There is no municipal CDS market

By Cate Long
January 12, 2012

California Treasurer Bill Lockyer, who is responsible for issuing new debt for the state, takes a lot of interest in the price of California’s municipal credit default swaps. The price of muni CDS can affect the cost of issuing new debt, since some investors use muni CDS as a pricing benchmark. But new work published by risk-management firm Kamakura suggests that there is no real market for municipal CDS and prices are generated primarily by broker-dealers posting their best estimates. If a specialty market is just a matter of a few dealers privately sending quotes back and forth, is it a real market? I’m not sure that it is.

Muniland’s most active states

By Cate Long
January 10, 2012

In the municipal bond market, one of the most insightful ways to examine a state is to look at how actively its bonds trade. Broker-dealers make money by trading, so naturally they go where the action is and commit market-making resources to those states. It’s generally true that the most populous states are the ones with the most traded bonds, but if we map the wealth of a state’s citizens to how often that state’s bonds trade, we get some interesting results. For example, New Jersey, which has only 2.8 percent of the national population but a high proportion of its wealthy citizens, might have the highest number of municipal bond owners as a percentage of state population.

Let Europe kill municipal CDS

By Cate Long
October 31, 2011

The solution to Greece’s debt crisis that Europe’s leaders announced on Thursday has market participants and commentators howling. It includes a provision that changes long-established rules for credit-default swaps mid-game. Mike Dolan, Reuters’ Investment Strategy Editor in Europe, said this:

All high government approval ratings are local

By Cate Long
October 3, 2011

This great graphic from Visually maps the public’s great discontent with the federal government using data from the Pew Research Center. It’s hard to imagine the numbers being any worse than this: 11 percent of the public is satisfied with the officials in Washington, DC.

Thumbs down on infrastructure bank

By Cate Long
September 15, 2011

Thumbs down on President Obama’s infrastructure bank

The Bond Buyer is reporting that U.S. transporation groups have given the thumbs down to President Obama’s proposed infrastructure bank. The core repayment mechanism for loans guaranteed by the proposed bank would be user fees and tolls. This contrasts to the current methods, which involve state and local governments borrowing in the municipal market to fund projects or the federal government collecting gasoline taxes to fund highway infrastructure. Given the growing opposition globally to the privatization of public assets, the core purpose of the infrastructure bank is bound to create more unease among public players and citizens. From the Bond Buyer:

Planning a 21st century power system

By Cate Long
September 2, 2011

Planning a 21st century power system

One of the biggest issues for America’s infrastructure is improving the national grid that moves electricity around the nation. From Wikipedia:

California: the queen of borrowers

By Cate Long
August 30, 2011

California is the queen of U.S. states given her size, wealth and desirability. Her economy is the eighth largest in the world and, as of 2008, the gross state product (GSP) was about $1.85 trillion, or approximately 13 percent of the country’s gross domestic product (GDP). It makes sense that she is the largest municipal bond issuer given her population, geographic size and infrastructure needs. California dominates muniland on many levels.

The gusher of municipal bond information

By Cate Long
August 29, 2011

The municipal bond market is often thought of as complex and murky. This is understandable; after all, there are over 50,000 issuers of bonds and a million plus specific municipal-bond issues. It’s staggering to imagine so many different securities.

Chapter 9 struggle: Unions are buying power

By Cate Long
August 15, 2011

“The unions are buying power”

This is a great video of Stephanie Gomes discussing her experience as a member of the City Council in Vallejo, California, as they struggled through a municipal insolvency and bankruptcy. She talks about the power of the police and firefighter unions and their stranglehold on local politics. Gomes comes across as passionate citizen who was willing to confront some of the deep-seated problems in her community. She highlights the importance of local and national media attention on the “dirty laundry” of municipal finances like high salaries and generous pensions for union workers. Her experience is an important lesson for anyone interested in muniland.

Muniland likely resilient to U.S. downgrade

By Cate Long
August 8, 2011

It’s a little frustrating to hear commentators outside of muniland bash all municipal bonds as though they were a homogenous asset class. AOL’s Daily Finance ran a quote from the top regulator at the Municipal Securities Rulemaking Board, who is pushing back on this idea: