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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
|
0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
|
1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Obama's BABs bid a boon for U.S., muni bonds |
REUTERS - Feb. 14, 2011 - by Michael Connor
(Reuters) - President Obama's proposals to revive Build America Bonds and shelter the middle class from tax rules targeting the wealthy would be applauded by the drooping $2.8 trillion municipal bond market.
Buried in Obama's massive spending plan presented to Congress on Monday, the fresh authorization of BABs would encourage foreign buying of debt sold by cities, states and towns. Analysts say changes in the alternative minimum tax (AMT) would also be a boon for airports, housing agencies and others niche issuers.
"The market would like these changes, but BABs and the AMT have costs associated with them," said muni strategist Chris Mier at Loop Capital Markets in Chicago. "I am not sure the GOP will be too enthusiastic, especially about BABs."
BABs were the 800-pound gorilla of munis last year, with issuers rushing to market late last year to sell federally-subsidized taxable BABs for infrastructure projects. BABs offerings pushed aside dozens of traditional tax-free deals before authorization expired on December 31.
Short-lived BABs, along with a less prominent program to shelter interest payouts on some types of bonds from the AMT, were credited by many analysts with lowering net interest costs for many muni issuers, reshaping the tax-free yield curve and helping stimulate U.S. economic activity.
"They looked back to see what worked, and BABs worked well," said John Mousseau, portfolio manager and vice president at Cumberland Advisors Inc. "I think BABs were worth 100 to 150 basis points in savings to issuers."
The turmoil of recent months in the muni market that has lifted interest rates was partly caused by a pullback by foreign investors drawn to BABs, according to Mousseau. A revival of BABs sales would steady the muni market, he said.
Worries about the financial stability of state and local governments weathering revenue downturns also fueled three muni sell-offs since November and sharply raised borrowing costs for roads, schools and other basics of U.S. society.
"Once you removed BABs and foreign investors and were left with just tax-free issuance, you were limited to individuals investing personally and through mutual funds," Mousseau said.
Mutual funds specializing in tax-free debt last week posted a 13th straight week of net outflows since mid-November and have lost a net $21.67 billion, according to LipperFMI.
Loop Capital's Mier said Obama's proposal for a three-year fix of the AMT -- a backstop set of tax calculations that eliminates many deductions for the very wealthy -- would increase demand for certain bonds sold by housing agencies, airports and industrial development authorities.
Congress has repeatedly modified the AMT regime on a temporary basis to keep millions of taxpayers from paying sharply higher taxes. Obama proposed a three-year change funded by higher taxes on the wealthy.
AMT bonds paying interest that loses its tax exemption for investors covered by the AMT rules account for about 5 percent to 9 percent of new muni bonds sold each year, Mier said.
Analyst Natalie Cohen of Wells Fargo Securities said a suspension of taxes on AMT munis had doubled issuance last year of airport bonds whose interest is normally tagged by the AMT.
After last year's record high of $425 billion, issuance so far in 2011 has been remarkably slow and ran at an 11-year monthly low during January.
For the complete article.
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