The muni market seems to be returning to normal after major outflows last summer, though several potential hot-button issues could still spook investors. We don’t think these represent major risks to market returns or properly positioned portfolios. (more…)
Posted by Gershon Distenfeld (pictured) and Ivan Rudolph-Shabinsky of AllianceBernstein (NYSE: AB)
Many investors have taken on more risk in their quest for higher returns—especially as signs have pointed to interest rates staying stable until next year. But two key elements are often overlooked: default risk and underwriting standards.
The Texas-sized bankruptcy of Energy Future Holdings, formerly known as TXU, may have been one of the more anticipated defaults of the past few years, but investors can still learn a lesson or two from it.
Investors seeking more robust returns in a lower-interest-rate environment often look to high-yield bonds for answers. But it’s critical that they don’t reach too far down the credit spectrum in search of higher yields—as tempting as it may be. (more…)
Emerging-market (EM) corporate debt returned big numbers for investors in recent years, as the sector rode a general wave of optimism about the future. But those days are gone. In 2013, successful investors have had to take a more painstaking path. (more…)
The US Federal Reserve talked in early summer about tapering its quantitative easing plan and raising interest rates—in part to stop investors from chasing yield into the arms of riskier loans. In the high-yield market, however, the conversation had exactly the opposite effect. (more…)
Joseph Rosenblum (pictured) and Neene Jenkins
It could be several weeks or a few months. But before long, the city of Detroit is likely to default on some of its outstanding bonds and possibly file for Chapter 9 bankruptcy protection. It would be a historic bankruptcy and is sure to create uncertainty in the municipal bond market. Some types of debt will fare better than others in the final restructuring. (more…)
Stockton, California, made headlines last June when it filed for a Chapter 9 bankruptcy. Now, a federal judge has not only given his okay to proceed; he’s also thrown retiree pension benefits into the debate. The big question is whether these benefits can be cut. The outcome could be a groundbreaking decision that would encourage other municipalities to adopt this approach—particularly those with pension problems.
The European financial crisis continues to challenge high-yield investors. Some were wary of Europe’s issues and stepped away last year, only to see European bonds dominate through the unpredictability. Others want in now, but worry that they’ve missed the rally. (more…)
High-yield bond defaults are historically low today, even for troubled companies. Despite the worries we hear in some corners about looming high-yield defaults, we think default rates will stay low for at least the next few years. (more…)