Jefferson County Bankruptcy May Revive Fears Whitney, M. Schroeder :
The bankruptcy of Jefferson County, Alabama, may keep municipal yields already high in relation to U.S. Treasuries higher than some investors fleeing exempt debt, according to Michael Schroeder, president and chief investment officer at Wasmer, Schroeder & Co.Failure might scare some buyers, after the analyst Meredith Whitney Bank forecast last year, "hundreds of billions of dollars" by default in the municipal market, thus escaping the tax-free funds, said Schroeder. Although his prediction did not materialize, so yields have remained high relative to Treasuries, data compiled by Bloomberg.In the year to September, the number of municipal default to 42, totaling $ 949 million from 79 during the first nine months of 2010, equivalent to about $ 2.89 billion, according to debt Bulletin Distressed Securities published by the Miami Lakes, Florida-based consultant rate Securities Inc."And 'some impact on the broader market base," Schroeder, a company in Naples, Florida-based manages approximately $ 3 billion bond issue, said in an interview before the bankruptcy filing. Return to the concerns expressed by Whitney, "It shows how the political analysis of the municipal credit has become," he said.
Premium Treasury :
Benchmark municipal bonds are traded above U.S. interest rates Treasury bonds with similar maturity, with 10 years of tax exemption to income of almost 115 percent of the federal debt, according to data compiled by Bloomberg. The ratio was 119 percent on November 1, a maximum of 123 percent in 2011 October 6, according to the data. He is averaging nearly 92 percent since 2001.Yields on the benchmark 10-year Treasury fell to 1.96 percent yesterday from 2.08 percent on November 8, according to the price of the bond trader Bloomberg. The 10-year return on AAA municipal debt was 2.25 percent, 2.30 percent, the data show BVAL.
"It's a negative," said Alan Schankel, director of fixed income research at Janney Montgomery Scott LLC in Philadelphia. "I do not think it's a big negative, but the size and number of headlines, 3 billion in bonds, can not fail to have an impact. I do not think it's going to be huge, as happened for a long time. "Municipal bankruptcy in Central Falls, Rhode Island, in August and Harrisburg, Pa., last month caused a leakage of $ 2.9 trillion municipal bond market, yields have fallen to levels not seen since the 1960s. The yield securities, including interest Treasury held this year at 9 percent, according to Merrill Lynch Bank of America index, and turned the 3.4 percent for the Standard & Poors 500 stock index , according to data compiled by Bloomberg.
"Slow-Motion" Shipwreck :
"I'm sure there are some people who want the dog in the market and use this key role, for example," said Rob November, CEO of Arbor Research & Trading Inc., a broker in New York. Investors hardly be surprised, he said."The market was more or less prepared for it," said November. "It was a train wreck in slow motion over the past three years. I do not think it will be a surprise and a disappointment."
Investors may be more reluctant to buy borrowers with exposure to derivatives, because the bankruptcy of Jefferson was related to interest rate swaps, which backfired when used to try to reduce the cost of county funds sewer project, said John Donaldson, who oversees $ 600 million of assets in municipal elections Haverford Trust in Radnor, Pennsylvania.
Question Of Risk :
"If someone opens a new official statement reads, and the disclosure of derivatives does not read well, I think, that it seems someone is trying to enter the market, which is a derivative of the visibility," said Donaldson.
While significant, bankruptcy does not raise the kind of fear that gripped markets defaults after Whitney's statements on CBS Corp. "60 Minutes" show in December, said Justin Hoogendoorn, Director General Group Strategic BMO Capital Markets in Chicago
"The market understands that it is systemic," he said. "It 'a title to chase a bit' of money in the retail sector, but most do not think the problem is too big for the market to absorb."
The bankruptcy of Jefferson County, Alabama, may keep municipal yields already high in relation to U.S. Treasuries higher than some investors fleeing exempt debt, according to Michael Schroeder, president and chief investment officer at Wasmer, Schroeder & Co.Failure might scare some buyers, after the analyst Meredith Whitney Bank forecast last year, "hundreds of billions of dollars" by default in the municipal market, thus escaping the tax-free funds, said Schroeder. Although his prediction did not materialize, so yields have remained high relative to Treasuries, data compiled by Bloomberg.In the year to September, the number of municipal default to 42, totaling $ 949 million from 79 during the first nine months of 2010, equivalent to about $ 2.89 billion, according to debt Bulletin Distressed Securities published by the Miami Lakes, Florida-based consultant rate Securities Inc."And 'some impact on the broader market base," Schroeder, a company in Naples, Florida-based manages approximately $ 3 billion bond issue, said in an interview before the bankruptcy filing. Return to the concerns expressed by Whitney, "It shows how the political analysis of the municipal credit has become," he said.
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| Jefferson County Alabama Bankruptcy |
Benchmark municipal bonds are traded above U.S. interest rates Treasury bonds with similar maturity, with 10 years of tax exemption to income of almost 115 percent of the federal debt, according to data compiled by Bloomberg. The ratio was 119 percent on November 1, a maximum of 123 percent in 2011 October 6, according to the data. He is averaging nearly 92 percent since 2001.Yields on the benchmark 10-year Treasury fell to 1.96 percent yesterday from 2.08 percent on November 8, according to the price of the bond trader Bloomberg. The 10-year return on AAA municipal debt was 2.25 percent, 2.30 percent, the data show BVAL.
"It's a negative," said Alan Schankel, director of fixed income research at Janney Montgomery Scott LLC in Philadelphia. "I do not think it's a big negative, but the size and number of headlines, 3 billion in bonds, can not fail to have an impact. I do not think it's going to be huge, as happened for a long time. "Municipal bankruptcy in Central Falls, Rhode Island, in August and Harrisburg, Pa., last month caused a leakage of $ 2.9 trillion municipal bond market, yields have fallen to levels not seen since the 1960s. The yield securities, including interest Treasury held this year at 9 percent, according to Merrill Lynch Bank of America index, and turned the 3.4 percent for the Standard & Poors 500 stock index , according to data compiled by Bloomberg.
"Slow-Motion" Shipwreck :
"I'm sure there are some people who want the dog in the market and use this key role, for example," said Rob November, CEO of Arbor Research & Trading Inc., a broker in New York. Investors hardly be surprised, he said."The market was more or less prepared for it," said November. "It was a train wreck in slow motion over the past three years. I do not think it will be a surprise and a disappointment."
Investors may be more reluctant to buy borrowers with exposure to derivatives, because the bankruptcy of Jefferson was related to interest rate swaps, which backfired when used to try to reduce the cost of county funds sewer project, said John Donaldson, who oversees $ 600 million of assets in municipal elections Haverford Trust in Radnor, Pennsylvania.
Question Of Risk :
"If someone opens a new official statement reads, and the disclosure of derivatives does not read well, I think, that it seems someone is trying to enter the market, which is a derivative of the visibility," said Donaldson.
While significant, bankruptcy does not raise the kind of fear that gripped markets defaults after Whitney's statements on CBS Corp. "60 Minutes" show in December, said Justin Hoogendoorn, Director General Group Strategic BMO Capital Markets in Chicago
"The market understands that it is systemic," he said. "It 'a title to chase a bit' of money in the retail sector, but most do not think the problem is too big for the market to absorb."
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