Muni sweeps: The Chairman’s presser

April 27, 2011

It’s an historic day for the bond markets as the Chairman of the Federal Reserve, Ben Bernanke, will conduct a live press conference following the conclusion of the Federal Open Market Committee’s two-day meeting.

Reuters will be live blogging the Federal Reserve press conference beginning at 11:30 ET and webcasting the press conference at approximately 2:15 ET.

Downhill for muniland

Credit quality for municipals is on a downward slide. From Bloomberg:

U.S. municipal-bond credit ratings were cut last quarter at the second-fastest pace since 2002 amid the “toughest year so far” for state and local governments since the recession began, Moody’s Investors Service said.

Moody’s said today that it cut ratings on 66 borrowers, including Nevada and Kentucky, and raised 17 in the first three months of the year. The ratio of downgrades to upgrades was 3.9 to 1. The rate trailed only the previous three months, which had the highest ratio since 2002, the credit-rating company said. It was the ninth-straight quarter in which more ratings were cut than raised.

“The trend is likely to prevail for all of 2011,” Conor McEachern, the Moody’s assistant vice president who wrote the report, said in a statement.

Muni pros call end of muni funds

Nicole Bullock of the Financial Times has a story today that bodes poorly for demand for municipal bonds.

The prospects are bleak for a significant revival in investor appetite this year for mutual funds that buy the debt of US states, cities and other local bodies, according to a survey of municipal bond experts.

Only 7 per cent of the 92 municipal bankers, lawyers and issuers who were polled by RBC Capital Markets at a conference sponsored by the Bond Buyer predicted a return to net nflows for this year, the survey released on Wednesday shows.

Investors have been abandoning muni mutual funds since November amid fears of rising defaults in the wake of economic recession, with the survey citing year-to-date outflows of nearly $30bn.

“Over the near term, at least, we don’t see a substantial reversal in the fund flows,” said Chris Mauro, director of municipal bond research at RBC Capital Markets.

Juicy airport bonds

The long awaited Chicago O’Hare airport expansion bonds were priced for institutional investors yesterday. (A little litigation delayed the offering.)

From Kelly Nolan at Dow Jones:

The O’Hare sale, which is by far the largest in the municipal bond market this week, was thus seen as a bellwether–though it will have little competition. Just $1.8 billion in tax-exempt issuance other than O’Hare is expected to sell this week, according to Thomson Reuters Municipal Market Data.

..the O’Hare offering still offered juicy returns. Tuesday’s repricing for institutions, which includes pensions, insurers and mutual funds, showed a $235 million tranche in 2041 offered a 6.10% in yield-to-maturity, around 1.47 percentage points more than triple-A rated debt.

Mini sweeps Illinois Muni To Boost Bond Mandates

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