OOPS! World's largest bond fund delays dividend payments!

[Joanne98]

By Adam L. Cataldo

Dec. 31 (Bloomberg) -- The Pacific Investment Management Co., which runs the world’s largest bond fund, said it is postponing two dividend payments to investors in a pair of closed-end municipal bond funds.

Proceeds from the Pimco Municipal Income Fund and the Pimco New York Municipal Income Fund II were due today and on Feb. 2, Newport Beach, California-based Pimco said in a statement.

“The funds intend to resume paying and declaring dividends as soon as possible,” the company said. Pimco said continuing problems in the capital market caused the values of the funds’ portfolios to decline and led to the decision.

Auction-rate preferred shares, with which the funds borrowed money to boost returns, must be backed by underlying assets worth at least 200 percent, the company said. When that threshold was missed, dividends couldn’t be paid.

Continued>>>
http://www.bloomberg.com/apps/news?pid=20601087&sid=ak7nLbjfY0lE&refer=home

[Zenlitened]

1. Yikes. PIMCO is practically a synonym for the word "bonds"...

... in some financial circles. :yoiks:

[marketcrazy1]

2. they just cut a deal

with the FED to become one of 4 primary dealers authorized to buy 500 billion dollars in MBS from fannie,freddy and ginnie for and on behalf of the FED.. NICE ( for them ) our tax dollars managed by private firms! ALL SPENDING BILLS MUST ORIGINATE IN THE HOUSE ( or so i thought ) ( constitution?? whats that!!! )

[A HERETIC I AM]

3. Your headline is misleading...

To say "World's largest bond fund delays dividend payments" is not accurate.

The worlds largest Bond Fund did NOT suspend dividend payments.

Two Closed End Funds managed by PIMCO have had two dividend payments suspended. The article you linked to mentions that the two funds are the Pimco Municipal Income Fund and the Pimco New York Municipal Income Fund II, neither of which are Open End Mutual Funds and neither of which rank as the "worlds largest" in their category.

It is more accurate to say "PIMCO suspends dividend payments in two Closed End Muni Bond funds."

[Joanne98]

4. OKAY PIMCO did it!!!!!!!!!

Satisfied?

[A HERETIC I AM]

5. The subject line in your OP reads;

World's largest bond fund delays dividend payments!

Now...is that accurate or not?

The answer is obviously no if you had carefully read the article you linked to.

But I understand. Sensationalism trumps accuracy every single time on DU when it comes to this sort of thing.

So yeah, I'm satisfied. If you were to lucidly explain why they did what they did, what led up to it and why it isn't that big of a deal, I'd be overwhelmed.

[sendero]

6. Why don't you explain..

... why it ISN'T a big deal, because I believe the headline is substantially accurate and it IS.

[A HERETIC I AM]

7. You think it's substantially accurate? Really?

Did you read the article linked in the OP?

What part of the following sentence leads you to that conclusion?

Pacific Investment Management Co., which runs the world’s largest bond fund, said it is postponing two dividend payments to investors in a pair of closed-end municipal bond funds.

It's no wonder so many on this board repeatedly say they don't understand these sorts of things. It's also clear that reading comprehension seems to be non-existent at times with those who might claim they DO understand them.

Grossly inaccurate information or mis-characterizations of the facts are regularly accepted as truth. This all too common occurrence on DU does NOTHING to further the understanding of those unfamiliar with how these instruments operate, how they are formed and their mechanics.

It isn't that big of a deal because none of the underlying instruments (the Municipal Bonds and Auction Rate Securities) held in either fund have defaulted. Full stop.


Investopedia is your friend.

[sendero]

8. And these defaults..

.. are insignificant. Yeah, right.

[A HERETIC I AM]

10. What defaults?

They are postponing payments because the value of some of the bonds held in the funds have dropped causing the asset coverage ratio to fall below a threshold level and therefore they are required to suspend or delay the payment of already declared dividends and suspend the declaration of further dividends until the issue is resolved.

THIS IS NOT A DEFAULT. There is a HUGE difference between a default and what is going on with the two funds mentioned in the article.

The article does not mention, nor does the press release on the Allianz website indicate that any of the bonds they hold have defaulted.

[Joanne98]

9. I took the headline right out of the first paragraph.

As you correctly noted. The headline they used was to boring.
This isn't Breaking News.