Fixed income

When the Build America Bond program ended there were two schools of thought. One argued that BABs would become an orphan class, with prices in the secondary market suffering from illiquidity. Another group thought there would be some scarcity value to the product and they would appreciate in value.

Investors got downright defensive in next-to-last week of May, moving their money from stocks to bonds and money markets in response to persistent concerns about inflation and the debt crisis in Europe.

The District of Columbia’s budget vote last Wednesday jolted local municipal bond investors who could see their taxes jump on Oct. 1 as a result of a provision to tax the interest earnings from munis issued outside the district.

The Central Texas Regional Mobility Authority, the first toll road agency of its kind in Texas, is looking for yield-hungry investors willing to take a risk on $374 million of revenue bonds at or below investment grade next week.

For portfolio managers of municipal bond funds, the past several months haven’t been for the faint of heart. Still, muni fund managers report mixed experiences in riding out the prolonged flood of outflows.

Robust Demand For Some Credits

Taxable bond funds and exchange traded funds enjoyed another banner month in April, according to Morningstar's latest Direct Fund Flow Update, adding another $17.7 billion and $23.3 billion in inflows, respectively.

The Financial Industry Regulatory Authority has fined Kane, McKenna Capital Inc. and Wulff, Hansen & Co. a total of $27,500 for municipal transaction disclosure and trade rule violations.

The “magic” 5% tax-free yield is ­sustaining strong demand from retail investors.

These days there seems to be a lot of information available to nervous retail investors about the municipal bond market. Maybe even too much.

CHICAGO — Strong investor relationships and diligent disclosure provide issuers with their best shot at keeping borrowing costs down amid headlines about fiscal stress that persist even as state tax revenues have rebounded, a conference panelist said here Tuesday.

A federal cap on tax-exempt bonds could gradually wean investors and issuers off the muni market and toward a permanent, expanded Build America Bond market that has a flexible subsidy rate, a new report from the Center for American Progress argues.

In what marks the largest outflow activity so far this year, tax-exempt money market funds lost a hefty $5.17 billion and total net assets fell to $306.93 billion for the week ended April 25, according to the Money Fund Report, a service of iMoneyNet.com.

Rep. John Tierney, D-Mass., plans to soon introduce a bill that would require all new munis to be taxable direct-pay bonds with a 25% federal subsidy rate — a proposal drawing a frosty reception from issuers and underwriters.

Tax-free municipal money market fund assets declined by $2.25 billion to $316.80 billion in the week ending April 11, representing a major acceleration of outflows from the previous week, according to the Money Fund Report, a service of iMoneyNet.com.

March was the third month in a row that retail investors were net buyers of individual municipal bonds, and it also was the fifth consecutive month that mom-and-pop investors sold more shares of muni mutual funds than they purchased, according to the March Transparency Report published by BondDesk Group LLC.

President Obama announced the framework of a plan Wednesday to shrink the deficit $4 trillion over 12 years, and urged House and Senate leaders to appoint teams to negotiate a final bipartisan plan by the end of June.

“I’ve been guessing we’re in the foothills of a long 20-year rise with cyclical interruptions,” said Dan Fuss, who runs the Loomis Sayles Bond Fund.

Lawmakers on Tuesday moved forward with two legislative efforts to overhaul the U.S. tax code, which would either halt, or threaten, tax-exemption for new muni bonds.

The municipal securities market is beset by problems that defy easy solutions, academics and experts told municipal analysts Friday.