When FIX – the industry electronic trading standard – was fleshed out for fixed income in 2003, municipal bonds were incorporated. I got a fresh look at FIX at the FIX Protocol Americas Trading Conference this week. All the major muniland alternative trading systems (ATS) including Bonddesk, MuniCenter and Tradeweb, as well as the major dealers are already FIX compliant for the latest 4.4 version.
The bankrupt cities San Bernardino and Stockton, California share similar fiscal woes. Both include very high employee pay and benefits. Both have sought the protection of Chapter 9 municipal bankruptcy and are shielded by the courts from any new litigation. The court protection gives the cities time and fiscal space to negotiate with employees and creditors, and to organize their financial affairs. It’s hard to imagine the difficulty of running a city in bankruptcy with dwindling cash reserves.
I wish that I knew how to put on a conference, because we need a muniland event with Bill Lockyer, California’s state treasurer, as the headliner. I would invite all the state treasurers and attorneys general to learn how state officials can wield their power to protect local governments from unscrupulous underwriters, bond counsels and financial advisors.
The Bond Dealers of America, an organization representing national middle-market bond dealers, held its national conference in Chicago last week. I did not attend, unfortunately, but the agenda was a good mix of regulatory and legislative perspectives from the buy-side (mutual funds, insurance firms, asset managers) and electronic trading platform executives.
Things are heating up in Albany, New York’s capitol. Someone close to Governor Andrew Cuomo appears to have been whispering into the ear of New York Post reporter Fredric Dicker:
The Joint Committee on Taxation is circulating an analysis of tax reform proposals, one of which includes removing the municipal bond tax exemption for all bonds issued after December 31, 2012. If the tax exemption is repealed or capped so that the federal government can collect more tax revenue, bond prices will fall. The higher yields would repay investors for their loss of tax exemption, nevertheless, groups are forming to oppose proposals to repeal the exemption.
One of the most common complaints in muniland is over a lack of disclosure. Public officials often say too little too late about fiscal matters. That is why it was a pleasant surprise to come across the proactive response of Joseph Calabrigo, the town manager of Danville, California, to Moody’s announcement that it is reviewing credit ratings associated with lease-backed and/or general obligation debts issued by 32 cities in California.
Juan Carlos Batlle, President of the Government Development Bank for Puerto Rico, does not like the way I characterized his comments at the Bloomberg State & Municipal Finance Conference last week. Here is the transcript of the panel he appeared on, so you can read his comments for yourself.