After Yellen’s warning: This is NOT time to be buying shares

Investing in shares is not rocket science. Do your homework, buy when the stock is out of favour, then sit back and wait. The real skill is in determining when your favourite share is "out of favour". After a multi-year bull market driven by cheap money and few alternatives, cheap shares are scarce. Last night US Fed chairman Janet Yellen, warned that one of the alternatives to shares is about to become more attractive. Yellen reckons an increase in bond yields are overdue and as bond yields rise, the cost of acquiring them falls. Cheaper bonds become an appealing alternative to their equity cousins. And, in time, money switches across. It's a cycle which has played out for decades. As this Bloomberg article outlines, smart players have taken note with both global multinationals Apple and Shell having raised big money in the bond market, locking in today's low yields. Share market investors should, at the very least, hold off buying more equities for now. Better to start building up cash for the time ahead when shares offer better value. As they will. – Alec Hogg .By Cordell Eddings and Michelle F. Davis .(Bloomberg) — The world's biggest companies are racing to issue bonds as the Federal Reserve signals that their time is running out to lock in borrowing costs while they're still near record lows.Apple Inc., the most valuable company on the planet, and Royal Dutch Shell Plc raised $18 billion in the U.S. bond market, jumping in just as the Fed Chair Janet Yellen says that yields on long-term debt is too low. The iPhone maker sold $8 billion in its fourth multi-billion dollar offering since 2013 to boost shareholder capital while it keeps its cash holdings abroad. Shell sold $10 billion of bonds through its U.S. unit for the first time in 18 months.The companies came to the market as economists project the Fed will boost its benchmark interest rate this year after holding it close to zero since 2008. Dollar-denominated corporate debt sales of more than $657 billion in 2015 are up 8.8 percent over the same period in 2014, a year when a record $1.57 trillion of bonds were issued, according to data compiled by Bloomberg."There is a feeling among issuers that this might be the last opportunity they have in awhile, and so you have a mad dash to issue debt as rates rise," said James Sarni, a managing principal at investment manager Payden & Rygel, with $85 billion in assets under management. "But there is a ton of money out there that needs to be put to work, so demand is still there, especially at these higher yield levels."Treasury YieldsThe yield on the 30-year Treasury note, a benchmark for everything from corporate debt to mortgages, has risen 52 basis points since the start of April to 2.99 percent, touching the highest level in five months as Yellen said Wednesday that yields on Treasury bonds are too low and could jump when the central bank raises borrowing costs.Speaking at a conference in Washington, Yellen said she sees signs of a "reach for yield" and that the market "could see a sharp jump in long-term rates."After touching the lowest levels in almost a year last month, average yields on investment-grade debt have risen, climbing to 3.08 percent, in the midst of a third straight week of rising borrowing costs, according to Bank of America Merrill Lynch Index data.'Fed Liftoff'"Companies are all getting in before the Fed liftoff," said Jennifer Vail, head of fixed-income research of the Minneapolis-based U.S. Bank Wealth Management, which oversees $112 billion. "We may see a retrenchment later in the year, but for now companies are still coming, and for the right reasons, firming up their balance sheets further.".The bull market in fixed income is over after prices of the securities peaked over the last few weeks, according to Michael Novogratz, principal at Fortress Investment Group LLC."In the last two weeks, the bull market in fixed income has ended and the bear market has started," Novogratz said in a Bloomberg Television interview with Stephanie Ruhle and Erik Schatzker. "We've seen probably a low yield in 30-year Treasuries."Apple issued securities in seven parts Wednesday. The longest-dated portion was a $2 billion bond maturing in 30 years that pays 4.375 percent, Bloomberg data show. That's 0.93 percentage points more than what Apple paid on a note of the same size and maturity in February.Share RepurchasesThe Cupertino, California-based company announced on April 27 it was boosting its capital-return program by $70 billion through March 2017 and that it would be accessing U.S. and international debt markets to help pay for it.Apple also sold fixed and floating-rate notes maturing in two and five years and a seven-year fixed-rate bond.Shell issued debt in as many as five parts. The longest- dated portion was a $3 billion, 4.375 percent bond maturing in 30 years that yielded 1.4 percentage points more than comparable Treasuries. Proceeds will be used for general corporate purposes.The Hague-based company last issued dollar-denominated debt in a $4 billion offering in November 2013, Bloomberg data show."Companies are able to bring big deals to the market right now — the Treasury's helping out" Julianne Bass, a San Antonio-based money manager at USAA Investment Management Inc., which oversees about $68 billion, said by telephone. "There's investor demand as yields go up — people want to get in at the higher yields."

After Yellen’s warning: This is NOT time to be buying shares

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