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Municipal Bond News

October 2012 Municipal Bond and Tax Free Mutual Funds News

municipal bonds

This month saw more of news about financial market volatility. Tax day has come and past. The Month’s municipal bond news included:

  • 10/18/2012 No Wave of Bankruptcies – Moody’s placed 30 California cities’ Municipal Bonds on credit watch for downgrades. Investors should probably avoid these areas:
  1. Azusa
  2. Berkeley
  3. Colma
  4. Danville
  5. Downey
  6. Fresno
  7. Glendale
  8. Huntington Beach
  9. Inglewood
  10. Long Beach
  11. Los Gatos
  12. Martinez
  13. Monterey
  14. Oakland
  15. Oceanside
  16. Palmdale
  17. Petaluma
  18. Rancho Mirage
  19. Redondo Beach
  20. Sacramento
  21. San Leandro
  22. Santa Ana
  23. Santa Barbara
  24. Santa Clara
  25. Santa Maria
  26. Santa Monica
  27. Santa Rosa
  28. Sunnyvale
  29. Torrance
  30. Woodland
  • Moody’s also placed General Obligation Muni Bonds issued by San Francisco and Los Angeles on review for possible upgrades!
  • Keep in mind that Moody’s only rates 95 of the 482 cities in California. Recently Atwater declared a fiscal emergency and may file for bankruptcy.
Municipal Bond News

September 2012 Municipal Bond and Tax Free Mutual Funds News

municipal bonds

This month saw more of news about financial market volatility. Tax day has come and past. The Month’s municipal bond news included:

  • 9/1/12: Poway Unified School District issued bonds with a high 7.45% interest rate. Oops! They are trying to fix it.
  • 9/17/12: Investors are seeking safety in Municipal Bonds issued by schools. The recent bankruptcy filings in several California towns is causing this affect. School districts unlike Municpalities undergo more oversight. None have defaulted on their bonds.

 

Municipal Bond News

August 2012 Municipal Bond and Tax Free Mutual Funds News

municipal bonds

This month saw more of news about financial market volatility. Tax day has come and past. The Month’s municipal bond news included:

  • 8/29/2012: Texas recently sold Municipal Bonds at some of the lowest rates they have ever seen. Clearly there continues to be high demand for Munis. One year at 0.225%.
  • 8/21/2012: Warren Buffet is terminating default protection for municipal debt. This may signal that he believes the future of muni bonds may not be rosey.
  • 8/7/2012: Peter Hayes with Blackrock issued a report on municipal bonds and blamed states for having a role in hurting local municipalities by cutting aid and passing on more costs.
  • 8/7/2012: Richard Larkin with HJ Sims reported that municipality bankruptcy is dependent on fiscial measures as well as relationships between states, cities, school districts, and counties. If a state takes an active role, it can help avert problems.
Municipal Bond News

July 2012 Municipal Bond and Tax Free Mutual Funds News

municipal bonds

This month saw more of news about financial market volatility. Tax day has come and past. The Month’s municipal bond news included:

  • 7/16/2012: San Bernardino, California declared bankruptcy. There may be some criminal negligence “accounting errors” involved in addition to the usual over paying employees and projects.
  • 7/11/2012: Municipal bond inflows hit a record during the quiet July 4th week. Investors are trying to tax-free income and realize that Munis have done well in the last couple of years.
  • 7/6/2012: Stockton has filed for bankruptcy and is trying a similar tactic as the Vallejo by seeking to cut the interest rate paid to their lenders.
  • 7/6/2012: Obama care is levying a 3.8% tax on many investments. Municipal bonds are not affected by this and should become more popular due to this new tax.
Municipal Bond News

Municipal Bonds – An attractive investment opportunity

Description – The article discusses about the current status of the U.S. municipal bond market as the aftermath of the Europe debt crisis.

As the budget gaps have been narrowed, investors have become inclined towards the municipal bonds. The Standard & Poor’s Muni Bond index was up and gained almost 3.85 percent up to now this year.  iShares S&P National AMT-Free Municipal Bond ETF, traded in NYSE as MUB has also given a considerable rise. The investors are happy with this performance and considering muni bonds as a good contributor to their fixed-income portfolio. Apart from the tax-benefits, the bonds offer other benefits that also lure investors to invest in this.

The knocks on the municipal bonds

Although munis look attractive, yet there are some panics involved in it. The budget deficits as well as the doubtful distinction of U.S. municipal bankruptcy are the key pitfalls, when it comes to investing in muni bonds. Some California cities like Stockton and do Vallejo as well as Harrisburg, Pennsylvania have failed on making debt payments and that surely instill hesitations amongst the bond investors. European debt crisis has contributed a lot in knocking the U.S. municipal bond market. While major European countries such as Greece require trillions of dollars as bailout, it is so obvious that the retail bond investors will be askance about U.S. debt facts. For example, the economy of California, which is at least 6 times bigger than the economy of Greece? Defaults in this state will surely cause panic in the municipal market.

California is not Greece

However, California is not Greece. Not only California, no U.S. state is not like Greece. According to the fixed-income analysts, Greece’s economy has hardly any similarity with the economy of any of the U.S. states. No U.S. government borrows money for funding deficits. In fact, no state can borrow funds for fulfilling deficits over multiple financial years without jumping through several political as well as legal loops. Moreover, U.S. states don’t accumulate debts for operational reasons and the debt-service expenses generally don’t cross 3 percent to 5 percent of the total government expenses.

Downside of U.S. economy

The state governments as well as local governments often slash the budgets whenever there is a revenue deficit. They also raise different taxes including income tax. It becomes a sore for the citizens, for examples, the citizens of California who has just faced such turmoil. And for that reason, the financial experts suggest that every state, except Vermont, should have a balanced budget to avoid facing situations like Greece’s. Such balanced budget would help the municipal bonds investors get paid properly.

U.S. economy – As of now

The good thing is that states are generating revenues with better pace as the budget deficiencies decline. According to the Census Bureau, American states witnessed a growth in the tax revenue generation, as of 2011. In this year, the tax collections rose to almost 765 billion USD. But in 2012, 30 out of 50 American states project a shortfall of 54 billion USD which should be reduced. As per the market strategists, the gap between the earned revenue and deficit has started narrowing down. On the other hand, the gap is increasing in Eurozone countries. Apart from Greece, there are many countries, which managed to remain stable during recession, are now on the threshold.

Revenue generation and Municipal Bond market  

With the growth in revenue generation, the muni bond market seems promising to the investors. They keep accumulating profits including tax advantages that ensure that the demand remains strong surpassing the supply.

The state governments as well as the local governments have experienced financial challenges due to the Great Recession and the Europe debt crisis. However, the U.S. states have hardly accumulated excess debt as countries like Greece.

Author’s Bio – Jonny Pean is a financial advisor of easyfinance.com. His writings on finance, investment, insurance etc lure readers.