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Monday, May 20, 12:30 PM The hot market for corporate junk (HYG, JNK) has pushed the yield on high-yield corporates (4.88%) well below that of high-yield municipals (5.22% nominally, over 8% on a tax-equivalent basis). The nominal spread of 34 bps is down from 56 bps a week ago as investors take notice of the anomaly. High-yield muni ETFs: HYD, HYMB, XMPT. 3 Comments
Friday, May 17, 3:55 PM The bear market in gold (GLD, IAU) has left three closed-end funds trading at abnormally large discounts to NAV, says Morningstar's Cara Esser: GTU, CEF, and PHYS. Likewise, a small selloff in municipal (MUB) paper has left these muni CEFs at attractive values: NXR, MYD, NXP. 2 Comments [Quick Ideas]
Tuesday, May 7, 9:39 PM While fears of widespread defaults in the municipal bond (MUB) market (perpetuated in December of 2010 by Meredith Whitney) have so far proven overblown, Moody's says a disturbing trend seems to be developing. Although only five defaults were recorded in 2012, that's more than four times the average yearly rate logged from 1970 to 2007. Perhaps the most notable thing about last year's five defaults: three of them were general government defaults as opposed to defaults on bonds tied to specific projects. The historical average for general government muni defaults: 1 every 4.3 years. 4 Comments
Tuesday, April 23, 9:29 AM Forecasts of "Armageddon" for the the municipal bond market (MUB) are terribly misguided, writes Randall Forsyth. Higher rates? Variable rate financing is only a small fraction of the market, and any increase would come from rock-bottom levels. Recent bankruptcies? They get a lot of headlines, but last year accounted for just 1% of all obligations. This year, just 0.6%. Comment! [U.S. Economy]
Tuesday, April 23, 5:53 AM San 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) 4 Comments [Global & FX, Top Stories, U.S. Economy]
Thursday, April 18, 1:34 PM A 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." Comment! [U.S. Economy]
Friday, April 12, 2:46 AM San 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. Comment! [U.S. Economy, Global & FX, Top Stories]
Tuesday, April 2, 10:00 AM Skittish municipal bond investors have driven the MUB below its NAV for more than two weeks - the longest stretch since the panicky period of August 2011. BAML sees opportunity noting munis have lost in March for 5 straight years as many investors sell holdings or avoid buying leading ahead of April 15 to help make tax payments. Comment! [Financials]
Monday, April 1, 3:41 PM In a blow to municipal bondholders, a judge rules Stockton, CA eligible for bankruptcy protection. The ruling let's stay the city's decision to keep pensions intact while imposing losses on those holding the town's paper. Jefferson County, AL and San Bernardino, CA - along with other municipalities - are watching closely. Bond insurer Assured Guaranty (AGO) slides 3.3%. 16 Comments [U.S. Economy]
Thursday, March 28, 1:21 PM A "perfect storm" of seasonal weakness combined with investors shifting money into stocks has opened up opportunity in the municipal closed-end sector, says Jeff Margolin. Muni CEFs fell 4.5% earlier this month even as NAVs declined just 0.5%, leaving the average CEF trading at a 1.1% discount to NAV vs. what has been a 3.2% premium. Comment! [Financials]
Wednesday, March 27, 4:56 AM A federal judge is due to hear closing arguments today about whether Stockton in California should be allowed to file for bankruptcy protection. The main is issue is whether the city can continue paying into the Calpers pension fund while forcing losses on bondholders. The case is being widely watched, with Alabama's Jefferson County and California's San Bernardino also considering breaking with the long-standing practice of meeting obligations to bondholders. 9 Comments [Global & FX, U.S. Economy]
Thursday, March 21, 9:24 AM iShares adds to its existing lineup of Target Date S&P Municipal Series. MUAG tracks an investment grade muni bond index comprised exclusively of issues maturing in 2018. Its expense ratio of 0.30% is in line with other iShares target date series ETFs, but higher than other municipal ETFs TFI (0.20%), MUB (0.25%), PRB (0.24%), NYF (0.25%). Comment!
Tuesday, March 12, 2:43 PM The MUB falls for a 7th straight session - now testing its 200-day moving average for the first time in 2 years. Municipals got beat up in late 2012 when it was rumored their tax-exempt status was to be served up as part of a budget deal. The scare subsided, but Morgan Stanley still sees a 30% chance of that happening. MUB -3.4% since the election. 6 Comments
Tuesday, March 12, 5:02 AM Illinois has become only the second state to be accused of securities fraud, with the SEC saying that it misled bond investors from 2005-2009 about the ever-worsening condition of its public workers' retirement plans by claiming that it was properly funding the scheme when it wasn't. However, while Illinois has agreed to a cease-and-desist order, it has escaped any fines and it hasn't had to admit any wrongdoing. (PR) 9 Comments [Global & FX, U.S. Economy]
Thursday, March 7, 3:14 AM The Detroit City Council has voted to appeal Rick Snyder's decision to put the city in a State of Emergency and appoint an outside manager to clean up its finances. The Michigan Governor is now scheduled to hold a hearing on Tuesday next week, and will decide whether or not to appoint the manager soon afterwards. Tellingly, Mayor Dave Bing doesn't back the appeal. 1 Comment [U.S. Economy]
Sunday, March 3, 2:42 AM Michigan Governor Rick Snyder declared Detroit to be in a state of emergency on Friday and said he would appoint an outside manager to help turn around its dire finances, which include $14B in long-term liabilities. City officials have ten days to persuade Snyder to change his mind. Should he uphold his decision, it would be the latest step in attempts to prevent Detroit filing what would be the biggest municipal bankruptcy in U.S. history. 26 Comments [U.S. Economy, Top Stories]

TFI SPDR Barclays Municipal Bond ETF

TFI

SPDR Barclays Municipal Bond ETF