Below is a chart highlighting default risk for sixteen states that we have credit default swap (CDS) pricing for. The number next to each state represents the cost per year to insure $10,000 worth of state bonds for 5 years. The higher the price, the higher the default risk. As shown, Illinois has the highest default risk of all states at 303.2 bps -- even higher than California. California ranks 2nd, followed by Michigan, New York, and New Jersey. Not to anyone's...
Municipal bonds are riding the fixed income rally these days, and the national muni bond ETF (MUB) is currently more than two standard deviations above its 50-day moving average. Muni bonds have the additional incentive of providing tax-free income during a time when taxes are expected to go higher. Investors have even been bidding up muni bond ETFs for New York and California -- two...
Signs of a slowdown domestically and overseas made traders here nervous, sending stocks and ETFs lower.
Treasury bonds and Japanese Yen led the way this morning, according to the ETF Dashboard. The top fund was the PIMCO 25+ Year Zero Coupon U.S. Treasury Index Fund (ZROZ) and the WisdomTree Dreyfus Japanese Yen (JYF):
After lingering in the background of the ETF industry for the last several years, fixed income funds have stepped up in recent months to become one of the primary drivers of growth. Through the first seven months of 2010, cash inflows to ETFs totaled $49 billion. Of this amount, more than $23 billion has been attributable to fixed income ETFs, reflecting that investors have become increasingly comfortable with the idea of achieving their fixed income exposure within the ETF wrapper.
You’ve heard it already and you’ll hear it again: California is the next Greece. Everyone loves the catchiness and simplicity of the analogy, but is there a real connection? A simple Google search yields countless articles with “California is the next Greece…” in the title. There are just too many such articles to pick one to dissect and link to. Why is this an important question? The answer lies in the consequences and remedies of a potential...
Below we highlight a Bloomberg chart of 5-year CDS (credit default swap) prices for the four states that seem to be at most risk of default -- California, Illinois, New Jersey, and New York. (Make sure to take note that the four prices are all on a different axis.) As shown, all four have spiked significantly recently, but just one -- Illinois -- has blown out to new highs versus the late 2008 spike. Illinois also has the highest risk of default of all...
Fixed-income investment strategies have been in vogue amidst all the market turmoil, especially through the use of exchange traded funds. But now, with indications that the global economy may be safely on its way to recovery, some pundits are saying that fixed-income ETFs are no longer desirable. Is that true?
Massive budget deficits brought on by years of reckless spending and low taxes have put many cash-strapped nations such as Greece and Spain in impossible positions. These countries now find themselves searching for ways to cut fat from their bloated budgets and get their fiscal houses in order and avoid the financial devastation that comes along with a sovereign debt default. While austerity measures have been held out as a vital component of the solution to these fiscal woes, many debt-laden European countries have found it difficult to cut social spending for political reasons. As such,...
As market volatility returns, many investors are probably looking toward non-European bonds for safety. Perhaps they want a rate of return above 100 basis points. So they consider municipal bonds. Maybe they even consider placing their bets on state-specific municipal bond ETFs like CMF or NYF. If so, they are making an implicit bet against local taxpayers. And they are not alone.
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