What Bond Investors Need to Do Now

Focus: BONDS

Louis Navellier Image Louis Navellier Editor, Blue Chip Growth and Emerging Growth

Last year was good for some bonds, but Louis Navellier has some advice on how bond investors should proceed in the year ahead.

So Louis, it wasn’t a great year for the bond market last year.

It was fine for corporates. Munis have had a spread problem, but they are heating up with the tax increases, and the government finances are getting better.

But you know, we’re in the bond business. We raise $1.2 billion a year in bonds. We package them in something called a unit investment trust. We just buy them, ladder them over what we call the sweet-spot yield curve, and people hold to maturity.

We like to do that because there is nothing wrong with bonds until the spread gets in the way of your return. So we try to buy them with tight spreads and we hold to maturity, so you have no what we call exit or transaction costs on the way out.

Everybody gets the same amount of interest every month, and you get your principal back as the bonds mature. We like investing in bonds that way. If you buy a bond fund, you want to make sure rates are falling, and you want to make sure that fund never has a run on the assets.

One of the things that has happened out there in corporate America...they are raising $2 trillion a year in the bond market, and they are using a lot of new debt to pay off old debt. So there are high-yield funds that now that the maturity is shortened, they don’t have quite the risk they once did, because of all the bond refinancing going on out there.

Are you seeing any junk coming to market these days?

Oh, yeah.

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