JPMorgan, Schwab Push Deeper Into Bonds

BOSTON (TheStreet) -- JPMorgan(JPM), Charles Schwab(SCHW) and BlackRock(BLK) are among financial firms offering more fixed-income investments after Americans lost trillions of dollars in the stock-market crash.

In a deal struck yesterday, Schwab's 7.8 million client brokerage accounts will have access to JPMorgan's fixed-income securities, including new-issue and secondary municipal bonds, corporate debt and non-convertible preferred securities. BlackRock, which has $1.1 trillion in fixed-income assets under management, on Monday introduced two new funds "specifically designed to capitalize on current opportunities in today's fixed-income marketplace."

Investors are seeking out bonds and other fixed-income securities to reduce risk in retirement, lower capital-gains taxes and avoid stock-market declines that included two bear markets in the past decade, according to Andy Gill, senior vice president for fixed income at Schwab. "Investors want to diversify and stabilize their portfolios, and fixed income plays an important role in that," he said.

JPMorgan and Bank of America(BAC) each pulled in about $5.5 billion in fixed-income revenue in the first quarter. Rival Goldman Sachs'(GS) fixed-income revenue rose 13% to $7.4 billion in the same period, and Citigroup's(C) more than tripled in just one quarter. Morgan Stanley's(MS) more than doubled from a year earlier.

To be sure, not all financial firms are as bullish as JPMorgan, Schwab and BlackRock. Bill Gross, manager of the Pimco Total Return Fund(PTTRX), has said bond's best days are over. He expects bond prices to fall in the next year as the economy strengthens and the Federal Reserve begins to raise interest rates in a "new normal" period of lower-than-average investment returns.

Still, municipal bonds are attractive, says John Hallacy, head of municipal research for Bank of America/Merrill Lynch. States and cities are cutting their budgets while considering more bond offerings to meet their projected needs, he says.

"While municipal defaults and bankruptcies have received a fair degree of media coverage, the actual incidence of defaults and bankruptcies are relatively low," he said in a recent Merrill Lynch Webcast.

Build America Bonds, or BABs -- created a year ago as part of the American Recovery and Reinvestment Act -- are an example of the health of the market, Hallacy says. The bonds, though taxable, offer a 35% government subsidy.

-- Reported by Joe Mont in Boston.

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