Buy side

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.

Municipal bond mutual fund outflows moderated last week as a nervous market seemed better able to absorb the relentless fund selling.

With a $1.1 billion Chicago airport deal postponed, the New York City Transitional Finance Authority and North Carolina instead will offer two of the largest deals in a lackluster week as February starts with an estimated $3.02 billion of volume, according to Ipreo LLC and The Bond Buyer.

To present a more integrated and timely view of states’ total debt obligations, Moody’s Investors Service on Thursday announced that for the first time it will combine net tax-supported debt and unfunded pension-liability figures when evaluating state ratings.

Tax-exempt money market funds experienced a second week of outflows, losing $3.18 billion, and total net assets dropped to $326.73 billion in the week ended Jan. 24 — $1.17 billion less than the previous week, according to the Money Fund Report, a service of iMoneyNet.com.

All The Bond Buyer’s weekly long-term yield indexes declined this week, as the muni market grew firmer in each session.

Investors in tax-exempt debt should be cautious about heeding recent reports about the possibility of widespread bankruptcy and default in the municipal market, and stop running away from solid, safe investments because of distorted opinions in the media.

Investors established a new record for withdrawals from municipal bond mutual funds last week as headline risk continued to chase people from state and local government debt funds.

Volatility and speculation about defaults and bankruptcies in the municipal market continue to spook issuers and investors, affecting volume in the primary market.

The sophisticated investor in retail municipal bonds has ­remained calm the past few months even as mutual funds have dumped state and local ­government debt by the truckload.

Tax-exempt money market funds posted their first decline since mid-December as outflows of $4.35 billion trimmed total net assets to $329.91 billion for the week ended Jan. 17, according to the Money Fund Report, a service of iMoneyNet.com.