A recent phenomenon is the emergence of bonds with shorter call protection as funding alternatives for municipalities. However, the shorter call protection also dampens the potential upside for investors, which in turn reduces the price they are willing to pay.
New York's budget leaves it at risk of becoming one of only five states that do not allow the use of design-build procurement to deliver public infrastructure projects.
The Commonwealth of Puerto Rico needs another "operation bootstrap" to spur its economy, a veteran municipal analyst says.
Scheduled negative amortization of pension liabilities is very common, can be perpetually increasing and is often unrecognized by many pension stakeholders and municipal market participants.
As protection of the retail and non-sophisticated market participant continues to be a priority for regulators, the new rule, G-47, clarifies obligations previously embedded in interpretive notices and makes clear that the time-of-trade disclosure obligation applies when you sell a municipal security to a customer, or purchase a municipal security from a customer, whether unsolicited or recommended, and whether in a primary offering or secondary market transaction.
With much of the angst around the debt ceiling silenced until 2015, Congress is unlikely to focus much on the municipal securities market, which means that the tax-exempt status of municipal debt is unlikely to be threatened in the near term. With that said, regulator cross hairs remained trained on the municipal market.
"One of these things does not belong" is a catchy slogan and it comes to mind when looking at the latest tax policy ideas coming from Washington when looking at the municipal bond tax exemption. The exemption is not a result of the growth of a tax code designed to induce or reduce certain behaviors. Rather, it is the foundation for the flow of capital in a $3.7 trillion dollar market required to efficiently finance the nation's infrastructure.
Land isn't the only thing drying up in California, as the drought's economic impacts are dangerously closing in on the state's financial resources.
Why is Proposed Rule G-47 pending approval by the Securities and Exchange Commission, and how will it differ from the existing rule? Why is this well-intentioned and, as some believe, needed rule the subject of an SEC order that has delayed its implementation?
The Securities and Exchange Commission used a combination of its antifraud authority and SEC Rule 15c2-12 in 2013 to raise the bar for issuers' secondary municipal market disclosures.
The first critical step in a municipal workout, whether inside or outside of bankruptcy, is to get all parties, the debtor and the creditors, to accept that they will all have to incur significant losses as a result of the workout process.
There is no easy, single answer to explain why Detroit or San Bernardino or Jefferson County and other local governments have resorted to bankruptcy in recent years.
Discount bonds performed worse because of the dreaded de minimis rule, under which buyers pay taxes on the gain at maturity at the ordinary income rate when the discount is large. But there is a silver lining taking a tax-loss can ease the pain.
The Government Finance Officers Association supports regulating those professionals who provide "advice" to state and local governments and believes that the Dodd Frank Act and the Municipal Advisor rule will help to ensure that those who provide advice have a fiduciary duty to their government clients.
It is going to be very difficult for the 2 million Puerto Ricans who do not live in poverty to pay $68 billion of principal, plus tens of billions of interest, plus uncertain amounts of swap termination fees, plus billions of unfunded pension obligations. How was it possible for all this debt to have been accumulated?
During October, Puerto Rico bond prices recouped a portion of their late-summer plunge that pushed yields above 10% for certain bonds. The rebound followed efforts by Commonwealth officials to address the island's wide-ranging fiscal challenges, plus speculation that the federal government might step in to assist Puerto Rico.
Puerto Rico's short term problems are tied to a Greece-like debt trap whereby policies aimed at reducing its fiscal deficit deepen a recession that further widens the deficit, with no end in sight to the vicious cycle.
In the guise of "bringing greater transparency and consistency to the analysis of pension liabilities," Moody's proposed an essentially "one-size-fits-all" approach to pensions that would effectively overstate pension obligations by applying an unreasonably low discount rate, said GFOA's Jeffrey Esser.
The Securities and Exchange Commission's $20,000 penalty on the Greater Wenatchee Regional Events Center Public Facilities District highlights the regulator's heightened focus on the municipal market.
Here is some advice to issuer's counsel regarding their role in bond issues.
In response to a recent commentary on the Securities and Exchange Commission's approval of a final rule defining municipal advisors, SIFMA agrees with Ms. Rodgers Caruso on an important point.
NAIPFA supports the practical, common-sense approach taken by the SEC and its office of municipal securities in writing its final municipal advisor rules, and believes that they will directly benefit the interests of issuers by creating a more robust, fair, competitive and transparent municipal market.
Congress is not honoring its Build America Bond promises to state and local governments, even as state and local governments are pledged to make payments to their investors and to rebuild the nations infrastructure critical to the future economy, jobs, and competitiveness of the country.
The city of Allen Park in Michigan is demonstrating a potential path for working through municipal financial stress by addressing issues relatively early on and by gaining important support from residents and the banking community.
After the Fed decided not to taper its stimulus program, muni investors may want to grab an airbag, as the market faces likely volatility in interest rates, fund flows, potential issuance and municipal bond relative attractiveness.
Bonds issued by the Commonwealth of Puerto Rico and related entities have experienced dramatic price swings since mid-August, amid shifting expectations about future supply and a growing media spotlight on the island's budget fundamentals.
Many cities and counties are paying substantially more in interest than is warranted by the real risk of their bond issues. How can local governments remedy this situation and thereby achieve better results for their taxpayers? Marc Joffe and Shannon Sohl believe the solution involves greater transparency.
There is undoubtedly considerable waste from inefficient advance refundings, but let's not throw out opportunities to save taxpayers' money, when warranted, by giving credence to half-baked theories based on shoddy scholarship, says Andrew Kalotay.
In the first half of 2013, we continued to observe a trend of increasing annual enforcement activity by the Securities and Exchange Commission, with a pronounced focus on the sufficiency and accuracy of the municipal market disclosures provided by state and local governments.
Over the years, Detroit's financial deterioration and the city's downturn have been well documented, so its bankruptcy filing came as little surprise to most market participants. This point can be reinforced by Interactive Data's analysis below of six different bonds issued by Detroit and related entities, which are representative of the types of debt and structures Detroit has issued.
A recent study of the economics of advance refundings asserts the provocative conclusion that "[t]he widespread practice of advance refundings of municipal bonds is, at best, zero net present value, though wasteful of fees." This study may well compel a counter-study from the many proponents of advance refundings.
Herbert J. Sims' Richard Larkin does not believe that Detroit had to file for Chapter 9 municipal bankruptcy.
The Detroit bankruptcy doesn't necessarily undermine the market for general obligation debt for all governmental borrowers.
Chicken Little is alive and well after Detroit's filing for Chapter 9 bankruptcy protection.
Build America Mutual details the actuarial analyses of pension and other postemployment liabilities that it incorporates in its review of every municipal bond it insures.
It has been just over a month since Detroit's emergency financial manager Kevyn Orr announced to our market that Detroit would treat its GO bondholders as "unsecured" creditors and pay them only pennies on the dollar. It is past time for the bond market to forcefully react.
It looked and felt like the sequel to Man of Steel had arrived prematurely, but this time, General Zod seemed to set his sights on the bond market, recruiting an army of bond fund managers to annihilate everything from one-year Treasuries to 30-year corporate and municipal bonds.
Savvy indenture trustees and bondholders familiar with the Chapter 11 process understand that being ahead of the curve often provides key advantages. What is less understood is that proactivity is even more important in Chapter 9 (municipal) bankruptcy situations, and often must predate any bankruptcy filing by several months.
Michael Decker's recent letter offers nine criticisms of our report on municipal bond markups. I briefly address his comments in the order they appear so your readers can evaluate his arguments fairly.
If municipal issuers have not come out of the woodwork yet in favor of the tax exemption, this should just about do it. Federal trustworthiness now is in shambles regarding subsidy programs designed to replace the tax exemption.
A recent research paper suggests widespread violations of MSRB fair pricing rules are rampant in the municipal market. But scratching just below the surface reveals serious flaws in the methodology and assumptions underlying the authors' conclusions.
Lessons from litigation over interest rate derivatives may come into sharp focus as the time for Lehman to bring claims against counterparties who terminated derivative instruments shortly after its bankruptcy filing will expire.
The onset of hurricane season on June 1 and the season's first named storm making landfall in Florida remind us that natural disasters can affect bond investors and issuers, including municipal entities in geographic areas in the path of a weather-related event.
With the nation's state and local governments already financing some 75% of America's public infrastructure and the federal surface transportation program on the brink of insolvency, the Finance Committee paper is a recipe for undermining the single most critical source of financing the nation's public infrastructure.
Before the financial crisis of 2008-09, it would have been significant news if yields on municipal bonds had exceeded those on Treasury securities at any maturity, and that occurrence likely would have attracted a variety of investors seeking to take advantage of the relative-value opportunity.
The MSRB needs to clarify that regulated persons serving as financial advisors, regardless of the title they use, cannot disclaim fiduciary duty.
Why invest in the $3.7 trillion municipal bond market? SIFMA's Michael Decker offers some of the compelling reasons.
Does the Federal Reserve really think that another round of continued buying of long term Treasuries and mortgage-backed securities will provide a significant healing effect to the ailing economy? Isn't it time to consider a different course of treatment where the "bang for the monetary buck" will be more significant?
Rep. Gwen Moore thinks HR 1628, the Public Pension Transparency Act introduced last week by Reps. Devin Nunes, Paul Ryan and Darrell Issa, proceeds from a false premise, which causes the bill to introduce opacity rather than transparency of disclosure into the market, and intrudes on state sovereignty and policy preferences in order to attack public workers and pensions.
The timing of twin proposals by Rep. Devin Nunes and Messieurs Erskine Bowles and Alan Simpson, which threatren state and local tax-exempt municipal bonds, could not have been worse.