Fixed income

The Financial Industry Regulatory Authority is preparing to take enforcement action against certain firms for selling municipal bonds to retail customers without disclosing material information, including that the bonds’ credit ratings had been spiraling downward, a FINRA official said Thursday.

In what could be a first of it’s kind action in the municipal bond market, the Internal Revenue Service has suspended tax-exempt bond attorney Michael W. McCall for at least 24 months from practicing before it for writing a false tax opinion.

It is not often one hears someone nicknamed “Wild” Bill exhorting patience.

By setting up municipal sales desks in foreign offices 10 years ago, top-ranked underwriter Citi had a head start in selling taxable munis to foreign investors, which turned out to be a major boon once Build America Bonds were introduced last year.

States will likely face rising costs due to federal health care reform over the long term, Moody’s Investors Service said in a report released this week.

A federal judge in Manhattan has ruled that a group of 11 California localities, including Los Angeles, may go forward with their civil cases against Goldman, Sachs & Co., Citigroup, and several other high-profile firms because they may have participated in an alleged conspiracy to rig bids for municipal investment contracts and derivatives.

The Treasury Department released interim guidance yesterday instructing municipal issuers how to issue four tax-credit bonds as direct-subsidy bonds, as was authorized by a jobs law enacted in March.

Wherever the money’s going, it’s not going to municipal bond mutual funds.

JPMorgan, the nation’s third largest municipal underwriter, and Charles Schwab, one of the world’s largest financial services companies, have joined forces to meet what they see as increasing demand from retail investors in the fixed-income market.

The Justice Department is seeking to intervene and temporarily halt fact-finding by a group of localities in their class action suit against Wells Fargo & Co. and 15 other banks, broker-dealers and investment brokers for allegedly conspiring to rig bids and fix prices of investment and derivatives contracts in the municipal market.

The two funds are focused on current market opportunities in taxable securities and selectively across the fixed income universe.

The German bank has strengthened its emerging-market debt units in Latin America with seven new hires

Municipal market dynamics are so favorable right now that investors involved in tender-option bond programs can create better revenue streams compared to what they received before the financial crisis, but at half the risk or less.

For 27 months, investors have consistently favored fixed-income funds, a trend that shows no sign of abating.

A lawmaker and a Treasury Department official Thursday pushed for a permanent extension of the Build America Bond program, but acknowledged that the greatest obstacle is finding a way to pay for it.

Sen. Ron Wyden, who recently caused a stir in the municipal bond market by proposing a tax-reform bill that would eliminate tax-exempt bonds and replace them with tax-credit bonds, said yesterday he is open to discussing possible modifications to the legislation with critics.

Build America Bond transaction participants are debating whether they need to do more to track BAB prices to avoid running afoul of statutory premium restrictions and jeopardizing the issuer’s subsidy payments or to respond to an Internal Revenue Service compliance check.

State and Local Debt Is Prized

Municipal closed-end funds continue to surge to new peaks despite the specter of higher interest rates threatening to throw a wet blanket on all the fun.

Last week, investors did something they have not done in well more than a year: withdrew more money from municipal bond mutual funds than they put in.