Best of the Bond Market for May 17th, 2012
Bloomberg: Tax For Bankrupt Alabama County Fails In State House – The Alabama House refused to consider allowing bankrupt Jefferson County, Alabama, to raise taxes, which may lead to further cuts in services and more missed bond payments. “What they don’t understand is the seriousness of our defaults on general-obligation bonds,” Todd said in an interview. “That’s going to cost the whole state.”
WSJ: On General Obligation Muni’s Investors Advise Caution - When Jefferson County, Ala., defaulted on some municipal bonds last month, investors may have been surprised to learn that the county lacked the authority to fulfill the most basic obligation of its “general obligation” debt: It didn’t have the authority to raise taxes to pay back lenders. Most states—including big ones such as New York and California—cap property taxes, a local government’s single-biggest revenue source.
MarketWatch: U.S. 10-yr yields hit record-low close of 1.71% - Fell further after the article currently 1.689%.
Bond Buyer: Market Post: Munis Firm As Buyers Participate – Yields inside nine years were steady while outside 10 years, yields dropped as much as two basis points.
MarketWatch: US Sells TIPS at Negative Yield – The Treasury Department sold $13 billion in 10-year Treasury Inflation Protected Securities on Thursday at a yield of -0.391%, the fourth straight time TIPS of this maturity have come at a negative yield
Reuters: US Bond Bulls not Ready to Call off The Charge - The case for Treasuries, they say is a simple one: with Europe in recession, China’s economy slowing and hopes of robust U.S. growth fading, the global economy is simply too weak to stoke significant inflation or justify higher interest rates.
WSJ: Chicago Sweetens Deal to Complete Muni Bond Sale - –Chicago increases yield 11 basis points on 2033 maturity to 3.70% $287 Million worth–Worries about city finances kept many investors away–Moody’s slapped city with negative outlook last month. The city also priced about $308 million in taxable general-obligation bonds on Wednesday, with a final maturity of 2042 and a spread over Treasurys of 250 basis points. Initial talk had that portion coming with a 235-basis-point spread, two investors said.
NatLawReview: Increased Regulation of the Municipal Bond Market And Its Potential Effects on Municipal Bankruptcies and the US Economy - Great longer than a summary but not too long overview of potential changes.
The Financial Lexicon: A Different Way To Play ArcelorMittal - if you plan to make a long-term, buy-and-hold type of investment in the company, consider splitting your investment between a long-term ArcelorMittal senior unsecured bond and the stock.
Marketwatch: Muni Bond ETFs and Retirees, A Match Made in Heaven? – “If you buy an individual bond, you get a semi-annual coupon payment,” Colby noted. “With muni bond ETFs, you get monthly dividends that are tax exempt and that’s an appealing feature for retirees.”
Advisor One: 5 High Profile Muni Bond Busts - good summary of Jefferson County AL, Central Falls RI, Harrisburg PA, Boise County ID, Vallejo CA.
Smart Money: Why a Balanced Portfolio Might not Work - Contrary to what you are being told, this 60/40 portfolio of stocks and bonds comes with no guarantees. There have been long periods during which it has done very badly.
Bloomberg: North Dakota Tops U.S. States In Credit Ranking As Florida Rises - The report is another indication that North Dakota’s natural-resource endowment is pushing the third-least-populous state to the front of the nationwide recovery. Florida moved up 16 spots on Conning’s list to 21st after ranking 37th in November.
Reuters MuniLand: We Shouldn’t Dread the Debt Limit – In its current form, the federal government is unsustainable, and many things have to change. The debt limit is a hard deadline that is focusing Washington’s attention again on our fiscal problems. Federal tax reform and budget cuts are politically messy and difficult, but state and local governments have been through four years of these battles. If local politicians can make hard choices, then national politicians can, too.
Bond Buyer: Schilling’s 38 Studios in a Bloody Mess, With R.I. Investors on the Hook - Two weeks ago Schilling’s [Famous Baseball Player] company, 38 Studios LLC, missed a $1.125 million payment that was part of a $75 million loan guarantee the state issued late in 2010 to entice Schilling to move his firm from Maynard, Mass., to downtown Providence