| Bonds Online |
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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
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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)
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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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Recession Will Have Lingering Effect On Municipal Bond Issuers |
DOW JONES NEWSWIRES - April 20, 2010 - By Romy Varghese
Even as the U.S. economy shows signs of recovery, local governments and municipal agencies will remain under pressure from lower revenues, higher expenditures, and weakened balance sheets, Moody's Investors Service said in a report Tuesday.
The ratio of municipal bond upgrades to downgrades improved slightly in the first quarter compared to the last three months of 2009, but the ratio is "significantly lower" than that seen in the second quarter of 2003, the year after the last recession, Moody's said.
"Going forward, we expect credit quality across municipal sectors to continue to exhibit signs of stress, a result of the lag of effects from the national recession on the municipal credits," the ratings firm said.
Meanwhile, Standard & Poor's said budget gaps for the 50 states are likely to exceed $100 billion for fiscal 2011. "While we see signs in some states of a nascent economic recovery and a flattening of the revenue decline of the past two fiscal years, we believe that the effect of the economic downturn on state revenues will be felt well beyond fiscal 2011," S&P said.
Moody's has a negative outlook on all major municipal sectors, such as states, local governments, high-education, health care and U.S. airports. Broad economic conditions, rather than issuer-specific items, sparked ratings changes in the first three months of this year, Moody's said.
During that period, the ratio of municipal upgrades to downgrades was 0.7-to-1, compared to the 1.1-to-1 ratio seen in the second quarter of 2003.
In addition, states will see the end of federal stimulus funds and have to re-think core services and programs, said S&P. States will borrow more as the funds dwindle, although many states are prohibited from tapping debt for budget relief.
"As in past downturns, we believe that state revenues will continue to decline well after the economy begins to rebound," S&P said.
Still, municipal bond issuers have key advantages over corporations facing economic pressures--they can cut services and raise taxes, said Justin Hoogendoorn, managing director for BMO Capital Markets' U.S. Fixed Income Group. "If there is a problem, there is an easier workability."
Indeed, Moody's is in the midst of adjusting municipal bond ratings to the same scale as corporate debt, which will result in higher ratings that better reflect default risk for many issuers. For instance, California, the lowest-rated state, moved from Baa1 to A1 on Monday.
And demand for tax-exempt municipal debt is robust. So far this year, $77 billion of tax-free muni bonds have been issued, compared to $95.6 billion the same period last year, according to Thomson Reuters. Meanwhile, typical corporate bond investors, who don't benefit from tax-exempt muni bonds, have been flocking to taxable bonds called Build America Bonds as a way to diversify and pick up yield. So far, $94 billion of these bonds, of which the federal government covers 35% of the interest rates for the issuers, have been sold since last April, when the first such bonds were sold.
"We think the municipal bond market is very attractive," Hoogendoorn said.
-By Romy Varghese, Dow Jones Newswires; 215-656-8263; romy.varghese@dowjones.com
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