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| 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. |
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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
|
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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U.S. Should Expand Build America Bonds, Goldman Says |
By Michael McDonald
Dec. 1 (Bloomberg) -- President Barack Obama should make the U.S. Treasury’s experiment with Build America Bonds a permanent feature of the municipal market and expand the allowed uses of the proceeds, according to James Esposito, head of investment grade banking at Goldman Sachs Group Inc.
The president would help lower interest rates in the $2.8 trillion municipal market if the program operates past its Dec. 31, 2010, expiration, Esposito told U.S. state treasurers at a conference today in New York. The sale of the taxable securities is accelerating with more than $90 billion expected next year amid emerging demand from foreign investors, he said. Since the first public deal in April, $55.4 billion of Build America debt has been sold.
“An extension and expansion of the Build America Bond program makes all the sense in the world,” said Esposito, who in May testified at a congressional hearing on Build America Bonds. The ratio between municipal bond yields and U.S. Treasury rates fell to 95 percent from last year’s record high of 195 percent in part because of the introduction of the securities, he said.
Build America Bonds
The Build America Bond program was created as part of the American Recovery and Reinvestment Act, approved in February. The program, administered by the Treasury, pays 35 percent of municipal borrowers’ interest costs on taxable securities sold for new capital projects. Issues in 2010 may total $110 billion, Chris Holmes and Alex Roever, fixed-income strategists at JPMorgan Chase & Co., said in a Nov. 27 report.
The Los Angeles Unified School District, which sold $1.37 billion of the taxable securities in October, saved $250 million in interest costs over the cost of tax-exempt debt after accounting for the federal subsidy, enough money to buy 455,000 textbooks a year for 25 years until the bonds mature, Esposito said.
Michael Mundaca, a presidential nominee to be assistant secretary for tax policy at the Treasury Department, said during a Senate Finance Committee hearing on Nov. 4 that the Build America Bond program may be extended. The securities can provide a savings to the federal government compared with the traditional tax-exempt muni market, according to an Oct. 27 report by the Congressional Budget Office and Joint Committee on Taxation.
Treasury officials “need more time” to evaluate the cost if the program is extended and determine whether the subsidy should be lowered from 35 percent if the Build America Bonds are extended or made permanent, Esposito said. It might be expanded to permit borrowers to refinance debt with Build America Bonds at a subsidy of 29 percent, he said.
The demand for Build America Bonds is growing as states and local governments sell more of the debt, he said. The securities now account for 8 percent of the supply in the taxable bond market and 30 percent of the market for investment grade debt maturing in more than 20 years, he said.
“BAB issuance volume has become too big for taxable bond fund managers to ignore,” Esposito told the state treasurers.
To contact the reporter on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net.
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| Stuff to look at |
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S&P Commentary and Newsletters: S&P
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Income Security Recommendation January 2013 Issue.
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