Global Investing

Calling CCCs

Junk bonds have enjoyed a rally since the start of the year but investors are facing a dilemma.

Should you buy larger, more liquid bonds that have already risen significantly, or buy smaller, illiquid bonds that have an attractive price?

Barclays Capital says triple-C rated bonds — the riskier segment of the junk space — are beginning to catch up with less risky issues because higher rated bonds have increasingly run into “call constraints”.

(For non bond geeks: Some corporate bonds have an embedded call option that allows the issuer to redeem the debt before its maturity date. )

Barclays says as of Wednesday’s close, 71 percent of callable BBs and 57 percent of callable single Bs were trading above their next call price, compared with just 29 percent of CCCs.

“Normal” volatility to help rally?

As the graphic above shows, volatility in U.S. stocks has re-entered what could be called normal territory after soaring higher during the financial crisis. The blue band is plus or minus one standard deviation around the 1990 to 2007 avverage.

There may be an implication for equities beyond the obvious sign that things are calming down. Lower volatility is a buy signal in many trading models.

(Reuters graphic by Scott Barber)

Gold offers double-edged shine

It was Goldman Sachs who famously predicted oil prices to reach $200 a barrel last year, but there are a school of bullish investors who forecast a substantial rally in gold.

Take Gold and Energy Advisor, which predicts gold will soon reach $2,500 an ounce (from today’s $895) then to $5,000. The Florida-based firm argues that gold is the only asset class that’s not only private (as opposed to state-owned), but also liquid, portable, fungible, divisible, and valuable enough that a small amount can store a massive amount of wealth.

It also argues that of $11.5 trillion stored in offshore accounts and other assets, if one percent were transferred into gold, that would be almost four times the entire annual investment demand for gold.

from Funds Hub:

Light at the end of the tunnel?

rtxb5afThere's no shortage of bad news in the financial world at the moment.

But one top hedge fund manager believes that equities could soon be heading for a very sharp rally.

Cazenove's Neil Pegrum -- whose fund made 9.4 percent last year while markets were plummeting -- believes UK equities could soon be enjoying a "March 2003" rally.

While it seems a long time ago now after the market's recent woes, March 2003 marked the start of a 4-year bull market which took the FTSE 100 from less than 3,300 to more than 6,700 and saw clever stockpickers reap huge rewards.