Fixed income

After months of rancorous fighting, Congress narrowly passed a last-minute deal to avoid most of the scheduled tax hikes and spending cuts and did not include a cap on tax exemption, allowing the muni market to breathe a temporary sigh of relief.

B of A Merrill Lynch ranked number one among municipal bond underwriters of long-term issuance for 2012, with a total of $53 billion. Among financial advisors, Public Financial Management retained its number one spot.

Market participants wonder if the Justice Department will indict more firms and individuals for bid-rigging of bond-related investment and derivatives contracts.

Long-term municipal bond volume rose modestly for the month of December, closing the door gently on a year that saw record low interest rates spur an upsurge in refundings.

Luz Padilla, the senior portfolio manager at DoubleLine Funds discusses emerging markets and opportunities for global investing.

Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest bond fund, expects stocks and bonds to return less than 5 percent in 2013 as high unemployment persists, he wrote in a Twitter post.

The Securities and Exchange Commission has issued an Investor Bulletin to help purchasers of municipal bonds better assess the bonds’ credit risks.

This week, municipal bond funds saw their largest outflows since January 2011 and the fifth largest on record.

Investors redeemed $6.57 billion from mutual funds for the week ended Wednesday, December 12, according to data from the Investment Company Institute.

As the market prepares to ring in 2013, municipal experts have mostly positive expectations for interest rates, credit quality, investor demand, and the viability of municipals' tax exemption in the New Year, mixed with some lingering apprehensions about the fiscal cliff and overseas turmoil.

Municipal experts say 2012 turned out to be a banner year for municipal bonds — as both demand and mutual fund inflows were strong and the market hit record levels.

The largest exchange-traded fund tracking municipal bonds traded at a discount to its underlying assets for the first time since July as states and cities flooded the market with the most borrowing in six months.

The fiscal cliff negotiations have brought taxes to the forefront of people's minds. What does it all mean for municipal bonds as an asset class?

Investors sent money to municipal bond mutual funds for a sixth consecutive week, though at a decreased pace.

Municipal bond mutual funds recorded their fifth straight week of inflows, and their 62nd week of positive flows in the past 66 weeks.

The largest U.S. exchange-traded fund tracking municipal bonds touched the highest price since it began five years ago as investors speculated that tax rates will increase to help curb the federal deficit.

“I don’t believe you’re going to get some sort of an early warning,” Gundlach said. “You should be moving now.”

Investors, still high on the muni market, continue to allocate money to municipal bond mutual funds, to the tune of $545 million.

Lipper has revised its weekly municipal bond fund flows lower for the week ending Nov. 21 after an error with Goldman Sachs led the company to report higher flows.

Bond investors holding significant amounts of U.S. treasuries and other high-quality credit should consider diversifying to less interest-rate-sensitive securities.