|
|
|
|
| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
|
|
| Bonds Online |
|
|
| 5/10/2013Market Performance |
| Municipal Bonds |
|---|
|
S&P National Bond Index
|
3.00% |
|
|
S&P California Bond Index
|
2.96% |
|
|
S&P New York Bond Index
|
3.13% |
|
|
S&P National 0-5 Year Municipal Bond Index
|
0.70% |
|
|
| S&P/BGCantor US Treasury Bond |
400.09 |
|
| More |
|
| Income Equities: |
|---|
| Preferred Stocks |
|---|
|
S&P U.S. Preferred Stock Index
|
848.03 |
|
|
S&P U.S. Preferred Stock Index (CAD)
|
636.26 |
|
|
S&P U.S. Preferred Stock Index (TR)
|
1,701.05 |
|
|
S&P U.S. Preferred Stock Index (TR) (CAD)
|
1,276.26 |
|
|
| REITs |
|---|
|
S&P REIT Index
|
174.07 |
|
|
S&P REIT Index (TR)
|
425.30 |
|
|
| MLPs |
|---|
|
S&P MLP Index
|
2,469.58 |
|
|
S&P MLP Index (TR)
|
5,428.50 |
|
|
See Data
|
|
|
|
 |
|
|
|
|
|
|
What’s the Matter with the Muni Market? |
GOVERNING - May 12, 2011 - BY: PENELOPE LEMOV
Borrowing is down; lending is down. The municipal bond market's problems run deeper than simple headline risk.
orrowing is way down. As of April this year, state and local government issuers brought only about $62 billion of new debt to the municipal market. That’s less than half of the $132 billion of new debt brought to the muni market over the same period last year.
Lending is also down. Individual and institutional investors have not only stopped turning to the municipal bond market as their source of safe, secure investments, but they’re taking their money out. Investors have withdrawn about $47 billion from U.S. municipal-bond mutual funds since Nov. 10, pulling money out for 24 weeks straight.
Why is the muni market so depressed? The easy answer would be Meredith Whitney's now infamous forecast on 60 Minutes that there could be 50 to 100 sizable municipal bond defaults. But the truth is, the muni market’s current problems run deeper.
Let’s start with the borrower side. The Great Recession is still taking its toll on state and local revenue. Even when that revenue recovers, few economists expect it to bounce back to those heady, pre-2008 days, when growth averaged 6 percent a year. The Rockefeller Institute’s Lucy Dadayan and Donald J. Boyd report that states collected $715 billion in total tax revenues in 2010, a gain of 4.3 percent from 2009. However, that 2010 figure was still 7.8 percent below the levels reported in 2008. Their April 2011 revenue report notes that “despite four consecutive quarters of growth, state tax revenues were still slightly lower in the fourth quarter of 2010 than in the same quarter three years earlier.”
When it comes to revenue recovery in the states, there is a long way to go -- and that has implications for the robustness of the muni market.
At a recent briefing on the Bond Dealers of America’s economic survey, Mark Vitner, committee chair and senior economist at Wells Fargo Securities, pointed out that pre-2008, states could count on healthy revenue growth and felt confident enough to borrow money to build stadiums, airports and city halls. Those projects, of course, fed the municipal bond market, pointing it toward dizzying heights -- as high as $475 billion in issuances in 2007.
There’s a different mindset today. As Vitner noted, states have been adjusting to poor revenue collections by making deep cuts in their budgets. They also are rethinking how much debt they can carry, given not only their present budgetary constraints but also the future outlook for revenue growth. The bottom line: States will be building less and borrowing less. Some market forecasters predict 2011 issuance could fall as low as $210 billion, though $240 billion is more of a consensus figure.
What about lenders? They are conspicuous for their absence. One reason is that the muni market looks increasingly unstable -- not necessarily because of headline risk or fear of defaults. There are bigger questions about whether the tax deductibility that makes muni bonds so desirable will continue. Senators Ron Wyden of Oregon and Dan Coates of Indiana have introduced legislation that would eliminate tax-exempt interest for new state and local debt in favor of tax-credit bonds. Wyden has argued that the tax exemption on muni bonds is inefficient and that replacing it with tax-credit bonds would benefit a broader set of taxpayers, not just high-net-worth individuals. Some of the pros and cons of taxable debt were discussed in a recent column by my colleague Girard Miller. The bill is awaiting further action with the Senate Finance Committee.
For the complete article.
|
|
|
|
|
|
| Partner Market Place |
|
|
|
| Stuff to look at |
Yield and Income Newsletter: A must have for income investors. subscribe NOW
S&P Commentary and Newsletters: S&P
|
|
| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
Keep up with monthly, in-depth coverage of fixed income market strategies, commentary, and insights as seen by our sources. Sign up for the free BondsOnline Advisor now!
Unsubscribe here [+] |
|
|
|
|
|
|
|
|
