Articles

Translated into English, this means one thing: Uh-oh.

Although trading opportunities remain in the municipal market, this is not a traders' market. Rather, income-oriented buyers (so called, going-away demand) has driven yields and credit spreads lower and lower as the scarcity of acceptable product continues to meet a growing need for safe, tax-exempt income.

The municipal bond market remains very well bid, with torrid and unrelenting demand from retail and other clients supporting both low nominal yields and tight credit spreads, in particular within 15 years. Longer buyers remain a bit more diffident but still aggressive. We do note a dramatic increase in institutional gains taking last week that helped offset an overall softer tax-exempt new issue calendar, however, even Friday's pointed losses in the Treasury market were insufficient to budge long munis off their strong premium pricing.

Scarcity of well-rated, tax-exempt bonds continues to support very low nominal yields on municipal bonds, with an assist last week from a stronger Treasury market. Throughout the crisis, municipals have been variously treated as a safety instrument (that moves with Treasuries) and a spread product (that moves counter, generally). At this point, there are enough buyers along most of the yield curve to outweigh increasingly hyperbolic reporting on the looming credit crisis in our sector.

With new vehicles of and means to purchase US Savings Bonds, there are more things to be cautious of with the government.

BestCashCow's Lynne Ashminov interviews Tom Doe from Municipal Market Advisors on Build America Bonds. What are they and do they present an opportunity for the individual investor?

With the Fed beginning what will likely be a slow road back to more normal intervention in the economy, Treasuries took a beating last week and municipal bonds saw sympathetic, if modest, losses across the yield curve. Still, this meant strong outperformance by tax-exempt paper that, with tax rates likely to go up and BAB-related scarcity likely to worsen or at least persist, may be setting the stage for record richness in tax-exempts over the next year.

Series I Bonds are currently paying 3.36% and are state and local tax free (and federal tax deferred). They can't be sold for 1 year so can be compared to a 1-year CD.

BestCashCow's Lynne Ashminov interviews Tom Doe from Municipal Market Advisors on what's happening in the municipal bond market. The interview includes current municipal bond opportunities, an assessment of municipal bond credit risk, and Tom's opinion of the biggest challenge facing muni investors today. Part I of a two part interview.