With core inflation declining and nominal economic growth rates weak in the aftermath of financial crisis, bond yields should trend lower in coming quarters.
Of course Ackman is also short in his holdings of MBIA, Ambac Financial and other bond insurers, meaning he makes profits when the shares of the companies decline.
They're looking for a way to rescue a little-known sector of the financial world called the bond insurance business.
Currently, he said, the bonds sell at significant discounts because of concerns about the financial health of the bond insurers.
If they are to have any traction in the financial markets, those bond purchases cannot have a 100bn-euro or 200bn-euro price tag attached to them.
Recently, deterioration in the financial condition of some bond insurers has led some commercial and investment banks to take further markdowns and has added to strains in the financial markets.
The counterparty was the troubled bond insurer ACA Financial Guaranty, which Moody's cut dramatically from A to triple-C one day in December.
Investors have bid up the price of US bonds since the financial crisis, and when bond prices increase their interest rates decrease.
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Last Aug. 27, Ben Bernanke delivered a speech at the annual Fed symposium that told the market the Fed would support financial markets with a renewed bond-buying program.
If they did, I would tell them that the thing that makes me most nervous about the global financial markets is whether the bond market is right about the future.
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Brent Burns, an investment manager who builds bond portfolios for financial planners, says that since the Fed announcement he has fielded a flurry of questions from advisers considering high-yield and international bonds, and real-estate investment trusts.
Vanguard doesn't recommend to financial-planning clients a global bond fund or exchange-traded funds that could mimic a commodities strategy.
Moreover, the current credit boom through trust loans and bond issuance will heighten financial risks in the economy.
The "AAA" financial strength rating is crucial to bond insurers because they effectively transfer their ratings to bond issuers.
My vote for the most unjustly maligned financial sector stocks goes to the bond insurers, which guarantee principal repayment and interest for most municipal bonds.
Despite the Fed's rate rises, overall financial conditions have remained loose: bond yields, in particular, have stayed unusually low, though they have picked up lately (see chart).
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Since the Greek crisis first emerged, analysts pointed out, European leaders have already increased cooperation, such as the European Financial Stability Facility and sovereign-bond purchases by the European Central Bank.
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Lloyds Banking Group's focus returns this week to the topic of its future management as the bank takes a series of steps to boost its financial health, including its successful bond exchange.
American International Group shares dropped nearly 6% Thursday on speculation it faced potentially large write-downs of investments in credit derivatives as well as exposure through its financial products group, which sells bond insurance.
The sale and leaseback opportunity within the bond document is done for financial and tax planning.
Warren Buffet, who rushed into the bond insurance business during the financial crisis has since backed away.
In spite of this, municipal bond insurers such as Ambac Financial (ABK) and MBIA (MBI) are somehow still solvent.
For one thing, U.S. policy makers have noticed the European covered bond market has weathered the financial storm relatively well.
They have these investments that are effectively an engineered kind of bond, an incredibly complicated financial instrument created by Harvard physics PhDs using massive computers.
Developing corporate-bond markets is important for financial stability, both as a buffer when other funding sources run dry and to reduce mismatches in a firm's balance sheet.
And there is another snag: if interest rates rise, and bond prices fall, many financial firms might be forced to record huge losses, or even to close down altogether.
But he also compares Herbalife to his previous short crusade against MBIA , which paid off in a huge way when the bond insurer cratered during the financial crisis.
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Mortgage insurer PMI Group said late Wednesday it will delay reporting its fourth-quarter and full-year 2007 financial results because of delays in receiving financial results from FGIC, a troubled bond insurer that it partly owns.
For some of the larger banks in countries such as Germany, keeping out of the bond market is a matter of choice, said Keval Shah, head of the bond-syndication desk for financial companies at Citigroup Inc.
Mortgage insurer PMI Group (nyse: PMI - news - people ) said late Wednesday it will delay reporting its fourth-quarter and full-year 2007 financial results because of delays in receiving financial results from FGIC, a troubled bond insurer that it partly owns.
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