No "new normal" as stocks to bonds gain like the roaring ’90s

Doubling Down

“Central banks basically wrote the ticket, so to speak, for bond markets in 2012,” said Tad Rivelle, chief investment officer for fixed income in Los Angeles at TCW Group Inc., which oversees $85 billion of assets. “If you’re just looking at 2013, largely speaking we’re going to see a repeat, a doubling down if anything, on quantitative easing and stimulative monetary policies,” he said Jan. 3 in a telephone interview.

Rivelle said he favors mortgage securities without government backing, leveraged loans and emerging-market debt. TCW’s Metropolitan West Total Return Bond Fund returned 11.4 percent last year, beating 98 percent of its peers, Bloomberg data show.

Treasuries fell last week as Congress passed legislation that averts income-tax increases for most Americans and minutes of the Fed’s last meeting indicated that policy makers may cut back on stimulus sooner than bond investors anticipated.

Unlimited Easing

Ten-year note yields ended last week at 1.90 percent after rising to 1.97 percent on Jan. 4, the highest level since April. They rose about 20 basis points, or 0.2 percentage point, from the Dec. 28 close, according to Bloomberg Bond Trader data. Yields were unchanged at 7:19 a.m. in New York.

The S&P 500 Index of U.S. stocks added 4.6 percent in its biggest weekly gain in more than a year. The Stoxx Europe 600 Index advanced 3.2 percent. The index returned an average 15.3 percent in the 10 years ending in 2000.

The MSCI world gauge’s 2012 increase topped the 9.4 percent annual average of the 1990s.

Fed Chairman Ben S. Bernanke and European Central Bank President Mario Draghi in 2012 pledged more bond purchases amid the slowest global economic growth since 2009. Shinzo Abe, whose Liberal Democratic Party won Japanese elections last year, has called for the central bank to undertake unlimited easing to revive economic growth.

“Last year, if you look at some of the biggest moves in the market, they came after policy announcements,” Quincy Krosby, market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion, said Jan. 3 in a telephone interview. “The new normal is markets predicated on central-bank action.”

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