This Week In Bonds (Week Ending 5-14-2010)

It was a strange and frantic week on the bond market, folks, as a whole slew of things happened we never thought we'd see, and some things we hope we never see again. Here are the highlights of this week in bonds:

1. Argentina's bond issue? Crazy talk. The most current word out of Argentina, specifically via the Buenos Aires Herald, says that any new bond release would have to offer thirteen percent interest. What's worse is that they're spending a lot of cash on social issues, because it's an election year and none of their version of Congress critters wants to get de-jobbed. But any Argentine debt issues WOULD have the backing of the central bank, so those out for some high risk and high return (thirteen percent is pretty good in an environment where money markets can barely be expressed without decimals) may be interested in talking crazy here.

2. American bonds are still the safe haven. The phrase "good as gold" gets thrown around a lot, but when you consider that about the only things that have been holding or gaining are United States Treasuries and precious metals, the phrase becomes a bit more apt. The big news this week was that American thirty year bonds had precious little movement, and that the three-years were actually looking better to investors. Whether they see an improving economy or just don't want to tie up cash too long remains to be seen, but American bonds had great moves.

3. Households de-leveraging, governments and corporations doing just the opposite. It was strange to talk about countries and corporations like you'd talk about Stanley Johnson in the old Lending Tree commercial (check that lovely chunk of history out here), but more and more debt looked more and more risky the farther we got through the week.

And what's the biggest thing you need to know this week? It'll stun you:

4. Time is the enemy of corporate bonds, and the friend of the municipal. For example, a two year AAA municipal bond went from .98 last month to .77 this month. but a TEN year AAA municipal bond actually went UP, going from 3.18 to 3.32. And a twenty year AAA went from 4.20 to 4.44. On the corporate side, short term ruled the day as anything above a two year bond actually went down from last month to this. Five, ten, and twenty year AAA all went down based on ValuBond's numbers, and the lesser issues followed in lockstep universally down.

So that's your week in bonds, folks--keep it right here for all the latest news!