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Wednesday, December 15, 2010

I Agree With Him....But At Least So Far We Have Both Been Wrong

I wrote on Nov. 29 that the selloff in muni bonds may represent a longer term buying opportunity. Apparently "bond guru" Bill Gross, the world's largest bond manager agrees with me (or should I say I agree with him) Investment News reports

Bill Gross bets big on muni bonds

Plows $4.4M of his own money into tax-exempt funds; 'optimism about a recovery'

December 14, 2010Bill Gross, the co-chief investment officer of Pacific Investment Management Co., spent $4.4 million of his own money this month to purchase shares of five municipal-bond funds run by his firm after tax-exempt debt tumbled.
Gross, 66, who manages the world's biggest bond fund at Pimco, has more than doubled his holdings of the firm's closed-end municipal bond funds, according to Securities and Exchange Commission data. He bought about 451,000 shares of Pimco municipal bond funds in December, bringing his total holdings to about 878,000 shares.
The municipal bond market has dropped in the past two months due to a jump in new bond issuance and rising Treasury rates. Tax-free holdings lost 2.29 percent in November, the third consecutive monthly slide and the longest since 2004, according to the Bank of America Merrill Lynch Municipal Master Index, which accounts for price changes and interest income.
“Bill Gross's leadership in being a buyer is notable as it reflects his optimism about a recovery in the underlying fundamentals of municipal bonds,”....

He bought 50,000 shares of the Pimco Municipal Income Fund III on Dec. 10 at an average price of $9.75, according to public records. That fund hit a 52-week high of $12 on Sept. 8

At least for now it looks as if we bothwere a bit premature. 3 month chart of MUB municipal bond etf is below

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