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The PowerShares Insured California Municipal Bond Portfolio (Fund) is based on the BofA Merrill Lynch California Insured Long-Term Core Plus Municipal Securities Index (Index). The Fund will normally invest at least 80% of its total assets in securities that comprise the Index and generally expects to invest at least 90% of its total assets. The Index is designed to track the performance of AAA-rated, insured, tax-exempt, long-term debt publicly issued by California or Puerto Rico or their political subdivisions.
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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
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, 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
Monday, Nov 114:36 AMAnother Californian city mulls Chapter 9
Monday, Nov 114:36 AM| 3 Comments
- The city of Desert Hot Springs in California could file for Chapter 9 after it projected FY revenue of $13.9M, $2.7M less than budgeted.
- The city, whose population is 26,000, will run out of cash on March 31.
- Amy Aguer, the interim director of finance and administration, has urged Desert Hot Springs' council to declare a fiscal emergency, a prerequisite for a Chapter 9 filing. An alternative to bankruptcy protection could be disincorporation.
- Should Desert Hot Springs apply for Chapter 9, it would become the fourth Californian city to do so since June last year, the others being San Bernardino, Stockton and Mammoth Lakes.
- ETFs: MUB, PZA, MUNI, TFI, ITM, MLN, CMF, XMPT, SHM, SUB, PRB, SMB, CXA, PWZ, SMMU, PVI, VRD, 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.
Tuesday, Oct 223:48 PMUBS likes closed-end munis trading at NAV discounts
Tuesday, Oct 223:48 PM| Comment!
- National closed-end funds are trading at an average 6% discount to NAV vs. a typical 1%, and with a yield of about 7%. Top picks are Neuberger Berman Intermediate Duration Fund (NBH +2.1%) and BlackRock Muni Income Trust (BFK +0.2%).
- As for state funds, they're more likely to have higher exposure to Puerto Rico as - other than paper within their home state - they're also allowed to buy the bonds of U.S. territories. Those with notably higher exposure to PR are: Neuberger Berman CA Intermediate Municipal Fund (NBW -0.1%), BlackRock Muniholdings NJ Quality Fund (MUJ -0.2%) and BlackRock NY Muni Income Trust (BNY -0.2%).
- As for the broader picture, UBS says the muni bond market has “entered into a transitional phase," in which they're no longer a "rates" product, but one valued on "credit." Not expecting a wave of bankruptcies, UBS does see an increase in the number of governments seeking protection. "We expect conventional notions regarding the homogeneity of municipal bonds to dissipate."
- Muni ETFs: MUB, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, NY, NYF, PZT, INY, CMF, PWZ, CXA.
Monday, Oct 1412:39 PMOversold munis await bid
Monday, Oct 1412:39 PM| 1 Comment
- "The time to buy securities is when there are explosions going all around,” says Loop Capital's Chris Mier, talking about bargains in municipals thanks to Detroit and Puerto Rico. Nearly $44B has been pulled from muni-bond funds this year, the fastest pace on record, according to Lipper. The average yield on high-grade bonds is 3.13% vs. 2.17% at the end of 2012, and the sale of new muni paper is off 15% from a year ago.
- States account for more than $500B of muni debt and 14 carry AAA ratings - just 4 U.S. companies are rated AAA. "“Investors have overreacted and worry that problems may be everywhere,” says Eaton Vance's Jim Evans. “There are definitely some difficulties, but the vast majority of credits are in good shape.”
- See also: Puerto Rico muni prices plummet 6.6% in October, off nearly 25% YTD.
- ETFs: MUB, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, NY, NYF, PZT, INY, CMF, PWZ, CXA.
Friday, Oct 44:15 AMStockton on course to exit Chapter 9
Friday, Oct 44:15 AM| Comment!
- Stockton's council has authorized a plan that will allow the Californian city to exit bankruptcy protection after it agreed with bond insurer Assured Guaranty (AGO) to restructure over $150M in loans.
- Stockton now has deals with all but three of its 19 major creditors, including with all the relevant bond insurers. The city hopes to file the plan to exit bankruptcy early next week and then leave Chapter 9 protection in around six months.
- The deal with Assured is dependent on court approval and on voters backing an increase in sales tax. (Previous)
- Muni ETFs: MUB, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, CMF, PWZ, CXA
Thursday, Aug 293:53 AMSan Bernardino declared eligible for bankruptcy
Thursday, Aug 293:53 AM| 4 Comments
- Federal Bankruptcy Judge Meredith Jury has ruled that the Californian city of San Bernardino is eligible for Chapter 9 bankruptcy protection, overruling opposition from California Public Employees' Retirement System (Calpers), the city's largest creditor.
- The key question is whether Calpers should be treated like other debtees. The pension fund says no, citing California law, while other creditors say yes, arguing that federal statues trump state law. It's an argument that is being closely watched and one that could reach the Supreme Court.
- Related ETFs: MUB, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, CMF, PWZ, CXA
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, Jun 135:22 AMU.S. states are expected to end their fiscal year on June 30 with a combined surplus of $23.7B after taking in stronger-than-expected revenues. However, the future is more uncertain, as income this year may have been boosted by residents selling assets ahead of a tax rise. Going forward, states will also have to cope with federal spending cuts, an expansion of Medicaid, and increasing pension and retirement obligations. |Thursday, Jun 135:22 AM| Comment!
Tuesday, Apr 235:53 AMSan Bernardino's council has passed a budget that will allow the bankrupt Californian city to restart $1.2M in biweekly employer contributions to Calpers while continuing to renege on its commitments to its other creditors, including bondholders. Along with Stockton, San Bernardino represents a test case over who should get paid first when a municipality goes bankrupt - the public employees or the bondholders. (previous) |Tuesday, Apr 235:53 AM| 4 Comments
Thursday, Apr 181:34 PMA butterfly flaps its wings in California? Tiny Canyon Lake (pop. 11K) notifies CalPERs it wants out of the pension plan, and says it's ready to pay a termination fee to do so. Behind the decision is CalPERs' recent approval of a 50% rise in employer contributions over the coming years. "How many cities might opt out," says a bankruptcy attorney. "The issue here for CalPERs is if Canyon Lake becomes a trend." |Thursday, Apr 181:34 PM| Comment!
Friday, Apr 124:04 AMCalifornia has raised $2.7B in a general-obligation bond offering, selling $1.25B for capital projects and $1.5B to refinance existing debt. The state took in $700M more than it initially intended to, although it had to raise the yield on 10-year paper to 2.37% from 2.33%, or 0.58 percentage point above the rate on benchmark 10-year munis. |Friday, Apr 124:04 AM| Comment!
Friday, Apr 122:46 AMSan Bernardino in California has proposed restarting bimonthly $1.2M employer contributions to Calpers almost a year after the city suspended the payments, although it will continue to renege on its commitments to other creditors, including bondholders. The decision highlights the battle over who should take most of the pain when a city goes bankrupt - the bondholders or the public servants. |Friday, Apr 122:46 AM| Comment!