Muni sweeps: Increasing the muni investor pool

It’s a glorious spring day in America and everything continues to bounce along. A little progress here and some fall back there. Oh and that unpleasant negative ratings watch on United States debt from Standard & Poor’s. Yeah that is not good. Welcome to a new week in muniland. The sun sets over a pond in Rogers, Arkansas, November 8, 2009. REUTERS/Lucy Nicholson

The sun sets over a pond in Rogers, Arkansas, November 8, 2009. REUTERS/Lucy Nicholson

Increasing the muni investor pool:

Marketwatch has an article which frames the proposed Wyden and Coates federal legislation for muni tax-exemption as having the effect of shrinking the investor pool.

I think this is a good frame to think about tax changes within. Whether they broaden the pool of investors for municipal debt or narrow it.

Build America bonds helped the muni market because they attracted new investors.

Want muni bonds? Get to a bulge bracket firm

WTC in progress Want to get some of the tax exempt bonds that are funding Silverstein Properties Inc.’s rebuilding of the new World Trade Center site?

Good municipal debt offerings, like hot IPOs, are usually reserved for clients of the underwriting syndicate.

Equity IPOs get all the press but it’s new muni bonds which are quietly allocated to the “high net worth” accounts and left there to spin off a multi-year stream of interest.

Welcome to MuniLand

As we begin exploring the municipal bond market in this new blog, it’s helpful to take a historical perspective.

To help us understand on a quantitative basis we have some useful data from the Securities Industry and Financial Markets Association (SIFMA). The data tells us that the municipal market is shrinking on a relative basis to other fixed income classes. Quelle surprise!

The borrowing needs of states, cities and public/private partnerships have grown from ~ $400 billion in 1980 to ~ $2.93 trillion in 2010. This is about a 7 fold increase.

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