Muniland on fire

January 11, 2012

In a sign of enormous investor demand, the benchmark for the municipal bond market hit an all-time low today. The Thomson Reuters MMD scale for AAA bonds maturing in 10 years finished the day at 1.82 percent, the lowest level since 1981.

Muniland’s most active states

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.

Tapping the brakes on Illinois debt?

January 5, 2012

Illinois, the state in the weakest fiscal position, is planning two big bond deals in the first quarter of 2012. Next week they plan to raise $800 million in general obligation bonds to finance various transportation projects, followed by another $750 million later this winter in long-term bonds to fund construction projects.

Muniland’s public officials are clueless, not corrupt

December 29, 2011

Matt Taibbi’s latest piece for Rolling Stone, “How Banks Cheat Taxpayers,” blasts a common municipal bond market practice in which a state or municipality selects an underwriter for an offering without soliciting competitive bids for the project. These are called “negotiated bond offerings” in muniland parlance, and Taibbi likens them to a legalized form of bribery:

The municipal bond market and the EU

December 23, 2011

Recently the International Monetary Fund and David Wessel of the Wall Street Journal compared market dynamics for European sovereign bonds and U.S. municipal bonds. I suppose the thinking was that America is a developed fiscal union and could offer lessons to the less politically unified EU, but it’s an impossible comparison. Europe’s market for sovereign debt and the U.S. muni market have practically nothing in common except that they are composed of bonds and trade over-the-counter. They display idiosyncratic behaviors based on fiscal practices, market structure, securities ownership, market liquidity and their use as collateral at central banks.

Munis are the star performer of 2011

December 16, 2011

Bloomberg had a great piece that rounds up the factors that made municipal bonds the best performing financial asset of the past year. The story is framed as a knock on Meredith Whitney for her scare call a year ago:

Year-end in muniland, part 1

December 13, 2011

Lots of excellent municipal bond market analysis is coming muniland’s way, and I’ll be sharing some of it through the end of the year. First up is Daniel Berger of Thomson Reuters Municipal Market Data, who makes an interesting point about the municipal bond yield curve. He notes that the 10-/30-year slope (or difference in yield on 10-year AAA bonds and 30-year AAA bonds) has rapidly steepened since August 1. Berger attributes this to the great performance of 10-year AAA bonds over that period. In a little over two months their yield has dropped from about 2.55 percent to under 2.00 percent. Investors are loving these bonds — it’s a full on “flight to quality.”

Found: $840 billion in municipal bonds

December 9, 2011

The Federal Reserve has quietly admitted they had undercounted about $840 billion of municipal bonds. Bloomberg reports on this new pile of assets:

Foreigners want America’s public assets

December 5, 2011

It seems like foreign governments and corporations are craving U.S. public assets like toll roads, electrical grids and railways. In the case of our largest creditor, the Chinese government, they don’t want any more U.S. Treasuries, but they do want to own the hard assets that comprise our nation’s infrastructure.

Reading the muni CDS tea leaves

December 2, 2011

I saw a strange tweet this morning that said “State CDS blew out yesterday per Bloomberg. Not sure what I missed here.” The anonymous tweeter attached the image above of graphs of credit-default swaps for 9 big states. Notice the very sharp one-day spike for every state except Ohio. Those spikes mean that those who trade muni CDS suddenly thought U.S. states were riskier, by anywhere from 2.09 percent to 17.02 percent, in one day. That is a big gap up.