 5% and poor corporte debt 10+ and 10 year US and cnd. tbills.

should note : how much people are chasiing yield the fts.pr.h which trades on Toronto now went from 25.30 to 26 in two days.

it should trade in a range from around 25.50 to 26 in the next few weeks. may try to trade some but will keep my core position as hard to find a preferred 5 year reset that I like..

thanks
selkirk