Buy side

As rating agencies seek to provide more transparency and regain accountability on how they rate credits, Standard & Poor's has issued a report stating how it will suspend ratings for U.S. public finance issuers.

The municipal market can expect to see $1.2 billion in new issuance this week, down dramatically from last week's revised $4.42 billion as the market takes a rest before Labor Day.

Investors pulled money from municipal bond mutual funds for a fifth consecutive week.

The week ending Aug. 24 saw $148 million in outflows from muni bond funds that report their flows weekly, according to Lipper FMI.

When Treasuries run, munis jog. That's the usual trend. But this week's Bond Buyer indexes suggest the muni market backed up quite a bit more than Treasuries on concerns of diminished demand and the prospect of post-Labor Day supply.

Even amid record-low muni yields, new issuance is expected to take a hit this week, with $3.65 billion of new money coming to market, down from last week’s revised $4.72 billion.

Plenty of scary headlines were circulating in the global marketplace this week, prompting investors to flock to high-grade fixed income.

CHICAGO — St. Petersburg, Fla.-based Raymond James & Associates is hoping to carve out a bigger chunk of senior-manager business in the Midwest with two new public finance hires in Chicago, one to bolster the firm's local government team here and the other to focus on large governmental issuers.

Kroll Bond Ratings got one step closer to rating muni credits last week by announcing its first big public finance hire. The next step is to release a comprehensive default study to show the market it can be a serious rival to the three dominant rating agencies.

The municipal market can expect to see a surge of municipal issuance this week, with $5.28 billion coming to market, up from last week’s revised $2.55 billion.

The Bond Buyer's weekly indexes indicate that tax-exempts outperformed the Treasury market this week — a trend that almost never happens when the two markets are rallying.

Higher borrowing costs for state and local governments as a result of the sovereign downgrade? Hardly. Or at least: not yet.

When Moody's Investors Service warned of a possible downgrade to the United States' sovereign credit last month, it said hundreds of triple-A muni credits ¯ including five of the 15 states it rates Aaa ¯ could likely follow.

Calm, yet cautious. Skeptical and apprehensive. Unfazed. Those are the mixed emotions that both retail and institutional investors have amid all the speculation and uncertainty swirling through the municipal market following last week's unprecedented downgrade of the U.S. by Standard & Poor's.

Nobody knows exactly what the long-term impact of the United States losing its AAA rating from Standard & Poor's means for municipal bonds, but that didn’t stop the experts from speculating.

Moody’s Investors Service called the second-quarter a "critical test" for liquidity facilities supporting the variable-rate demand market. So kudos all around, for the market passed with "near-universal success."

Even with municipal bond yields across the curve dropping to 2011 lows last week, borrowers are still not jumping at the opportunity to come to market.

In a historic week for the nation and the financial markets, money market funds saw outflows across the board. As Congress was busy ironing out a resolution to the debt-ceiling crisis before the Aug. 2 deadline, investors withdrew $1.23 billion from tax-exempt money funds in the week ended Aug. 1, according to the Money Fund Report, a service of iMoneyNet.com.

Health care and housing remain two of the most risky sectors in the municipal market, with the federal health care bill and the sluggish real estate market contributing to skepticism about the sectors. But muni experts say some distressed debt is safe enough to be a buying opportunity.

While the speculative hysteria about across-the-board municipal debt defaults has calmed, many investors are still wondering what bonds remain at risk and how many municipalities will end up in bankruptcy.