Friday, August 30, 2013

Markets have worst month since May 2012

Dow fell 30, decliners over advancers & NAZ lost 30.  The MLP index fell 5 to the 436s & the REIT index was off 2+ to 260.  With one minor exception, the MLP index is at its lowest level since mid Mar.  Junk bond funds fluctuated & Treasuries did little.  Oil saw profit taking on easing tensions over Syria & gold fell, paring a 2nd straight monthly gain, on bets that an improving US economy will support the case for the Federal Reserve (FED) to curb its stimulus.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLV13.NYM....Crude Oil Oct 13....107.70 Down ...1.10  (1.0%)

Live 24 hours gold chart [Kitco Inc.]

iPhone 5 models are pictured on display at an Apple Store in Pasadena, California July 22, 2013. REUTERS/Mario Anzuoni

Photo:   Yahoo

Apple launched a trade-in program in its US retail stores for older models of its iPhone as it gears up for the launch of a new version of the smartphone.  Customers will get a credit for old phones to be used toward the purchase of a new model.  A thriving industry exists for older versions of smartphones, especially the iPhone, on websites.  Even broken iPhones can fetch as much as $125 from vendors, who resell them in the US & internationally.  It has been estimated that the used smartphone & tablet market in the US will reach $14B by 2015.  The stock lost 4+ to 487.

Apple rolls out iPhone trade-in program in U.S. stores Reuters

Apple (AAPL)

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Pimco Sees Taper in Worst MBS Slump Since 1999: Credit Markets

Photo:   Bloomberg

US gov-backed mortgage bonds are heading toward their longest monthly slump since 1999 as concern mounts that the FED will begin paring its debt purchases even as the steepest rise in home-loan rates in at least 40 years slows the housing rebound.  Securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae lost 0.33% thru yesterday, heading for their 4th month of declines & bringing losses since Apr to 2.78%, according to Bank of America Merrill Lynch index data.  Investors led by Pacific Investment Management (PIMCO), manager of the world’s biggest bond fund, are bracing for the FED to scale back its stimulus when policy makers meet next month, even after data the past week showed falling home sales & a slowdown in property appreciation.  Average rates for 30-year mortgages reached a two-year high of 4.58% last week.  “We still believe that tapering is going to happen,” said Michael Cudzil, an executive VP who specializes in mortgages at Pimco. “The Fed is looking at the progress seen in the data over a long-term period of time, rather than any one given month.”  Bolstering speculation the Fed will taper are doubts among some policy makers about how effective their balance-sheet expansion has been in boosting the economy and their concern that it may spur excessive risk-taking, he said.  “They’ve done the work preparing markets, and they’ll probably take this as an opportunity to make the move and see how the markets react,” Cudzil said.  The slump in mortgage bonds pushed the average rate offered on new 30-year fixed home loans to 4.51% this week from an almost-record low 3.35% in early May, according to Freddie Mac.  The 35% increase over 17 weeks is the fastest in a comparable period since at least 1972.

Pimco Sees Taper in Worst MBS Slump Since 1999: Credit Markets

China will start trading gov bond futures next week, providing investors with a tool to manage risk 18 years after the derivatives were suspended following a probe into alleged market manipulation.  Trading will commence Sep 6, according to a China Securities Regulatory Commission.  The daily trading limit for the 3% 5-year note as the underlying security is set at 2% on either side of the previous day’s settlement price, according to the China Financial Futures Exchange.  The contracts will help China achieve the central bank’s goal of liberalizing interest rates & deepen financial markets as Premier Li Keqiang tackles slowing growth.  The People’s Bank of China in Jul removed a floor on borrowing costs previously set at 30% below the benchmark, as Li pledged to give market forces a bigger role.  Governor Zhou Xiaochuan said he’s preparing to free up savings rates.  China became Asia’s 2nd-largest gov bond market at the end of 2012, with 7.4T yuan ($1.2T) of notes outstanding.  Gov bond sales were 1T yuan in the first 7 months this year, following total issuance of 1.6T yuan in 2012, according to data from ChinaBond, the gov debt clearing house.  Maturities range from 91 days to 50 years.  The yield on gov notes due 2018 climbed 25 basis points this month to 3.91% on Aug 29, ChinaBond data show.  The rate touched 3.99% on Aug 20, the highest in almost a year.

China to Resume Bond Futures Trading Next Week After 18-Year Hiatus

Stocks concluded a dreary note with another decline.  The Dow lost 200 this week & dropped more than 700 in Aug.  This was a slow month in trading, so movements mean less than at other times.  But even after this decline, Dow is up an massive 4.4K in 2 years.  Sep will have a lot to deal with relating to what the FED decides about bond tapering, financing gov operations, raising the debt ceiling & possible military intervention in Syria.

Dow Jones Industrials

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