Wobbly muniland markets

August 25, 2013

Just some chart play today. Notice all the weak spots.

Chart 1 and 2 are from Morgan Stanley’s August Municipal Bond Monthly.

S&P Muni Index data is here.

Check me out on Reuters Insider. Insider is a free Thompson Reuters video service for finance professionals covering multiple asset classes.

An appeal to President Obama as he goes to Scranton

August 23, 2013

President Obama and his entourage are pulling into Scranton, PA for a speech on Friday. In many ways Scranton is the east coast equivalent of Detroit; a former industrial powerhouse reduced to the economic wilderness. The city’s unemployment rate was 9 percent in April 2013. Scranton almost ran out of cash last summer and the mayor reduced everyone to minimum wage to meet payroll.

What Obamacare may cost muniland workers

August 22, 2013

A handful of U.S. cities, led by Chicago, are working to shift retiree health care expenses (OPEBs) off their balance sheets and onto the federal government via President Obama’s Affordable Healthcare Act. Retiree healthcare is a big expense for muniland, and few governments have saved for this expense. Since OPEBs are often protected by contract, they are not easily lowered or adjusted. Spending such as education and other programs is often crowded out. Shifting some of these retiree benefits to Obamacare is attractive for many stressed cities.

Muniland is shrinking

August 20, 2013

Muniland bond issuance is slowing, according to Thomson Reuters data. Year-to-date issuance through June was $176 billion versus $194 billion in the same period a year ago. Thomson Reuters broke down the data by the largest issuing states and region of the country above. The West, likely fueled by California, and the Southwest were the only regions that borrowed more this year than last. It would be interesting to map this against economic growth across the country.

Diluting the MSRB

August 20, 2013

Muniland’s overseer, the Municipal Securities Rulemaking Board, has a big job keeping the $3.7 trillion municipal bond market in order. The MSRB was first authorized by Congress in 1975 and mandated to have 5 securities firms, 5 bank dealers and 5 public members. It was nonetheless dominated by the views of bank and dealer members, rarely undertaking investor protection initiatives. There was minimal oversight of municipal bond trading and underwriting practices as dealer banks were steering the ship.

Can Philadelphia borrow to save its schools?

August 16, 2013

Philadelphia will borrow $50 million to fund the opening of its school system on September 9th. Reuters reported:

Muniland, meet your issuers

August 15, 2013

How safe are GO bonds?

August 14, 2013

Detroit’s Emergency Manager Kevyn Orr and Michigan Governor Rick Snyder have told some bondholders that they will not be repaid at 100 cents on the dollar in Detroit’s bankruptcy plan. Lamentations ring out across the nation. This treatment of general obligation (GO) bonds – the gold standard for municipal securities – has rocked the market.

Where is Detroit’s sales tax?

August 14, 2013

I have read about 5,000 stories about the collapse of Detroit. I keep searching for some useful or novel idea for fixing the city, and what I haven’t seen is any discussion of raising taxes.

Stockton proposes sales tax hike to put police on the street

August 13, 2013

Stockton, California was a topic on Morgan Spurlock’s Inside Man program on CNN this week. The focus was on the increase in crime since the city slashed spending on police and fire in its bankruptcy proceeding. 70 percent of the city’s budget is spent on “safety” needs, and the city is broke.