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SMMU vs. ETF Alternatives
The PIMCO Short Term Municipal Bond Strategy Fund is an actively managed exchange-traded fund (ETF). Designed to be appropriate for investors seeking tax-exempt income, the Fund consists of a diversified portfolio of primarily intermediate duration, high credit quality bonds, which carry interest income that is exempt from federal tax and in some cases state tax. With this Fund, investors will see the names of the bonds owned daily. In addition, the Fund will not use options, futures or swaps.
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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
Friday, Jul 265:56 PMMichigan Gov. Rick Snyder and Detroit Emergency Manager Kevyn Orr defend their plan for the city's bankruptcy, reiterating their opposition to a bailout and maintaining that general obligation bondholders will get no new deal. Meanwhile, the muni bond market's self-regulator says the treatment of GO bonds risks changing how investors view what has long been considered the safest class of municipal debt. |Friday, Jul 265:56 PM| 17 Comments
Friday, Jul 2610:38 AMThe biggest long-term impact on the municipal bond market (MUB) likely will come from how the bankruptcy court views Detroit emergency manager Kevyn Orr’s attempt to lump GO bondholders with other unsecured creditors. Orr's gambit is a "game changer" if permitted to stand, Schroders' Eric Friedland says, adding that at the least a "more granular approach" is needed in analyzing GO bonds, as different states treat the bonds in different ways. |Friday, Jul 2610:38 AM| 2 Comments
Friday, Jul 264:59 AMMunicipal bond funds experienced outflows of $1.2B in the week through Wednesday amid rising concerns that other cities will follow Detroit in declaring bankruptcy. It was the ninth week in a row of net outflows, with the trend starting after the Fed said it would start tapering its QE program later in the year. Yesterday, U.S. Bankruptcy Judge Steven Rhodes suspended lawsuits in state courts that seek to halt Detroit's bankruptcy filing, saying his court will be the only venue for legal action regarding the Chapter 9 submission. |Friday, Jul 264:59 AM| 1 Comment
Tuesday, Jul 232:09 AMU.S. Bankruptcy Court Judge Steven Rhodes has set an initial bankruptcy hearing for Detroit for tomorrow, when the city will request that it receive federal court protection from lawsuits. Fearing that their benefits will be cut, Detroit retirees, workers and pension funds have already submitted three cases in state courts to try to stop the bankruptcy, although federal law usually trumps state law in bankruptcies. |Tuesday, Jul 232:09 AM| Comment!
Monday, Jul 223:51 PMThe selloff in fixed income (AGG, BND) has created great opportunity in a number of sectors, writes David Kotok, particularly municipals (MUB -0.7%), where the entire curve (of highest quality paper) is trading above comparable Treasury yields. Present pricing only makes sense if one believes the U.S. tax code is going to be repealed. The dysfunction may even have overseas investors attracted to the raw yield of munis, says Kotok, suggesting evidence sophisticated foreigners are stepping up to buy.
|Monday, Jul 223:51 PM| 1 Comment
Monday, Jul 224:47 AM"If Detroit isn't too big to fail, is any city?" asks the WSJ. There's Oakland, "Detroit's doppelganger on the West Coast," where 100 police were laid off recently to fund retirement benefits and pension-obligation bonds despite high crime. Philadelphia spends about 20% of its budget on pensions, while Chicago Public Schools is firing 2,100 people due to a $400M rise in retirement payments. "The pension crisis is no longer around the corner," said Mayor Rahm Emanuel. "It has arrived at our schools." |Monday, Jul 224:47 AM| 6 Comments
Sunday, Jul 212:06 AMDetroit has asked a federal judge to set the city's initial bankruptcy hearing for Tuesday, when it plans to seek protection from creditor lawsuits. The request came after a state court ordered Michigan Governor Rick Snyder to drop Detroit's Chapter 9 filing, arguing that it breaches the state's constitution. However, bankruptcy lawyer Kenneth Klee believes that a state judge can't force Detroit to withdraw the petition even if Snyder wants to, only a federal judge can. |Sunday, Jul 212:06 AM| Comment!
Friday, Jul 193:36 PMAfter hanging in there early, municipal bond prices (MUB -0.7%), (HYD -1.5%) tumble in wake of the Detroit Chapter 9 filing (this as Treasury yields fell). "If you are a market-maker today, you have to be cautious because you don't know what the market impact is going to be," says Matt Fabian of Municipal Market Advsiors. Michigan bond funds: Eaton Vance Michigan Muni closed-end fund (MIW -0.8%), BlackRock MuniYield Michigan (MIY -1.3%), Nuveen Michigan Quality (NUM -0.7%). |Friday, Jul 193:36 PM| 11 Comments
Friday, Jul 199:46 AMThe iShares Muni Bond ETF (MUB +0.1%) opens with a slight gain as does the High Yield Muni ETF (HYD +0.2%) following last night's Chapter 9 filing by Detroit. "The situation in Detroit (is) a Michigan issue and not a broader muni market issue," opined BlackRock two weeks ago in anticipation of the filing. Other names of interest: MBIA (MBI -1.7%), Assured Guaranty (AGO -1.9%), Ambac (AMBC -2.4%). |Friday, Jul 199:46 AM| 8 Comments
Thursday, Jul 188:47 AMChicago's general obligation and sales tax ratings are cut 3 notches by Moody's to A3 from Aa3 as news of the city's large and growing pension liabilities and budget pressures apparently finally reaches the agency. The move affects $8.2B of the city's GO and sales tax debt. The outlook is negative. |Thursday, Jul 188:47 AM| 1 Comment
Thursday, Jul 184:09 AMMoody's has cut Chicago's general-obligation debt rating by three notches to A3, with the outlook negative, citing a retirement-fund deficit of $36B and "unrelenting public safety demands" on the budget. "Absent significant growth in the city’s operating revenues, escalating pension funding requirements will increasingly strain the city's operating budget, as pension outlays compete with other spending priorities, including debt service and public safety," Moody's said. (PR) |Thursday, Jul 184:09 AM| Comment!
Thursday, Jul 183:40 AMDetroit could reportedly file for what would be the largest municipal bankruptcy in U.S. history within days should emergency manager Kevyn Orr fail to reach agreement with the city's bondholders, pension funds and other debtees over restructuring long-term liabilities of $20B. The plan is to offer secured creditors much of what they're owed but to provide pennies on the dollar to unsecured bondholders, unions and pension funds. Municipal-worker retirees would be especially hard hit, receiving less than 10% of what they're owed. |Thursday, Jul 183:40 AM| 6 Comments
Tuesday, Jul 93:55 PMInvestors pulled $13.5B from municipal bond mutual funds in June, according to Lipper, led by Vanguard which saw $2.3B exit (more on Vanguard outflows). The rush out is 2nd only to that seen in December 2010 when skittish investors were spooked by Meredith Whitney's loud call for a large number of state and municipal defaults. Unlike 2010, last month's move was part of a broad exit out of fixed income. Among muni ETFs: MUB, SUB, MUNI, PVI, PZA, SHM, TFI. |Tuesday, Jul 93:55 PM| Comment!
Thursday, Jun 274:51 PMGundlach: Tell us how you really feel, Jeff. "TIPS (TIP) are probably the worst asset class in the U.S. ... I have talked myself blue in the face (previous) trying to get investors not to buy (them)." Given their recent big declines, he doesn't hate them as much as a few weeks ago, but he's still not a buyer. On municipals (MUB), he's a buyer, particularly in closed-end funds who've been doubly whacked thanks to growing discounts to NAV. A sampling of muni CEFs: NIO, NVG, BTT, NPM, NRK, MUC, VCV, NEA. |Thursday, Jun 274:51 PM| 3 Comments
Thursday, Jun 273:05 AMU.S. states have a combined pension shortfall of $980B, Moody's calculates, or the equivalent of 66% of their income on average, including money from federal block grants and aid. Nebraska has the smallest gap relative to revenue with a shortfall of 7%, while Illinois - not surprisingly - has the largest hole with 141%. Moody's intends to take account of the underfunded pension schemes when assigning credit ratings. |Thursday, Jun 273:05 AM| 6 Comments
Wednesday, Jun 263:34 PMWith today's gain, the iShares AMT-Free Muni Bond ETF (MUB +2.1%) has its biggest two-day rally since the financial crisis. but is still off more than 5% YTD. "We are taking advantage of this very opportunistic time," says Cumberland's David Kotok, reiterating a bullish stance he's had for a couple of weeks. "We see no more attractive alternatives." |Wednesday, Jun 263:34 PM| 3 Comments