×
Newsmax TV & Webwww.newsmax.comFREE - In Google Play
VIEW
×
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
VIEW
Tags: tobacco | bonds | cigarettes | demand

WSJ: Investors in Tobacco Bonds Might Get Burned By E-Cigarettes

By    |   Wednesday, 25 June 2014 11:21 AM

Many big-time investors, such as Pimco's Bill Gross, have jumped into tobacco bonds, and the growth of electronic cigarettes may make them pay the price for that.

Pimco's Total Return Fund, managed by Gross, holds about $301 million of tax-exempt bonds from Ohio's Buckeye Tobacco Settlement Financing Authority, along with tobacco bonds from California and West Virginia, The Wall Street Journal reports.

Research firm Morningstar says the Total Return fund raised its exposure to tobacco funds last year and a BlackRock high-yield fund lifted its exposure to tobacco bonds in the first four months of this year, according to The Journal.

Editor’s Note:
Get These 4 Stocks Before 399% Stock Market Rally!


Wells Fargo predicts the market for electronic cigarettes and other vaporizing devices will reach $2.5 billion this year, an increase from $1.8 billion in 2013, The Journal reports.

But e-cigarettes are stealing demand from regular cigarettes. And it's the revenue from regular cigarette sales that fund bond payments.

"Over the years, we've witnessed demand for combustible cigarettes drop steadily year in and year out, and that's prior to the introduction of what can be considered a competing product," Robert Amodeo, head of municipal debt at Western Asset Management, told The Journal.

Analysts predict some tobacco bonds could default by 2020 as the smoking rate for regular cigarettes dips due to e-cigarette competition and health concerns, Reuters reports.

"If the [consumption] decline goes to 6 or 7 percent, it will be very quick," Tom Metzold, portfolio manager at Eaton Vance Investment Managers, tells the news service. "I think that the first ones [defaults] are probably five years away."

Editor’s Note: Get These 4 Stocks Before 399% Stock Market Rally!

© 2021 Newsmax Finance. All rights reserved.


StreetTalk
Many big-time investors, such as Pimco's Bill Gross, have jumped into tobacco bonds, and the growth of electronic cigarettes may make them pay the price for that.
tobacco, bonds, cigarettes, demand
280
2014-21-25
Wednesday, 25 June 2014 11:21 AM
Newsmax Media, Inc.
Join the Newsmax Community
Register To Comment Login To Comment
Please review Community Guidelines before posting a comment.
 
TOP

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved
NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved