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SMB vs. ETF Alternatives
The Market Vectors Short Municipal Index ETF (SMB) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Barclays Capital AMT-Free Short Continuous Municipal Index . The Index provides broad exposure to investment-grade municipal bonds with a nominal maturity of 1-6 years.
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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 32013, 3:14 AM
Tuesday, Dec 32013, 3:14 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
Monday, Dec 22013, 9:57 AM
Monday, Dec 22013, 9:57 AM| Comment!
- Barracuda Networks (CUDA +2.7%) shares trade up after receiving 5 Outperform ratings and 1 Buy on Street initiation day and PTs of $25-$28.
- William Blair analyst Jason Ader calls the recent IPO a "Business Model Story," with the company's uniqueness stemming from its business model rather than specific products. He observes, Barracuda "targets small and midsize business (SMB) customers and offers easy-to-use IT products in high margin segments, with a powerful branding capability, a high-velocity sales engine, and proactive customer support."
- Margins may be set to improve as the company diversifies from the maturing content security segment (~3% growth) to the storage segment (~40% growth), Ader adds.
Thursday, Nov 282013, 4:59 AM
Thursday, Nov 282013, 4:59 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 262013, 3:31 AM
Tuesday, Nov 262013, 3:31 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
Wednesday, Nov 202013, 3:39 AM
Wednesday, Nov 202013, 3:39 AM| Comment!
- Jefferson County in Alabama has become the first municipality to successfully tap the bond markets while still in bankruptcy protection, selling $1.8B in sewer warrants.
- However, Jefferson will reportedly have to pay up to 6.85% in interest on the debt, which has a maturity as long as 40 years.
- The county is now due to go to court today to seek authorization to exit bankruptcy by the year-end.
- ETFs: MUB, HYD, PZA, MUNI, TFI, ITM, HYMB, MLN, XMPT, SHM, SUB, PRB, SMB, SMMU, PVI, MUAF, MUAG, MUAE, MUAD, MUAC, VRD, GMMB, RVNU
Tuesday, Nov 192013, 4:38 AM
Tuesday, Nov 192013, 4:38 AM| Comment!
- Just over two thirds of metropolitan areas will grow in 2013, a report from IHS Global Insight has forecast.
- However, that means that 119 out of the 363 regions studied will stay the same or decline, said the report, which was prepared for mayors. The figure is worse than the 73 areas that didn't expand last year.
- Of the cities that are doing well, Midland in Texas is expected to perform the best with growth of 7.3%. Odessa, also in Texas, is seen expanding 6.4%.
- Municipal ETFs: MUB, HYD, PZA, MUNI, TFI, ITM, HYMB, MLN, XMPT, SHM, SUB, PRB, SMB, SMMU, PVI, VRD, GMMB, RVNU
Monday, Nov 112013, 9:06 AM
Monday, Nov 112013, 9:06 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 112013, 4:36 AM
Monday, Nov 112013, 4:36 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
Friday, Nov 82013, 3:20 PM
Friday, Nov 82013, 3:20 PM| 1 Comment
- Assured Guaranty (AGO +2.7%) and MBIA's (MBI +1.3%) municipal insurance unit National Public Finance Guarantee sue Detroit over using property tax money earmarked to pay general obligation bonds, and ask the judge overseeing the city's bankruptcy petition to force the city to set the cash aside.
- Emergency manager Kevyn Orr has upset municipal bond markets by including more than $400M of GO bonds in Detroit's nearly $12B of "unsecured" debt. The October 1 default triggered most of a $9.37M interest payment due on that paper to have to be made by Assured and National.
- The lawsuit also raises the insurers' concern about the $350M debtor-in-financing deal Detroit reached with Barclays in October. They want the court to prohibit the city from giving any creditor "super-priority status" in which those property tax payments again may be diverted from the GO bonds.
- The next payment due on the bonds - $47.6M - is due on April 1.
- Also keeping an eye on the proceedings is Ambac (AMBC).
- Muni ETFs: MUB, PZA, MUNI, TFI, ITM, MLN, XMPT, SHM, SUB, PRB, SMB, SMMU, PVI, VRD, GMMB, RVNU
Monday, Oct 282013, 3:38 PM
Monday, Oct 282013, 3:38 PM| Comment!
- Municipals (MUB) aren't just trading cheap relative to Treasurys (TLT), but also to corporates (LQD), argues JPMorgan.
- The observation isn't a huge surprise, but the team notes continued light supply of municipals as a supporting factor - there's been an average of $5.6B per week in issuance since rates turned higher in May vs. and average of $7.2B per week from January to April. It turns out the refinance market for local governments has slowed along side that of homeowners.
- JPMorgan doesn't expect a "sustained uptick" through the end of the year, but what about this fall's big drop in rates?
- Muni ETFs: MUB, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, NY.
- IG Corporate ETFs: LQD, CBND, CORP, FLTR, FLRN, ITR, LWC, SCPB, VCIT, VCLT, VCSH, IGU, IGS, CSJ, QLTA, QLTB, BSCI, BSCJ, BSCK, BSCL, BSCM.
Wednesday, Oct 232013, 3:08 PM
Wednesday, Oct 232013, 3:08 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 222013, 3:48 PM
Tuesday, Oct 222013, 3:48 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 142013, 12:39 PM
Monday, Oct 142013, 12:39 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 42013, 4:15 AM
Friday, Oct 42013, 4:15 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
Monday, Sep 302013, 1:42 PM
Monday, Sep 302013, 1:42 PM| Comment!
- Municipals are cheap relative to the rest of fixed-income on a tax-equivalent yield basis not just to those in high tax brackets, but for those on lower rungs as well, says Vanguard's municipal operations chief Chris Alwine. As opposed to the rest of fixed-income, munis tend to be dominated by individual investors, and hence are more prone to short-term volatility, he argues.
- While muni investors tend to be homogenous, the market itself is very much heterogeneous and "shouldn't be brushed with broad strokes." - is Meredith Whitney listening? There are about $3.7T in assets, with more than 95K issuers, and a majority of the market is AA-rated. In other words, according to Alwine, Detroit is an outlier, not a game-changer.
- Relevant ETFs: MUB, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, NY.
Friday, Sep 272013, 3:37 PM
Friday, Sep 272013, 3:37 PM| 3 Comments
- Detroit has $18.5B in debt obligations and none of the $300M will go in that direction. Instead the money will be used for transportation and demolishing of buildings. "There is nothing we can do to help on the bankruptcy; there is no bailout," says the WH's Gene Sperling. "(It's) like dumping a cup full of water in Lake Michigan," writes Yahoo's Jeff Mackeon.
- Chicago next? It's pension liabilities are 678% of revenue, dwarfing Detroit's ratio.
- Meanwhile, the bond insurers (MBI, AGO, AMBC) have fallen and can't get up as they mull over not just Detroit, but maybe the far larger issue of Puerto Rico.
- Muni ETFs: MUB, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, NY.