PrefBlog

Everything is Morgan Stanley’s fault!

Institutional investors’ allocations to dollar-denominated bonds have dropped to the lowest level since 2007 as strategists at Morgan Stanley and JPMorgan Chase & Co. see a shift away from the debt that may fuel higher borrowing costs.

Holdings by investors from pensions to endowments fell to 26.2 percent of assets in the second quarter, from 30.1 percent in the corresponding period of 2012, according to the Wilshire Trust Universe Comparison Service, which tracks plans that oversee $3.46 trillion. Morgan Stanley’s $1.8 trillion wealth management unit has been advising clients to cut bond allocations to the lowest in more than five years, Chief Investment Strategist David Darst said.
…
Institutional investors such as corporate and public pensions have reduced their median allocation to U.S. bonds from 32 percent of their assets in the last three months of 2011, according to data compiled by Wilshire Associates Inc., whose Trust Universe Comparison Service tracks more than 1,700 plans.
The current proportion of dollar-denominated debt holdings is the least since the fourth quarter of 2007, Kim Shepherd, a spokeswoman for the firm, said in an e-mail.

“There is movement by institutional investors out of investment-grade bonds,” said Eileen Neill, a managing director in the consulting division of Wilshire, a Santa Monica, California-based financial advisory firm. “It’s not out of fear of bonds, it’s out of necessity because of the low yields. They’re moving to higher yielding bonds and emerging markets debt.”

Individual investors have been shifting to stocks from bonds as well. The gap between flows into bond mutual funds and exchange-traded funds and those focused on equities widened to $70 billion in June, the most ever, according to JPMorgan analysts led by Nikolaos Panigirtzoglou in London.

The bank-owned Toronto Stock Exchange is up to its usual tricks today. It sold me very expensive data indicating that the “last” quote for CIU.PR.C was 6.83-23.99. When I went to their website to check the last few trades, I was informed that the “last” quote was 24.41-23.99 … bid bigger than the ask. Not even the most cursory editor … so in despair, I have put it into HIMIPref™ as 22.99-23.99.

Wonder of wonders, it was mixed day for the Canadian preferred share market, with PerpetualDiscounts off 12bp, FixedResets down 16bp and DeemedRetractibles gaining 9bp. Lots of volatility, with FixedResets prominent on the down side. Volume was high.

This entry was posted on Tuesday, August 13th, 2013 at 9:20 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.