Buy side

Illinois’ $3.7 billion general obligation bond issue that was postponed last week will return to the calendar this week, the highlight of an otherwise bleak primary market.

Nearly all The Bond Buyer’s weekly yield indexes declined this week as long-end yields fell with each passing session and prices strengthened, mostly on the back of a light primary market.

After recouping recent losses last week, tax-exempt money market funds saw $1.75 billion slip away in the week ended Feb. 14.

Issuers paid less to borrow in the tax-exempt market in 2010, with a more pronounced decline in underwriting fees on bond issues authorized as part of the American Recovery and Reinvestment Act compared to the decline of combined tax-exempt and stimulus debt.

The Obama administration’s proposal to renew the Build America Bond program may suffer from the same problem it had the first time around, when the federal government didn’t think municipalities would use BABs that much.

Municipal bond mutual funds in the period ending Feb. 9 saw heavy withdrawals for the 13th consecutive week.

A $3.7 billion taxable Illinois general obligation sale this week is the largest single deal to test the fickle and fiscally challenging waters of the municipal market so far this year. It will be the standout offering in an otherwise lifeless primary.

Tax-exempt money market funds recouped most of last week’s losses, adding $2 billion and finishing with $326.39 billion in total net assets for the week ended Feb. 7, according to the Money Fund Report, a service of iMoneyNet.com.

Low short-term interest rates continue to erode the investment income of state and local governments.

The Bond Buyer’s long-term weekly yield indexes increased this week, reflecting losses in the Treasury market.

As the expiration of the Build America Bond program loomed last year, the market was wracked with uncertainty about just who was going to buy long-term tax-exempt bonds. Thanks to the drought of new municipal bond issuance in 2011, the market is still wondering.

Retail investors in municipals are shaken, but still ­standing, after a relentless barrage of ­negative media hype surrounding forecasts for massive municipal ­bankruptcies and defaults later this year.

Carl Dincesen, the former head of ­municipal credit at Ambac, plans to launch an investor-pays credit ratings service later this month to fill what he describes as a niche: a forward-looking evaluation of the probability a municipality will default.

The recent media firestorm over state and local government finances has resulted in heightened efforts by those in the municipal bond industry to educate jittery investors and enhance disclosure in the nearly $3 trillion market.

Municipal bond mutual fund outflows continued to subside last week from recent record-setting levels as the cash most prone to panic appears to have left by now.

Issuers in South Carolina and California will face little competition as they lead an otherwise light slate of new volume in the competitive and negotiated markets estimated at just $2.62 billion, according to Ipreo LLC and The Bond Buyer.

Tax-exempt money market funds fell $2.34 billion to $324.39 billion in net assets in the week ended Jan. 31, according to the Money Fund Report.

Nearly all of the Bond Buyer's weekly yield indexes were flat to higher this week as losses during the second half outweighed earlier minor gains.

Gridlex, a risk-management and trade analytics service, announced the launch Tuesday of a service evaluating the illiquidity of municipal bond mutual fund holdings.

Climbing the wall of expiring bank guarantees on municipal debt in the coming months may not turn out to be as daunting as anticipated.