There was a fantastic article, “A Sneak Peek at the Streetcar Revival,” in Government Technology yesterday. Old streetcars are being refurbished for service in American cities. I imagine we will see more of this.
The Municipal Securities Rulemaking Board has released data for January showing that the monthly number of small trades is decreasing while trade size is increasing. Trades of municipal securities of $100,000 or less, which are typically used as a proxy for retail activity, continued to trend lower, accounting for 81.4 percent of the 797,451 trades in January 2012. In terms of par traded, or the face amount of bonds that are redeemed at maturity, small trades accounted for 9.5 percent of all par traded in January. In comparison, trades of more than $1 million accounted for 3.5 percent of all trades and 72 percent of all par traded in January 2012.
Municipal Market Advisor’s Matt Fabian explains the basic equation of muniland: State and local governments are issuing fewer bonds for new projects, which constrains supply. Demand is extremely strong, and the combination is keeping municipal bond yields at historical lows.
At minute 8 in this Bloomberg video, Larry Fink, CEO and chairman of the world’s largest asset manager, BlackRock, says everyone must be 100 percent in equities. I hope he doesn’t mean that everyone should sell their municipal bonds. Could he become muniland’s next Meredith Whitney?
This chart is from some interesting work by Kroll Bond Ratings:
“The amount of municipal bonds outstanding over time varied greatly. As shown in this chart, the pre-Depression municipal bond market was much larger, expressed as a percentage of GDP, than we have seen more recently. It should be noted, however, that the last portion of the pre-Depression upward spike was due to a rapid shrinking of GDP between 1929 and 1933.”