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Wednesday, January 9, 5:09 AM Illinois legislators ended their 2012 session yesterday without taking any measures to deal with the state's $97B unfunded liabilities, which are rising by $17M a day and which could lead to more downgrades. "I think we may learn from Wall Street very shortly about the importance of doing this quickly," says state Senator Daniel Biss. "We all look like idiots." (previous) 11 Comments [Global & FX, U.S. Economy]
Tuesday, January 8, 12:11 PM A plan to limit the tax-deductibility of interest on municipals would trigger mandatory redemption provisions on some of the paper, says Citigroup, which estimates up to $150B of the paper may need to be called. If just one investor is forced to pay taxes on what were tax-exempt bonds, says Vikram Rai, mandatory redemptions can be triggered for all owners of the same issue. 4 Comments [U.S. Economy]
Monday, January 7, 4:57 AM Illinois legislators yesterday unveiled a plan that has bipartisan support and that aims to solve the state's massive pension crisis. Illinois has an eye-watering $96B in unfunded liabilities, which is threatening the state's A2 rating and hurting its ability to finance its services. The proposals including limiting pensionable salaries and raising retirement ages, although unions have vowed to fight the measures. 5 Comments [U.S. Economy, Global & FX]
Wednesday, January 2, 11:18 AM Municipals (MUB +0.4%) catch a nice bid even as interest rates turn sharply higher (TLT -1.2%). The fiscal-cliff deal raised tax rates on higher incomes, but didn't touch the deductibility of interest earned on municipals - a small perfect storm for the sector. 3 Comments [U.S. Economy]
Friday, December 21, 2012, 12:18 PM Panic gripping the municipal bond sector might be a buying opportunity. Amid worries of the future of the tax exemption, $2.8B fled the sector last week - the sort of numbers not seen since 2 years ago when tobacco bonds were downgraded. "Shocking," says RBS' Chris Mauro, expecting cooler heads to prevail in the new year. 1 Comment [U.S. Economy, Financials]
Wednesday, December 19, 2012, 2:43 AM Michigan Governor Rick Snyder has appointed a financial review team for Detroit after a preliminary study found that the city had "a serious financial problem." The team, which includes State Treasurer Andy Dillon, will carry out a new review that could lead to the appointment of an emergency manager who would have authority to allow Detroit to file for what would be the largest ever U.S. municipal bankruptcy. 2 Comments [U.S. Economy, Top Stories]
Sunday, December 16, 2012, 3:43 AM A preliminary review by Michigan has found that Detroit has a "serious financial problem," with reporting problems causing cash-flow projections to significantly oscillate on a monthly basis. The review could lead to the declaration of a fiscal emergency and prompt the appointment of an emergency financial manager. A municipal filing for bankruptcy protection, the biggest in U.S. history, could ultimately ensue. (previous) 30 Comments [U.S. Economy, Top Stories]
Friday, December 14, 2012, 2:21 PM The MUB slides another 1% as no one in D.C. has yet denied rumors municipal bond interest's tax-exempt status may get served up as part of a budget deal. The ETF has lost about 2.4% of its value over the last 2 weeks - roughly equivalent to the fund's annualized yield. 1 Comment [Financials, U.S. Economy]
Wednesday, December 12, 2012, 8:59 AM Municipal bond investors may not be pleased on a rare spot of agreement between the White House and the GOP: A willingness to subject to tax a portion of municipal bond interest paid to higher-income households (are there any muni bond holders who aren't higher income?). 9 Comments [U.S. Economy, Financials]
Tuesday, December 11, 2012, 4:54 PM San Bernardino's creditors square off with a group of Wall Street bondholders arguing they should have the same status as Calpers in the city's bankruptcy proceedings. Among the creditors are Ambac and a unit of MBIA (MBI). A loss by the creditors would have major repercussions for municipal finance - look for the case to make its way to the Supreme Court at some point. 2 Comments [U.S. Economy]
Thursday, December 6, 2012, 1:26 PM "The margin for error is so thin," says Morgan Stanley's Michael Zezas, no longer a bull on municipal debt. With yields this low, all it would take is an 18 basis point move higher in rates to wipe out a year's worth of interest income. "We can't envision a scenario in which muni yields would hold while U.S. Treasury yields moved." Comment! [U.S. Economy]
Friday, November 30, 2012, 3:21 PM Amidst speculation tax rates are going higher and will force more money into tax-privileged sectors, investors drive the iShares Municipal Bond Fund (MUB) to an all-time high. At $114.02, the fund has been trading above its NAV (currently 113.11) since mid-July. More room to run? BlackRock points out municipals yield more than Treasurys, and that's before taking the tax-advantage into effect. 3 Comments [U.S. Economy]
Friday, November 30, 2012, 3:07 AM With 2-3 weeks to receive $30M of state aid from Michigan in order not to run out of cash, Detroit is again teetering on the brink of bankruptcy. The aid is contingent of the city implementing the provisions of an agreement in April, when Michigan agreed to provide $137M, but those measures haven't been enacted. Financial mismanagement, political corruption, a hard-hit housing market and a massive loss of population are the causes of Detroit's woe.
9 Comments [U.S. Economy, Top Stories]
Wednesday, November 28, 2012, 10:44 AM The stakes are raised as Calpers moves to sue San Bernardino over the bankrupt city's decision to halt its bi-weekly payments to the fund. The precedent-setting case will have major implications for the way bondholders and insurers are treated in a municipal bankruptcy. If Calpers loses - good for creditors. If Calpers win - not so good. It's hard to imagine this not making its way to the Supreme Court. Comment! [U.S. Economy]
Monday, November 26, 2012, 3:45 PM Massive shortfalls in Pennsylvania's two public pensions puts the state - absent major reform - on a path to either cut benefits or slash core government functions, says budget secretary Charles Zogby. State revenue - expected to rise $819M in FY2014 - will be nearly completely consumed by pension cost increases of $511M. 10 Comments [U.S. Economy]
Tuesday, November 20, 2012, 5:40 AM Bankrupt Californian city San Bernardino presented a new budget yesterday in which it proposed renegotiating its obligations to the Calpers pension fund as part of its restructuring. San Bernardino is being closely watched, as Wall Street bondholders have indicated that they plan to challenge Calpers' historical primacy as a creditor in bankruptcy cases. Comment! [U.S. Economy]

SHM SPDR Barclays Short-Term Municipal Bond ETF

SHM

SPDR Barclays Short-Term Municipal Bond ETF