Municipal Market Update

Apr 08, 2013 | by Franck Cushner, CFP®

As some states improve their financial circumstances, it also poses a challenge for municipal bondholders as there is less of a demand for municipal bonds, whose interest is considered tax-free.

A number of states have presented proposals to either eliminate new or reduce state income taxes

These states include Arkansas, Indiana, Iowa, Louisiana, North Carolina, Ohio, Oklahoma, and Wisconsin.

Historically March has been the worst performing month for municipal bonds for decades. This is because investors sell municipal bonds ahead of the April tax deadline, while March has comparatively had few maturing bonds.

The SEC brought securities fraud charges against Illinois for misleading bond investors about the extent of its pension plan underfunding.

California had to raise the yield on a $2.1 billion bond offering for state bonds, because of a lack of institutional demand. This in turn, increases the state’s borrowing costs.

Michigan appointed a bankruptcy attorney to try to rescue Detroit from financial distress.

Puerto Rico saw its credit rating cut to near junk status by S&P, as Moody’s had done the same in December.

 

Sources:          Bloomberg, MSRB

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