Junk-Bond Selloff Intensifies - (online.wsj.com) Investors
retreated from the U.S. junk-bond market for the third straight trading day and
stocks of large asset managers were hit by heavy selling, a sign that the deepest turmoil in financial
markets
since summer is intensifying. Some investors reported difficulties selling
lower-rated bonds quickly or at listed prices, though others said the market
appeared to stabilize somewhat after the record plunge in prices on Friday. While
the market for the highest-quality bonds remains intact, there are signs across
Wall Street that investors are losing confidence in lower-quality bonds and the
firms that most actively deal in them. Waddell & Reed Financial Inc., which manages the $6.2 billion
Ivy High Income Fund that has suffered the largest outflows this year of any
junk-bond fund, tumbled 7.5%. AllianceBernstein Holding LP, which runs the $5.8 billion AB High
Income Advisor fund, dropped 7%.
Third Avenue Sought Internal Loan Approval
Before Fund Shut - (www.bloomberg.com) Two
months before it froze cash withdrawals from a $788.5 million high-yield bond
fund, Third Avenue Management requested approval for interfund lending, a
program sought by an increasing number of mutual fund managers to bridge
short-term liquidity needs. Third Avenue’s request, disclosed in an Oct. 14
filing with the U.S. Securities and Exchange Commission, would allow its mutual
funds to temporarily borrow money from one another. Investors who are redeeming
could get paid with the loans almost immediately, even if it took the firm
several days to receive cash from the sale of assets. Third Avenue’s
application is pending, and it’s unlikely that an earlier approval would have
prevented the shutting of the Focused Credit Fund because the loans only last a
few days and don’t provide longer-term liquidity. The firm pursued fund-to-fund
lending as a precaution for 2016 and not to deal with the redemptions from the
credit fund, said a person familiar with the matter, who asked not to be
identified because the information is private.
Muni Bonds Backed by Junk Companies Feel Pain
of High-Yield Rout - (www.bloomberg.com) The
corporate junk-bond rout has mostly left few ripples in the $3.7 trillion
municipal market, with one exception: Tax-exempt debt issued by the high-yield
companies. Local-government bonds sold on behalf of U.S. Steel Corp., the
nation’s second-largest producer, traded Monday at an average of about 67 cents
on the dollar, the lowest price since they were issued in November 2009 and
down from 113 cents to start the year, data compiled by Bloomberg show. They
have a B2 rating from Moody’s Investors Service, five steps below investment
grade. Trading in tax-free debt backed by Marathon Oil Corp. jumped to a
two-month high on Dec. 11, with prices touching the lowest in nine days even
though it has an investment-grade rating. Fortunately for high-yield muni
buyers, corporate-backed credits make up only a sliver of the tax-exempt
market. There’s about $7 billion of fixed-rate, non-investment-grade and
tax-free industrial-development bonds, Bloomberg data show. By comparison,
Puerto Rico has $70 billion of debt outstanding, while states and localities
have sold $23 billion of junk-rated tobacco securities, the data show.
Shipping Index Plunges to Fresh Record Amid China Steel Slump - (www.bloomberg.com) The shipping industry’s most-watched measure of rates for hauling commodities plunged to a fresh record amid a persisting glut of ships and speculation weakening Chinese steel output could translate into declining imports of iron ore to make the alloy. The Baltic Dry Index fell 4.7 percent to 484 points, the lowest in Baltic Exchange data starting in January 1985. Rates for three of the four ship types tracked by the exchange retreated. China, which makes about half the world’s steel, is on track for the biggest drop in output for more than two decades, according to data compiled by Bloomberg Intelligence. Owners are reeling as China’s combined seaborne imports of iron ore and coal -- commodities that helped fuel a manufacturing boom -- record the first annual declines in at least a decade. While demand next year may be a little better, slower-than-anticipated growth in 2015 has led to almost perpetual disappointment for rates, after analysts’ predictions at the end of 2014 for a rebound proved wrong.
Fed Dread Turns Mexico Into ‘Whipping Boy’ as
ETF Outflows Surge - (www.bloomberg.com) Wagers
that the Federal Reserve will raise interest rates for the first time in almost
a decade are souring sentiment toward Mexican stocks. Traders have pulled $840
million from the nation’s largest exchange-traded equities fund this year, the
biggest outflow among developing nations, according to data compiled by
Bloomberg. With one of the world’s most-traded currencies, deep corporate ties
to the U.S. and policy makers who have pegged the timing of their rate
decisions to the Fed’s calendar, Mexico is a popular way for foreign investors
to bet on all things emerging markets, said Paul Christopher, the St.
Louis-based head global market strategist for Wells Fargo Investment Institute.
High-Yield Risks Shed Doubts on Strength of U.S. Economy -
(www.nytimes.com)
With Fed Set to Lift Interest Rates, the Little Guy Feels Anxious - (www.nytimes.com)
Why China Is Loosening the Yuan’s Ties to the Dollar - (online.wsj.com)
Bill Gross: High-yield pain is start of something - (www.cnbc.com)
More than half of millennials have less than $1,000 - (www.marketwatch.com)
With Fed Set to Lift Interest Rates, the Little Guy Feels Anxious - (www.nytimes.com)
Why China Is Loosening the Yuan’s Ties to the Dollar - (online.wsj.com)
Bill Gross: High-yield pain is start of something - (www.cnbc.com)
More than half of millennials have less than $1,000 - (www.marketwatch.com)
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