Three good books on muniland

March 5, 2012

The municipal bond market is an arcane topic that receives little attention from the mainstream media or the academy (there are not many sources of complete information online, either). Fortunately there are several new muni books that are miles ahead of the thick tome that was previously lauded as the industry must-read: The Handbook of Municipal Bonds, part of the Frank Fabozzi series. Weighing in at over 900 pages, the Fabozzi book is best left for advanced muni market participants.

End municipal tax exemptions for private projects

February 29, 2012

There is a very blurry line in muniland between truly public activities and private activities that allegedly have some public good, and into this ill-defined space, for-profit and non-profit organizations have found ways to issue tax-exempt municipal bonds. This gray area should be a prime target for Congress to examine when it goes looking for ways to raise more tax revenue from muniland.

Muniland needs defenders when Meredith Whitney talks her book

February 23, 2012

Yesterday DealBook announced the dreariest news possible for muniland: Meredith Whitney is publishing a book entitled Downgraded: Why the Next Economic Crisis Will Be Local, which is due out in November. DealBook says:

From a rates market to a credit market

February 22, 2012

I attended two events in the last few days that featured top muniland bond fund managers discussing the markets, and a theme that kept coming up was how the financial crisis had substantially changed muniland. In nearly identical language, three fund managers said the market has changed from a “rates” market — where trading and portfolio decisions were made based on interest-rate movements — to a “credit” market, where buying decisions pivot on the credit quality of individual bonds. This is a sea change for the business and has driven more demand for credit analysts in muniland. It has likely caused a growing reliance on official credit ratings among individuals and firms that can’t do credit analysis.

2.5 million muni bond investors unaffected by proposed tax changes

February 15, 2012

In his budget for fiscal year 2013, President Obama has resurfaced his proposal from last September to reduce the tax exemption for the wealthiest municipal bond investors. This tax reform proposal is unlikely to pass this year, but a battle is already raging in the media about what damage the change could do. Dire predictions of much higher yields for municipal bond issuers are being thrown around with little or no verification.

What happens to muniland in 2012?

February 3, 2012

It looks like smooth sailing for the municipal bond market in 2012, according to three senior market participants who exchanged views at the Fitch Ratings 2012 Municipal Credit Forum. Continued strong demand for municipal bonds, ongoing low bond issuance, favorable Federal Reserve rate policy and major banks upping their direct loans to municipal entities will make 2012 another strong year.

Muniland: the big picture (part 2)

February 2, 2012

Last week I wrote about the size of the municipal bond market and the kinds of investors who are involved in it. This week I thought it would be helpful to explain how municipal bonds are traded.

Muniland: the big picture (part 1)

January 26, 2012

A lot of municipal bond reporting zooms in on particular issuers or sectors and assumes that the reader understands the broader market. But the municipal bond market is foreign to most people, and I thought that it might be useful to sketch out the bigger picture. Here are some quick bullet points:

Munis haven’t been this hot since the ’60s

January 20, 2012

Municipal bonds had a spectacular performance in 2011. Now investors want to know whether last year’s shining returns can be repeated, or whether the mechanics of the bond market suggest that most of the gains for the asset class have already been made.

A municipal bankruptcy does not ruin a state

January 17, 2012

Chart source: Bonddesk

State politicians in Alabama, Pennsylvania and Rhode Island have lambasted municipalities within their borders that have either declared, or attempted to declare, bankruptcy. The politicians gripe that when a municipality in their state goes into Chapter 9 bankruptcy, it affects the cost of borrowing for the state and other issuers located there. But this rests on the false assumption that markets do not discriminate between different borrowers. Municipal bond issuers, like public companies, are looked at individually because every entity has its own story. After all, when American Airlines went bankrupt, it was not as if all airlines suffered.