Israel Benchmark Bonds Drop Before Inflation Data, Debt Auction

January 15, 2012, 2:58 PM EST

Article from Bloomberg Business Week

By Sharon Wrobel

Jan. 15 (Bloomberg) -- Israel’s benchmark bonds fell for the first time in five days before an inflation report today and a government debt auction tomorrow.

The yield on the 5.5 Mimshal Shiklit bond due January 2022 increased one basis point, or 0.01 percentage point, to 4.48 percent, at the close of Tel Aviv trading. Inflation probably declined to an annual rate of 2.4 percent in December from 2.6 percent the prior month, according to the median estimate of 12 economists compiled by Bloomberg. Prices probably rose 0.2 percent in the month after declining 0.1 percent in November, according to the survey. The data is scheduled to be released at 6:30 p.m. local time.

“Investors were sitting on the fence at the end of the trading day ahead of the inflation data coming out later and ahead of the bond auction tomorrow,” Sagie Poznerson, head of trading at Leader Capital Markets Ltd. in Tel Aviv, said by telephone. “Some investors were selling today to buy at better prices at the auction tomorrow.”

The Finance Ministry is planning to sell 1.5 billion shekels ($390 million) of debt tomorrow, including 300 million shekels of the benchmark bonds due 2022 and 200 million shekels of the 5.5 percent bonds due 2042.

The two-year break-even rate, the yield difference between the inflation-linked bond and fixed-rate government bonds of similar maturity, fell seven basis points to 195. That implies an average annual inflation rate of 1.95 percent. The yield on the CPI-linked bonds due June 2013 was little changed at 0.45 percent. The rate has dropped 35 basis points this year.

Fund Flows

Israeli funds raised a net 349 million shekels from investors in the week ended Jan. 12, Meitav Investment House Ltd. said today. Corporate-bond funds drew investments for the first week since October, pulling in 34 million shekels, while government bond funds raised 226 million shekels and stock funds drew investments of 32 million shekels, according to Tel Aviv- based Meitav.

The Tel Aviv Bond 40 Index, a measure of inflation-linked and fixed-rate corporate bonds, fell for the first time in seven days, dropping 0.2 percent. Israel Electric Corp. said its board approved a bond sale of as much as $500 million to institutional investors, according to a Jan. 12 filing.

The shekel, which weakened 7.5 percent in the past 12 months, lost 0.4 percent to 3.8473 a dollar on Jan. 13. Two-year interest-rate swaps, an indicator of investor expectations for rates over the period, rose two basis points to 2.50 percent on Jan. 13. The central bank last month held the benchmark interest rate at 2.75 percent.

--Editors: Andrew Rummer, Claudia Maedler

To contact the reporter on this story: Sharon Wrobel in Tel Aviv at swrobel4@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

Article from Bloomberg Business Week

Municipal Debt Yields Plunge to 44-Year Low as 2012 Supply Trails Demand

By Brian Chappatta - Jan 14, 2012 1:01 PM GMT+0800
Article from Bloomberg

U.S. municipal-bond yields dropped to the lowest in more than four decades as issuers were slow to sell enough debt this month to meet demand after the asset class beat Treasuries and U.S. stocks last year.

The interest rate on 20-year general-obligation bonds with an average Moody’s Investors Service rating of Aa2, the third- highest, fell 0.21 percentage point to 3.62 percent in the week ended Jan. 12, according to a Bond Buyer index. That’s the lowest since April 1967, when Lyndon B. Johnson was president.

“We’re in the middle right now of just a powerful rally,” said Joe Deane, who manages $16 billion as head of municipal- bond investments at Pacific Investment Management Co. in New York. “You have to let the new-issue market begin to put supply back into the marketplace because, at the moment, the market is on the tight side.”

Municipal interest rates are also falling as tax revenue rebounds following the 18-month recession that ended in 2009, and as governments close $500 billion of budget deficits. State and local-government tax revenue rose 4.1 percent in the third quarter, the eighth straight gain, the Census Bureau said.

In the two weeks ending Jan. 6, states and municipalities issued $1.27 billion of bonds, the lowest two-week total since January 2008, according to data compiled by Bloomberg.

The amount of local-government debt scheduled for sale in the next 30 days dropped to about $4.2 billion, down 37 percent from a one-month high on Jan. 10, Bloomberg data show.

At the same time, investors are funneling money into the $3.7 trillion market at a faster clip. U.S. municipal-bond funds added about $1.1 billion in the week to Jan. 11, the most since March 2010, Lipper US Fund Flows data show.

The yield on top-rated 30-year municipal bonds fell the past five days, to 3.39 percent at 4 p.m. New York time yesterday, according to Bloomberg Valuation Index data.

The municipal market returned 11.2 percent in 2011, compared with 9.8 percent for Treasuries, according to Bank of America Merrill Lynch index data. The Standard & Poor’s 500 index was little changed for the year.

To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

Article from Bloomberg

Pimco’s Gross Raises Treasuries in Fund to 30%

By Susanne Walker - Jan 12, 2012 7:05 AM GMT+0800

Article from Bloomberg