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The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its assets in taxable municipal debt securities publicly issued under the Build America Bond program.
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Country: United States
- In Your Portfolio: Broad U.S. Bond ETFs, A Guide to Municipal Bond ETFs and Closed-End Funds
- Asset Class Performance: Bonds
Wednesday, Dec 42:52 AMIllinois legislature OKs pension overhaul
Wednesday, Dec 42:52 AM| 7 Comments
- Illinois' Senate and House have approved a revamp of the state's retirement system, one of the most underfunded in the country with a gap of almost $100B.
- The plan is designed to fully fund Illinois' five pension systems by 2044 by saving an estimated $160B over 30 years. Workers and retirees face cuts, the retirement age for younger staff will rise, and the state will increase its payments by $60-70B.
- Unions are strongly opposed to the proposals and intend to go to court to stop them from being enacted. One argument is that the overhaul violates the state constitution by lowering pension benefits.
- Still, the Illinois revamp could provide a template for municipalities that are grappling with similar problems. Chicago, which has a pension shortfall of $19.5B, has been watching the situation with interest. (Previous)
- ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, MLN, HYMB, BABZ, XMPT, BABS, SHM, SUB, PRB, SMB, PVI, SMMU, MUAF, MUAE, MUAD, MUAG, VRD, MUAC, GMMB, RVNU
Tuesday, Dec 33:16 PMAnother bad year in store for munis?
Tuesday, Dec 33:16 PM| 1 Comment
- Municipals are "a credit market with a rates problem," says Morgan Stanley's Michael Zezas, seeing a base case (60% probability) of total returns of -1.7% to -4.1% in 2014. The bulk of the negative returns should come early, he says, thanks to the 10-year Treasury yield rising to 3.45%.
- The bull case - in which the economy slows and the 10-year yield slides to 2.3% - has munis returning between 3.5% and 6%. The bear case - growth jumps and the 10-year rises above 4% - sees losses of 6.2% to 10%.
- When to jump in? When "loss cushions outpace expected rate increases," he says, and when "market duration has extended."
- Muni ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, HYMB, MLN, CMF, BABZ, XMPT, BABS, SHM, SUB, PRB, PZT, SMB, NYF, CXA, PWZ, PVI, SMMU, MUAF, INY, MUAD, MUAG, MUAE, VRD, MUAC, GMMB, RVNU
Tuesday, Dec 311:50 AMDetroit eligible for bankruptcy protection, says Judge
Tuesday, Dec 311:50 AM| 25 Comments
- Rejecting calls to dismiss the case, a Detroit judge finds the city acted in good faith when it filed for Chapter 9 bankruptcy. The city, he rules, could not have negotiated in good faith with its creditors without the filing. Pensions are unsecured creditors, says the judge, and thus not protected from potential cuts.
- Assured Guaranty (AGO +0.4%), Ambac (AMBC -1.1%), and MBIA (MBI -0.1%) have all fallen about 1% since the ruling.
- The unions and pension funds are likely to appeal the decision.
- “It is indeed a momentous day,” says the judge, Steven Rhodes. “We have here a judicial finding that this once proud city cannot pay its debts. At the same time, it has an opportunity for a fresh start. I hope that everybody associated with the city will recognize that opportunity.”
- Municipal bond ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, HYMB, MLN, CMF, BABZ, BABS, XMPT, SHM, SUB, PRB, PZT, SMB, NYF, CXA, PWZ, PVI, SMMU, MUAF, INY, MUAD, MUAG, MUAE, VRD, MUAC, GMMB, RVNU
Tuesday, Dec 33:14 AMJudge to decide whether Detroit can enter Chapter 9
Tuesday, Dec 33:14 AM| 2 Comments
- U.S. Bankruptcy Judge Steven Rhodes is due to decide today on whether Detroit is eligible for bankruptcy protection.
- Should Rhodes approve Detroit's request, the city would be protected from lawsuits in several courts, including over a plan to cut retiree benefits. It would also prevent creditors from suing to seize assets after Detroit defaulted on loan payments.
- Meanwhile, Illinois' House and Senate are set to vote on a proposed overhaul of the state's retirement system, one of the most underfunded in the country with a gap of almost $100B.
- The measures would save an estimated $160B over 30 years with cuts for workers and retirees but would fully fund the state's five pension systems by 2044. However, unions are deeply opposed to the legislation and its passage is not certain.
- ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, HYMB, MLN, BABZ, BABS, XMPT, SHM, SUB, PRB, SMB, PVI, SMMU, MUAF, MUAG, MUAE, MUAD, MUAC, VRD, GMMB, RVNU
Thursday, Nov 284:59 AMIllinois leaders agree to pension deal
Thursday, Nov 284:59 AM| 38 Comments
- After two years, Illinois' legislative leaders have finally reached a deal to overhaul the state's retirement system, one of the most underfunded in the country with a gap of almost $100B.
- However, details of the plan weren't provided.
- The proposal must win approval from the House and Senate in votes that are due to take place on Tuesday; however, authorization is by no means assured, especially with unions expected to provide vehement opposition.
- Chicago, which has a pension shortfall of $19.5B, is watching the situation with interest.
- ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, MLN, HYMB, BABZ, BABS, XMPT, SHM, SUB, PRB, SMB, SMMU, PVI, VRD, GMMB, RVNU
Tuesday, Nov 263:31 AMCalifornia bullet-train project suffers bond setback
Tuesday, Nov 263:31 AM| 3 Comments
- California state Judge Michael Kenny has blocked the California High-Speed Rail Authority from issuing over $8B in bonds to help fund the proposed high-speed rail line from San Francisco to Los Angeles.
- In explaining his action, Kenny said the authority's finance committee hadn't properly disclosed its reasons for authorizing the debt.
- The decision could cause delays and increase the costs of the $68B project, which has been losing public support.
- ETFs: MUB, BAB, PZA, MUNI, TFI, ITM, MLN, CMF, BABZ, BABS, XMPT, SHM, SUB, PRB, SMB, CXA, PWZ, SMMU, PVI, VRD, GMMB, RVNU
Monday, Nov 119:06 AMFitch downgrades Chicago
Monday, Nov 119:06 AM| Comment!
- "The downgrade reflects the lack of meaningful solutions to both the near- and long-term (pension) burden," says Fitch, cutting Chicago's unlimited tax general obligation bonds to A- from AA-, and keeping the outlook Negative. This affects more than $8.5B of debt.
- To review: This general obligation debt is secured by the city's full faith and credit and (theoretically) nearly-unlimited power to tax.
- Fitch notes improvement in the government budget, but that the pension woes overshadow this. There's also the sluggish recovery in the Midwest - "high unemployment persists and property tax base recovery has been elusive."
- Muni ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, HYMB, MLN, CMF, BABZ, BABS, XMPT, SHM, SUB, PRB, PZT, SMB, NYF, CXA, PWZ, SMMU, PVI, MUAF, INY, MUAD, MUAG, MUAE, VRD, MUAC, GMMB, RVNU
Wednesday, Oct 233:08 PMPimco: Stay defensive in munis and jump in when volatility rises
Wednesday, Oct 233:08 PM| Comment!
- The country has "entered a less benign period for public finance," says Pimco municipal managers Joseph Deane, David Hammer and Sean McCarthy. "The inability of states and territories to avail themselves of Chapter 9 bankruptcy only increases the risk of a more disorderly outcome, since they can still default on payments, triggering a need to restructure."
- While not anticipating a big bump in muni defaults, the team is keeping an eye on "pockets of credit stress" in municipalities and the territories. Likely talking about Detroit (as opposed to Puerto Rico), they say "willingness to pay may simply fall short of capacity, and restructuring may be a rational economic consideration."
- Avoid smaller issuers with large and growing fixed costs (unfunded pensions), they say. Position defensively, and take advantage of volatility by buying duration. They note high-quality 30-year municipals could have been purchased in June and July at yields equivalent to the 30-year Treasury - a big discount from the 85-90% of the long bond yield they usually trade at.
- Muni ETFs: Broad: MUB, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, NY , NYF, PZT, INY, CMF, PWZ, CXA, BAB, BABZ, BABS.
Wednesday, Aug 213:56 AMMoody's upgrades outlook on U.S. states
Wednesday, Aug 213:56 AM| 3 Comments
- Moody's has lifted its collective outlook on U.S. states to stable from negative, the first time the ratings agency has improved its view of states since the financial crisis.
- "Improving labor and housing markets have boosted consumer confidence, and strong stock-market performance has further improved state revenues," Moody's analyst Baye Larsen explained.
- Credit quality is high, with 30 states holding the two highest ratings, AAA or or Aa1. Due to its massive pension gap, Illinois has the lowest rating among states, A3.
- The local government outlook remains negative. (PR)
- ETFs: MUB, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, NYF, PZT, INY, CMF, PWZ, CXA, BAB, BABZ, BABS
Thursday, Mar 222012, 10:59 AMWhere do municipal bonds go after giving back much of their big early YTD gains alongside the rise in Treasury yields? While yields are no longer at the "absurdly high" ratio of 150% of Treasurys seen last fall, at 115-120%, they remain well above pre-crisis norms of 85-95%, writes John Mousseau, continuing to see value in the sector. |Thursday, Mar 222012, 10:59 AM| Comment!
Saturday, Feb 42012, 8:15 AMThe "fade Whitney" trade may be getting close to played out as municipals tack a 2.31% rise in January onto a 10.7% gain in 2011, with yields for top-rated paper now at or near all-time lows. Lower-rated munis offer the best relative value, says Jim Kochan, but investors should expect coupon income and nothing more for the rest of the year. |Saturday, Feb 42012, 8:15 AM| 2 Comments
Monday, May 92011, 8:04 AMBanks renewed or replaced 85% of expiring letters of credits with municipalities in Q1, a report from Moody's shows, easing fears of a costly scramble to refinance tens of billions of dollars. The banks had issued these notes, worth $13.5B, during the financial crisis. |Monday, May 92011, 8:04 AM| 4 Comments
Thursday, Apr 72011, 12:19 PM
Wednesday, Dec 82010, 5:55 PMBuild America Bond yields rose to 11-month highs as the federal program, left out of the tax cut deal, looks set to expire at year's end barring a last-minute save. Zero Hedge says it demonstrates what happens to an asset class "when it becomes clear that the government may not prop it in perpetuity." |Wednesday, Dec 82010, 5:55 PM| 1 Comment