Muni sweeps: Market turning points

May 16, 2011

A muniland expert alerted me that we passed a significant benchmark late last week. The benchmark, which market experts say is a key indicator, is the ratio between the yield for 10-year AAA municipal bonds and the yield for the 10-year U.S. Treasury note.  It hit a 12-month low of 82.35 last Thursday night.

Daniel Berger, Senior Market Strategist at Thomson Reuters MMD, tells me “the light primary market issuance in 2011 has not kept pace with bond redemptions. Muni buyers could be in a larger predicament and reach for muni bonds in June when redemptions jump to $27 billion if monthly average issuance continues to be less than $16 billion.”

Daniel is saying that there will be more money from bond redemptions chasing fewer newly-issued bonds. Prices will likely rise and yields will go down. This could cause a bigger market rally.

More market turning points?

Reuters reports that small investors have slowed and almost ended withdrawals from muni mutual funds.

Outflows at U.S. tax-free mutual funds may have crested, signaling that small investors are possibly warming to America’s municipal market, now in a month-old rally.

Mutual funds data group Lipper late on Thursday reported that funds specializing in U.S. muni debt had nearly $95 million of net outflows in the week ended May 11, marking the 26th straight week of outflows.

But the total was less than an eighth of the previous week’s outflows of over $796 million, according to Lipper, a unit of Thomson Reuters.

The four-week moving average of muni fund outflows also narrowed.

California may register bonds on New York Stock Exchange

The Bond Buyer reports on a market-moving development this morning:

California Treasurer Bill Lockyer is pushing a bill that would allow the state, the largest issuer of municipal debt, to take the unusual step of selling $25 bonds on the New York Stock Exchange.

The proposed legislation would change state law to allow minimum general obligation bond denominations to drop to $25 from $1,000, potentially increasing California’s reach into the retail market.

The bill “would allow us to issue these $25 instruments that are really a security listed on the New York Stock Exchange,” said Tom Dresslar, a spokesman for the treasurer’s office. “The more retail you have, it puts you in a better position to get the best possible price when you go to the institutional side.”

This is tremendous news for retail investors. Imagine being able to get a muni bond price like you get a stock price. Revolutionary!

Open Gov West

I mentioned Open Gov West on Friday in my post about sunlight and citizen participation. Here is some video replay of the conference, and here is a good PowerPoint on “How to create government websites that don’t fail.”

Social Services 211, an open database/wiki/map, won the grand prize for open government application and we are waiting for a link to share.

Mini sweeps

The Hill: Debate ramps up as debt limit looms

Slate: It’s Debt Ceiling Day, and We’re Having a Pension-Cutting Party

MSRB: MSRB Sets New Transparency Standard for Municipal Variable Rate Securities

Ipreo: Ipreo Muni Deal Calendar (w/o May 16, 2011)

The Mainliner Blog: Municipal Investing From a Contrarian Perspective

Investment News: Muni bonds: More bang for the buck

Stateline: In Texas, school growth clashes with a shrinking budget

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