Dan Seymour

Many investors think the expiration of the Build America Bond program would actually be good for existing BABs because the entire universe of taxable bond buyers will be fighting over a finite and relatively small pool of available debt.

Build America Bonds have entered a world of their own. As the market braces for a blitz of taxable state and local government debt sales to close out the year, some experts expect the already-shaky correlations between BABs and other assets to break down.

Money market funds continue to waive big chunks of their management fees as yields on cash instruments remain too low to charge the full amount.

Bank of America Merrill Lynch fended off a summer onslaught from Citi to hold on to the top spot among municipal bond underwriters through three quarters of the year.

The return of bank profitability, coupled with some of the provisions of the federal stimulus, coaxed banks to buy state and local government debt in the first half.

The Basel III bank capital requirements proposed earlier this month threaten to eviscerate the supply of eligible investments for tax-free money market funds — an industry already struggling with a severe supply shortage.

The sell-off in municipal bonds finally appeared to sap some retail demand for state and local government debt last week as muni mutual funds reported taking in the paltriest amount of new money in six weeks.

Investors continue to stuff cash into municipal bond mutual funds, exacerbating a supply-demand imbalance that has kept yields on tax-exempt bonds near historic lows.

The unit investment trust has quietly blossomed into the dominant investing vehicle for Build America Bonds — the taxable municipal debt created under last year’s stimulus legislation.

If there’s a day of reckoning on the horizon for municipal closed-end funds, the market hasn’t spotted it as investors continue to fork over a premium for the trusts.

Municipal bond mutual funds reported another healthy slug of new money last week as demand for high-quality fixed income continued to drive investment flows.

Cash continues flooding into municipal bond mutual funds as retail investors embrace yields many once scorned as being far too low. Municipal bond mutual funds that report their figures weekly posted a net inflow of $927.1 million during the week ended Aug. 18, according to Lipper FMI.

When asked whether municipal bonds can continue their record-setting ways, one of the most common refrains from market participants is: "why not?"

Retail demand for municipal bonds continued to surge last week as mutual funds that invest in state and local government debt posted their second biggest weekly inflow of the year.

Even as Build America Bonds continue to transform municipal finance, one thing stays constant: hedging a portfolio of muni securities remains very difficult.

George Friedlander has rejoined Citigroup as head of municipal strategy.

Two new Standard & Poor’s indexes tracking municipal bonds launched yesterday, paving the way for Vanguard to enter the municipal exchange-traded fund business.

Municipal bond mutual funds’ assets climbed to a new record total as they continue to command new money from investors in spite of low yields and a nonstop wave of bad headlines in the mainstream press over state and local government credit.

The growing investor acceptance of taxable municipal bonds over the past year appears to have hit a stumbling block.

Build America Bonds have begun to reshape long-term taxable bond indexes that until now included little state and local government debt.