Fixed income

Investors' continuing obsession with purchasing Treasury bonds is a sign of 'irrational exuberance,' says the chairman of investment manager T. Rowe Price when 10-year yields are under 2.0%.

Muni market participants say the rule in its current form could affect about half of municipal securities and reduce liquidity in the muni bond market. The Volcker Rule was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that became law in 2010.

Stocks and bonds are moving in the opposite direction more so than anytime in the last 10 years.

The waves of issuance rolling into the municipal primary market the past few weeks continue to grow. Last week's volume, at more than $9 billion, approached record territory for 2011, and this week's anticipated issuance should easily set a new high for the year, at nearly $12 billion.

Alabama issuers should not see their ratings lowered by the Jefferson County bankruptcy action, but investor perception could take its toll on future issues.

Retail reaction to the announcement that Jefferson County, Ala., filed the largest municipal bankruptcy in U.S. history is likely to be muted, yet will still be closely monitored, portfolio managers say.

Wachovia Bank NA, currently Wells Fargo & Co., has reached a tentative settlement of a class action suit with municipal issuers over antitrust charges of bid-rigging for municipal investment, derivatives and other contracts.

Secondary market trading volume surged to more than $851 billion in the third quarter of 2011, the highest so far this year, but still fell 8.5% short of the almost $931 billion reached during the same period last year, the Municipal Securities Rulemaking Board said Wednesday.

Analysts and managers say they are finding value in the municipal market by taking advantage of attractive intermediate yields and buying opportunities presented by credits that find themselves in the headlines, among other strategies.

Winners will include—not only cyclical sectors that do well early in a market cycle—but also defensive plays.

Tax-exempt yields soared as demand for safe-haven assets fell on positive news coming from Europe.

State Street Global Advisors this week launched its High Quality Green Bond strategy, giving investors a way to direct fixed-income investments to global climate solutions.

A bond attorney urged colleagues to do more for “market betterment” by supporting legislative efforts to give the SEC authority to develop “a uniform baseline disclosure rule.”

Municipal bonds are at some of their cheapest levels, relative to Treasuries, in market history. The problem is, most muni buyers don’t care.

Brown Advisory has launched the Brown Advisory Tactical Bond Fund, a fund focused on total return that, using a quantitative modeling process to track macro movements in bond sectors, will invest in fixed-income products including tax-exempt municipal bonds, corporate bonds, U.S. Treasury bonds, Treasury inflation protected securities and cash equivalents.

The TCW Group has launched the MetWest Unconstrained Bond Fund, a mutual fund with the flexibility to invest across a wide array of global fixed-income sectors.

DoubleLine Funds Trust has launched the DoubleLine Low Duration Bond Fund.

Scout Investments has launched the Scout Unconstrained Bond Fund, which will invest across the entire fixed income universe -- including investment grade, high-yield, governments, agencies, mortgage-backed, asset-backed and foreign markets.

Muni investors have herded into short-term debt the last few months thinking that if rates rise, longer-term bonds will plummet in value and it will be good to have cash on hand to reinvest at higher rates. But are short-term bonds really such a safe haven?

Mortgage real-estate investment trusts have been exempt from the Investment Act of 1940, which regulates the fees that can be charged to investors and limits the amount of leverage a fund can use. But the Securities and Exchange Commission said last month that it had initiated a review of that exemption, as mortgage REITs are beginning to look more like mutual funds.