Bonds

A surge of activity in derivatives indexes measuring risk in prime mortgage bonds threatens to shake investor confidence in the underlying securities just as some observers thought they were starting to attract buyers again after the crisis.

One PrimeX index, which tracks the price of bonds backed by pools of adjustable-rate mortgages, fell 2.75 cents on the dollar Friday, to 95.28 cents from 98.13 at Thursday’s close, according to index administrator Markit. That is a big move for a single day. That index fell below 100 cents on the dollar Tuesday for the first time ever, to 98.125. More >

Municipal bonds have been one of the top-performing asset classes in 2011. But the rally might not last much longer, advisers and strategists say.

The Merrill Lynch Municipal Masters Index has returned 9.5% this year, outpacing stocks and corporate bonds, and trailing Treasurys by just 0.3%. Driving the gains: bargain-basement prices, decreased bond issuance, a recovering economy and falling Treasury yields.

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Fears over the U.S. government’s date with debt-doom have sparked a rush into highly rated corporate bonds over other asset classes, investors and analysts say.

Investor Mike Zebarth, of Rock Fall, who has been managing his own portfolio for about a decade, said he sees corporate bonds as a good alternative to Treasuries right now. He turns 64 “very shortly” and said he’s looking for a safe place for his money. More >

Weekly outflows from US municipal bond funds have fallen below $100m, the lowest level since investors began cashing out last November, according to Lipper, the fund tracker. More >

U.S. government debt prices rose on Thursday, aided by weaker-than-expected data on the labor market and manufacturing.

New U.S. claims for unemployment insurance remained above the key 400,000 level last week, coming in at 403,000, more numerous than economists had forecast. The previous week’s jobless count was also revised up. More >

Outflows from municipal bond mutual funds are likely to continue for the next few months, according to mutual fund analysts.

Jeff Tjornehoj, head of Lipper Americas research, More >

If you’re wondering whether you should invest in stocks or bonds in 2011, that’s like wondering if you should breathe air or drink water in 2011.  Stocks and bonds are as different as air and water. It’s not one or the other, it’s both, and that seems to be a point that most investors still don’t understand.

I can’t tell you how many articles I’ve read suggesting that investors load up on stocks and dump bonds this year.  They approach the stock vs. bond question as if it’s only an issue of which will provide the better return in 2011. That’s not the way to analyze these two options. More >

Most investors are familiar with the most common ways of losing money in the fixed-income market, but there are other, lesser known – and equally effective – ways to drive yourself to the poorhouse using fixed-income securities. Here we attempt to survey them all, so that you can learn to avoid potential problems and better prepare for inevitable ones. More >

Most investors are familiar with the most common ways of losing money in the fixed-income market, but there are other, lesser known – and equally effective – ways to drive yourself to the poorhouse using fixed-income securities. Here we attempt to survey them all, so that you can learn to avoid potential problems and better prepare for inevitable ones.

1. Trading Losses
Losing money is easy if you’re buying and selling bonds as a trader. More >