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| 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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| More |
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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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Municipal Bond Rates Aren't Telling the Whole Story |
Minyanville - June 8, 2011 - By Atlantic Capital Management
The municipal bond space seems to have weathered the recent storm, reverting back to its normal, quiet existence. That is how it appears on the surface since interest rates and spreads have been falling from their April highs. Yet there remains the question of bond issuance that needs to be examined more closely.
Issuance of municipal bonds has not recovered alongside the reductions in the perceptions of risk. Total issuance so far in 2011 has been the slowest since 2001. Some of this can be explained by the December 31, 2010, expiration of the Build America Bonds Program (BAB). There was an accelerated pace to the sales calendar in November and December, but nothing on a scale that would explain the lack of activity in 2011.
The three-month average of total municipal bond issues at the end of 2011 was, according to the Federal Reserve, an elevated $44.4 billion monthly rate. That average was $10 billion a month more than the April 2010 average (before the 2010 economic slowdown occurred), but only $4 billion a month more than the December 2009 average. So whatever pickup in issuance due to the BAB expiration there was, it was not large.
By contrast, the three-month average for the February-April 2011 period was a paltry $16.9 billion. The monthly range for 2011 has been consistently weak, with a low of $12.8 billion in January and a “high” of $18.9 billion in March.
To put these numbers into greater perspective, the worst three-month period during the credit crisis of 2008/09 was $22.8 billion from September-November 2008. It is an understatement to say something significant is occurring when there are 30% fewer municipal bonds being offered in 2011 than were offered at the worst of the Panic of 2008.
If we look at a cross section of the municipal sector, the decline in issuance is clear in every category. But it is most pronounced in revenue bonds tied to special districts and statutory authorities. State and city budgets have received most of the scrutiny to date, but bond investors are really having difficulty with these legal categories of state and local government entities.
Revenue bonds are a subset of municipal bonds where the cash flow to pay interest and principal are secured by revenues that come from economic activity associated with a specific facility or system: airport bonds, sewer bonds, hospitals, toll roads, etc. These kinds of bonds appropriate portions of these revenue streams to repay bondholders. The revenue streams themselves are tied to general economic conditions.
The three-month average monthly issuance for revenue bonds fell from $31.6 billion in December 2010 all the way down to $9.5 billion in April 2011, a 70% decline. We also know that most of the decline was “new capital” rather than refinancings. The three-month average for “new capital” across all types of issuers was $32.2 billion in December 2010, plummeting to $9.3 billion by April 2011. This is the opposite of 2008/09 where refinancings were more greatly affected.
For the complete article.
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