Tags: Pimco | Gross | Municipal | Bonds

Pimco’s Gross Bullish on ‘Undervalued’ Municipal Bonds

Tuesday, 03 Jan 2012 07:39 AM

By Dan Weil

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
U.S. municipal bonds had a nice run last year, as the massive municipal defaults predicted by experts such as Meredith Whitney didn’t come to fruition.

And Pimco bond fund manager extraordinaire Bill Gross sees a good chance for the rally to continue. The Barclays Capital Municipal Bond Index gained 10.7 percent in 2011.

For a long time, worries about the financial woes of states and cities put pressure on muni bonds.
_________________________________________________________


Unthinkable ‘Death Cross’ Signal Haunts Investors

MarketWatch reports that “all three major U.S. indexes now are in Death Cross mode,” signaling a possible crash. Watch the Aftershock Video, Be prepared!

_________________________________________________________

“This has been a deserted asset class,” Gross, manager of Pimco Total Return Fund, the world’s largest mutual fund, tells The New York Times.

gross200.jpg
Bill Gross
(Pimco file photo)
“People read about Alabama, Illinois, and Harrisburg, Pa., and they’re disenchanted. Things aren’t rosy, but that doesn’t mean most municipal issuers are going to default. There are a lot of A- and AA-rated municipals.”

Gross notes that A-rated munis generally yield about 4 percent to 5 percent tax free. That’s quite attractive compared to the 1.87 percent taxable yield on 10-year Treasurys.

And closed-end muni funds using leverage yield about 7 percent. Investors should beware that munis can be “volatile,” but they’re also “undervalued,” Gross says.

To be sure, not everyone is bullish on munis. Many experts expect the trend of municipal credit downgrades to continue, hurting muni bonds.

Whitney and others who forecast huge muni defaults "just had the wrong ‘D’ word," Dan Genter, chief investment officer at RNC Genter Capital Management, tells The Wall Street Journal.

“People need to be focused on downgrades, not defaults."

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Send me more news as it happens.
 
 
Get me on The Wire
Send me more news as it happens.
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Top Stories

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved