MuniLand

Bonddesk, an alternative trading system, has published an excellent report on what types of  muni bonds retail is trading.

Contrary to common wisdom revenue bonds, those NOT backed by taxing authority, were the clear winners as they captured 63% of retail trades.

Average yields in April are shown for bonds maturing in 10 years. (See the report for more yield data.) General obligations bonds Revenue bonds AAA 3.2% 3.4% AA 3.5% 3.8% A 4.1% 4.5% BBB 5.2% 5.2% High yield 7.2% 6.5% % of retail trades 29% 63%

Smartmoney described revenue bonds in a recent article.

[O]ver the past decade, private developers have figured out how to jump on the [muni] bondwagon.

Blogging politicians

The House Financial Services Committee is blogging!

Right on!

Here is why they are doing it:

We believe that during this time of ongoing economic uncertainty there are questions being asked that are not being answered. We believe there are areas of financial services regulation and housing policy that are being overlooked which demand scrutiny.

We believe that there is a need for clear, concise appraisals of policies and ideas as opposed to “inside baseball” commentary.

We believe there are reporters, congressional staff, advocates, academics, constituents, and Members of Congress who have interest in financial issues, but don’t necessarily have the time to do the digging, and we hope this blog makes it easier.

There is a very interesting class of municipals that you may not know about.

They are called “variable rate demand obligations” (VRDOs).

Moody’s estimates the market size at about $380 billion or 13% of the $3 trillion municipal market.

Moody’s issued a report today saying that this class of munis is finding its sea legs. This is good news for muniland. The health status of VRDOs was a big concern for market participants and Moody’s is cautiously optimistic.

VRDO’s are bonds issued with longer maturities (up to 30 years) that you can put back to the trustee or tender agent with a little notice.

Good morning Muniland!

Muni funds down single bonds up

Michael Connor of Reuters has written an excellent article entitled “Some wealthy buyers swim against outflow tide“.

Connor makes the point that muni funds have been forced to sell off bonds for 25 straight weeks as they suffer redemptions and someone is picking up the slack.

If there wasn’t a strong pool of ready buyers then municipal yields would be rising. And in fact they have gone down.

Shopping for municipal bonds is tough.

Investors generally don’t know if the issuer is financially healthy or spiraling down to default. The media does not have useful data.

But the information is out there.

Towns and states, that issue municipal debt, are responsible to create thorough, audited documents such as annual financial statements and offering documents for new debt issues.

The Municipal Securities Rulemaking Board (MSRB) has a nice surprise coming for retail investors. It’s an expansion of the EMMA document repository system. And it will make bond shopping much easier.

Greenfields

Remaking our urban distressed areas is not easy. But cities are our economic and cultural centers. Reclaiming the exhausted areas opens up many possibilities.

The Brookings Institution has written a roadmap for renewal. It means changing some law. From the summary:.

Unfortunately, weak and antiquated state laws governing tax foreclosure, land banking, code enforcement, and other areas make it difficult for local governments to address vacancy and abandonment, and prevent them from unlocking properties’ productive potential. To give municipalities the tools the need to repurpose distressed land and buildings, states should:

Everybody beats up on Meredith Whitney for her muniland panic call.

Yesterday she doubled down on her prediction of “hundreds of billions of dollars’ worth” of municipal-bond defaults.

Whitney was speaking on a panel, Reading the Tea Leaves: What Lies Ahead for Financial Markets?, at the Milken Global Conference.

I want to give Whitney some credit.

Whitney has a very good macro view of the U.S. economy. At the Milken conference she said that housing has contracted for four consecutive years. States have spent at a 30% higher CAGR rate than consumers.

UBS finally comes to the table

In November, 2009 the Wall Street Journal reported that Swiss bank UBS was in talks to settle with the SEC on their role into the three year investigation in municipal bid rigging.

After two years they’ve finally reached agreement to pay $160 million in restitution and fines.

From the SEC announcement:

“Our complaint against UBS reads like a ‘how-to’ primer for bid-rigging and securities fraud,” said Elaine C. Greenberg, Chief of the SEC’s Municipal Securities and Public Pensions Unit.

The United States Conference of Mayors released a survey Tuesday focused on metropolitan transportation investments. Generally the take-away is that the mayors want less money spent on highways and more spent on cities’ transport needs.

From the survey:

• Ninety-eight percent of mayors point to investment in affordable, reliable transportation as an important part of their cities’ economic recovery and growth.

• Three in five mayors said they would not support an increase in the federal gas tax if federal transportation funding were allocated among programs in the same proportions that it is today.

American City and County reports on a wonderful photo campaign launched by the Association of Equipment Manufacturers (AEM) to highlight America’s crumbling infrastructure.

I predict the category “One bumpy road” receives a lot of submissions. Here is how it is described by the AEM:

Disintegrating roads are a fact of life for almost everyone. Some have even rewarded us with a flat tire or worse! Send a photo of a decaying bridge or road; show Congress the consequences of their inaction.