Posted on 02/25/2011 11:25:56 AM PST by FromLori
Municipal bond issuance dropped to an 11-year-low in January. It has not picked up substantially in February, according to the muni bond people I speak to.
January saw $12.2 billion of new debt, a decline of nearly 63 percent from January 2010. Volume hasn’t been this low since January of 2000.
The standard explanation for this is the end of the Build America Bond program, which offered qualified issuers a 35 percent federal tax subsidy to issue taxable debt.
But the BABs—the bonds' colloquial name—accounted for just 24 percent of the $757.6 billion of state and local debt issued from April 2009 through last month. So obviously, the decline goes much further than the end of the BAB program would warrant.
The muni bond people say that the excess decline comes from front-loading that occurred in the end of 2010, as issuers rushed to get BABs in before the program died. There’s some evidence for this: issuance spiked as the program neared its end, totaling $133.8 billion for the fourth quarter, the second-highest quarterly volume ever.
(Excerpt) Read more at cnbc.com ...
This fear about munis is WAY overstated.
The best muni bond managers in the nation say that this is a great buying opportunity - and they are correct.
-Rex
‘The best muni bond managers in the nation say that this is a great buying opportunity - and they are correct.”
There wouldn’t be any bias or anything self-serving in that analysis by these bond managers would there?
I just bought 20 CA AA+/ad valorem backed G.O. bonds 4.5% CPN due 8/1/2037 for $72/bond. The OI was 101.00. They have a par call in 6 months, and the YTCis 17%!!!!! My tax bracket makes these 13%+ TAX FREE!
The bond rating agencies are really no more than financial archeologists (their revelations come from examining the fossilized corpse done in by the marketplace) , so it is important to look elsewhere to discover problems in the municipal bond market. Know the issuer yourself and purchase the most traditional securities in the most conservative states, or the bonds of traditional organizations with the security of funding defined by a robust local economy. Purchase the bonds for income and not for resale. There are sufficient bad securities being traded out there for defaults to have a cascade effect on the market as a whole.
There is no economic good news and we have MASSIVE uncertainty here and the middle east....yet the market goes up.
I was reading this article Stock Market Manipulation and Gold Trading which shed a little more light on the subject.
I’ll respectfully disagree. Illinois raised 3.7 Billion this week to pay into unfunded pension liabilities. The problem with that is the teachers union alone in Illinois in underfunded by 40 billion. That may be the biggest but its just one of many. Repeat that story across many other states and you’ll see the magnitude of the problem. States increase taxes and its much more difficult for cities to do it. I don’t think the house will allow the sort of unfettered rescue we have seen in the past either.
Nope. These guys run money for zillions of people. It’s not in their interest to make bad calls.
The media is making way too much of it. Don’t fall for it.
I didn’t say there wasn’t ANY risk. There is in all investing.
But the fears being raised about the muni market are way over the top.
Don’t fall for this.
I think CA is a great place to look for munis. But watch those carefully...not because they’re CA GOs, but the length of the bonds.
Otherwise, good work!
Your welcome I read that article myself. Here’s a couple more you might like.
Bernanke Admits QE Raises Stock Prices, Force Investors Into Other Assets
THE BERNANKE PUT AND INSTABILITY IN COMMODITY MARKETS
http://pragcap.com/the-bernanke-put-and-instability-in-commodity-markets
I am pretty well versed on risk and markets. Accepting 3-4% returns in exchange for the risk involved seems silly. The only reason returns are what they are is due to the rating agencies. Lets not forget how wrong them have been forever. There’s very little information out there on the finances of a great many municipalities so that lack of transparency should serve as a warning as well.
I stand by what I wrote, and BTW, don’t give a rip for the rating agencies.
Me either and yet their ratings are a huge component in pricing the paper.
And we know bond fund managers NEVER talk their book, right?
Right?
My take on why the muni bond issuance is way down is that it reflects a newly found need to be fiscally prudent or else you get voted out of office.
Oh ye of little faith.
If you wanna believe what the financial press is selling, go ahead. Then think of all of the times those birds have been wrong. Almost always.
I stand by my comments.
Munis are paying much better than that.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.