A smarter way for Congress to talk about muni tax code

By Cate Long
April 27, 2012

Chris Mauro, head of U.S. municipal strategy at RBC Capital Markets, sent around a comment note suggesting that the media coverage of the Senate Finance Committee hearing Wednesday that included discussion of possible changes to the taxation of municipal bonds was overheated:

Does the market trust corporate issuers more?

By Cate Long
April 26, 2012

Darrell Preston of Bloomberg News wrote a great piece comparing the yields on trades of comparably rated corporate and municipal bonds. He highlighted that corporate bonds have a much higher risk of default than municipal bonds but have similar yields. His analysis suggests that risk is not being properly priced if in fact ratings between asset classes are comparable and that municipal issuers are paying interest rates that are too high.

Municipal bonds don’t always have the best after tax returns

By Cate Long
April 23, 2012

The following is from guest commentator Terry Hults, Senior Portfolio Manager of Municipal Investments, at AllianceBernstein. It’s helpful to see municipal bond investing in a broader light and the data above really frames the discussion well.

Boston funds publicly, while Chicago goes private

By Cate Long
April 20, 2012

Two major American cities are embarking on large capital programs, but in very different ways. Boston Mayor Thomas Menino has a $1.8 billion, five-year plan that he will fund with municipal bonds, while Chicago Mayor Rahm Emanuel is trying to push a $7 billion plan, which will be paid for by private investors, through the city council. It would be hard to find to two more dissimilar approaches to rebuilding America’s urban infrastructure or two more different lists of who will reap the monetary benefit of the improvements.

The Marlins’ new home, courtesy of taxpayers

By Cate Long
April 4, 2012

Kevin Grey of Reuters wrote a delightful piece describing the opening of the the new home of the Miami Marlins. The stadium has all the touristy bells and whistles that you would expect from a state that brought us Walt Disney World, Universal Studios and Sea World:

Muniland’s bad boys

By Cate Long
March 22, 2012

Last week I called Puerto Rico “America’s Greece” partly because of its financial statistics and partly because of its inclusion in the muniland bad-boy list maintained by Thomson Reuters Municipal Market Data. What the bad-boy list tells us is how much the bonds of the weakest issuers trade over the AAA benchmark. To put it another way, that difference is the premium the market charges for the risk of owning these bonds; it also reflects the premium the bad-boy issuers would have to pay to bring new bonds to market. For example, Puerto Rico, currently the weakest borrower on the list, would have to pay 225 basis points more than a AAA 10-year bond to borrow. Given that MMD AAA benchmark closed on Tuesday at 2.33 percent, that would mean an investor would demand a yield of 4.58 percent to buy a 10-year Puerto Rico general obligation bond. Also using Tuesday’s numbers, investors would demand a yield of 3.88 percent to own a 10-year California GO bond. This is how the market works — it punishes the weak.

The SEC’s startling refresher on due diligence

By Cate Long
March 20, 2012

The SEC’s Office of Compliance Inspections and Examinations, muniland’s uber-regulator, issued a “Risk Alert” yesterday directed at underwriters of municipal bond offerings. The alert basically said: If you offer new bonds for sale, you must perform due diligence on the issuer. And you better document what you did.

The birds’-eye view of muniland

By Cate Long
March 14, 2012

My Thomson Reuters colleague at Municipal Market Data, Daniel Berger, published an excellent report on the debt of the 40 poorest U.S. cities. His work is exclusively for MMD subscribers, but I excerpted the high-level part where he summarizes the general view the credit rating agencies have about municipalities. Here is what Dan had to say:

An open letter to Puerto Rico Governor Fortuño

By Cate Long
March 13, 2012

Dear Governor Fortuño:

I wanted to write you to discuss the condition of Puerto Rico’s economy and its municipal debt load. After I wrote a column last week entitled “Puerto Rico is America’s Greece,” I was surprised to see the piece get a lot of attention. What I said has been common knowledge in the U.S. bond market for some time, and the facts that I brought up have been previously pointed out by the major credit rating agencies. For those in municipal bond markets, I wasn’t really adding much that was new to the conversation.