Municipal Market Advisors - Research and Analytics

Friends In Transition
We are proud to offer our friends an extended trial period while you are in job transition. Please sign on for free trial. We are happy to help during these changeling times" [ Friends In Transition ]
FSA’S and ASSURED’S Warnings
Last night, Moody’s issued a downgrade warning on FSA’s and Assured Guaranty’s financial guaranty ratings. While the market had begun to express some caution regarding FSA, the risk to Assured is a surprise. In its reports, Moody’s notes FSA’s exposure to directly-insured residential mortgage backed securities and Assured’s relatively concentrated portfolio, while both companies face very difficult new structured finance business generation (insured US structured paper issuance is down 97% YTD). The report also alludes to a potential drop in municipal investor demand once Moody’s public finance group shifts municipal bond ratings to the global (corporate equivalent) scale. Finally, we believe Moody’s is also attempting to shore up the value investors’ place in Aaa ratings generally (we have heard repeatedly from investors that “Aaa” is no longer the indicator it once was). [ report w/no-risk trial sign up ]
Matt Fabian: Using the MMA Consensus as a "Behavioral Overlay" to the MMD

Matt Fabian, Managing Director at Municipal Market Advisors says the MMA Consensus is a “powerful and predictive” market indicator. Also: the BMA swap on the rise as a hedging vehicle, Moody’s credibility concerns, and the lessening value of bond insurer ratings. DerivActiv.com MP3

Tom Doe: Prop. & Casualty Industry Slowdown Will Bring Muni Supply; Panic of 1837
Tom Doe, CEO of Municipal Market Advisors speaks on the property and casualty insurance industry and its possible reduced need for tax-exempt income. Also: primary volume trends, the month of July in historical perspective, and the similarities of today with the Panic of 1837. DerivActiv.com MP3

MMA's: TOP STORIES

Munis Weaker But Floating Rates Fine For Now
(INSIGHT: pub. July 23, 2008; 3:30p EST)
Municipal bonds fell today, underperforming Treasuries on a down day, while market participants are saying that the floating-rate market remains relatively healthy in the face of pending insurer downgrades:
”Munis cash is down but there is a good amount of activity occurring,” a trader said. ”We picked up a couple of things on the long-end to see if we could get something and really 20 years and out fell a good amount. On the short end we bought bonds in 2009 and 2010 and that stuff...” [ report w/no-risk trial sign up ]

MUNICIPAL CONSENSUS 'Aaa' G.O.
(CONSENSUS: pub. 7/23/2008 3:00p EST)
The Consensus Yield Report is a pure 'Aaa' G.O. yield curve for the municipal bond market, formed from the daily input of over 80 fIrms. The data's median average is considered representative of a "mid market" level that identifies the Consensus measure of fair value. learn more about the Consensus

Maturity	Muni 'Aaa'	U.S. Trsy.	%
1yr:	2.20%	2.20%	100%
2yr:	2.51%	2.79%	90%
5yr:	3.20%	3.55%	90%
10yr:	3.89%	4.16%	94%
30yr:	4.99%	4.71%	106%

Munis Underperform Taxables At Midday
(INSIGHT: pub. July 23, 2008; 12:30p EST)
Municipal bonds trader weaker as the morning progressed while Treasuries improved from their morning lows and several large deals underwent auction or pricing:
”Municipals are losing more ground as we start to see primary levels and the overall lack of bids out there in the secondary,” a trader said. “Buyers are trying to determine where the bottom is and...” [ report w/no-risk trial sign up ]
Muni INSIGHT - Munis Weaker With More Supply Looming
(INSIGHT: pub. July 23, 2008; 10:30a EST)
Municipal bonds declined this morning along with the Treasury market as participants ponder the impact of monoline downgrades and the primary market continues to offer more supply:
”The market has become undone,” a trader said. “There is a lot of nervousness out there because of the FSA and Assured news. We are feeling a bit better than yesterday but...” [ report w/no-risk trial sign up ]
Munis Fall; Embrace A Brave New World
(INSIGHT: pub. July 22, 2008; 3:30p EST)
Municipal bonds declined significantly, especially on the on the long-end today, as the market began to come to terms with the potential impacts of having no triple-A insurers in the primary market going forward and what the spillover might be:
”It’s not pretty,” a trader said. “The new deals came in poorly and reflected what the illiquid secondary was unable to: lack of faith in our market. The impact of the insurance news going forward could be really bad because...” [ report w/no-risk trial sign up ]
Munis Down On Supply and Insurance News
(INSIGHT: pub. July 22, 2008; 12:30p EST)
Municipal bonds continued to fall today with the Treasury market as supply and bond insurance issues eroded price performance:
”Muni cash is weaker today and it is worse farther out along the curve,” a trader said. “It is a mixed bag with overall weaker bids on FSA and Assured paper along with Treasury news and then all this supply today. None of it bodes well for our market....” [ report w/no-risk trial sign up ]
Munis Decline With More Insurer Woes
(INSIGHT: pub. July 22, 2008; 10:30a EST)
Municipal bonds were weaker to start the day along with Treasuries while secondary trading continued to be limited as more bond insurer news is restricting confidence in the market for now:
”It is quiet but busy,” a trader said. “There is big news circulating the market again and people don’t know what to make of it. We are cheaper though, I’d put us at about 2 basis points off in serials.” [ report w/no-risk trial sign up ]
Munis Head Weaker In Front Of Supply & Suspicion
(INSIGHT: pub. July 21, 2008; 3:30p EST)
Municipal bonds traded slightly weaker in spots today while Treasuries were mixed as uncertainty in the muni market is keeping many participants sidelined:
”The municipal market is very quiet today,” a trader said. “We see the market unchanged to off 2 basis points. The market has a heavy tone as dealers remain long significant amounts of Maryland, Nevada and Washington GOs. Buyers seems content to wait for this week's calendar to set the tone. [ report w/no-risk trial sign up ]
Munis Little Traded With Weaker Bias To Start
(INSIGHT: pub. July 21, 2008; 10:30a EST)
Municipal bonds opened the day with little trading and a weaker bias in sympathy with the Treasury market as participants begin to gauge different scenarios for the week ahead:
”At this point it feels like a typical Monday in the summer and the market is still trying to find itself,” a trader said. “People respect the new-issue calendar this week and we are likely to come in on the cheaper side to start off the day. Guys just want to make sure things clear so we probably have a weaker bias.” [ report w/no-risk trial sign up ]
Munis Decline But Activity Picks Up In Afternoon
(INSIGHT: pub. July 18, 2008; 3:30p EST)
Municipal bonds declined today but found reasonable two-way flow in the mid-afternoon as Treasuries fell:
”Sure the long-end is weaker but today I saw a bunch of high-grade trades going on out there,” a trader said. “There is a big seller but there have been some...” [ report w/no-risk trial sign up ]
Munis Weaker Again With Emphasis On Long Bonds
(INSIGHT: pub. July 18, 2008; 10:30a EST)
Municipal bonds were thinly traded this morning with a weaker tone, more so on the long-end once again, while Treasuries fell slightly:
”The market is quiet with some retail going on in the front-end that looked ok but there were a few big trades out long that put us off a few more,” a trader said. “A lot of guys are looking ahead to another sizeable primary...” [ report w/no-risk trial sign up ]
Munis Fall With Emphasis on Long-End
(INSIGHT: pub. July 17, 2008; 3:30p EST)
Municipal bonds fell today with the Treasury market while losses grew as the trading day wore on that resulted in significant losses on the long-end of the curve:
”The long-end got whacked today,” a trader said. “We got worse as the day went on and really the selling pressure mounted and...” [ report w/no-risk trial sign up ]
Munis Down; Burdened With Offerings In Secondary
(INSIGHT: pub. July 17, 2008; 12:30p EST)
Municipal bonds declined today with the Treasury market as the secondary may be weighed down with offerings on the long-end of which there are few bidders:
”Slowly and quietly things are turning to a point that we may not want to be,” a trader said. “There are a good amount of bid-wanteds – I’d put us at around $650 million by 11:30 am - and the bidding is ...” [ report w/no-risk trial sign up ]
Munis Decrease Slightly With Treasuries
(INSIGHT: pub. July 17, 2008; 10:30a EST)
Municipal bonds opened the day trading a bit weaker in line with the Treasury market as traders are calling the secondary heavy with new issuances from earlier this week:
”We are off a bit all along the curve as the supply is setting in and we are taking direction from taxables,” a trader said. “There are a few offerings here and there but right now it looks like it could be a quiet one as liquidity is challenging at this point.” [ report w/no-risk trial sign up ]
Munis Fall With Limited Liquidity As Issuance Weighs On Market
(INSIGHT: pub. July 16, 2008; 4:30p EST)
Municipal bonds fell on a steeper yield curve with losses increasing out long today in sympathy with the Treasury market but was also swayed by the influx new issues:
”If you own quality bonds you are only down 5 basis points or so but if you own something that no one wants you are worse by 10 or more,” a trader said. “It is the same deal as the past few weeks. High-grades do better and everything else just languishes. Today though, even the best...” [ report w/no-risk trial sign up ]
Large Supply And Taxables Losses Hurt Munis
(INSIGHT: pub. July 16, 2008; 12:30p EST)
Municipal bonds declined in most parts of the curve today in sympathy with the Treasury market while new-issues led by triple-A rated Maryland weighed in on tax-exempt space:
”We are weaker everywhere along the curve except for in the 1 to 3 year range that still has continued support as it did yesterday,” a trader said. “The market is sort of withdrawn and fine with letting the bid...” [ report w/no-risk trial sign up ]
Front-End Gains Continue But Not Farther Out
(INSIGHT: pub. July 16, 2008; 10:30a EST)
Municipal bonds traded on a steeper yield curve today as the continued front-end strength was not followed farther out along the curve while the Treasury market reacted poorly to inflation data:
”There continues to be pretty aggressive trades of high-grades inside of 2012,” a trader said. “The bid seems a lot weaker once you get out of 10-years. Guys are sitting around though for the most part and there...” [ report w/no-risk trial sign up ]
Munis Gain In Front-End As Primary Gets Going
(INSIGHT: pub. July 15, 2008; 3:30p EST)
Municipal bonds increased slightly today with an emphasis on the front-end, as did the Treasury market, while the heavy primary was generally well digested amid a slow secondary:
”It is very slow out there and while I think a few select items traded modestly better we are having some trouble getting much done in the secondary,” a trader said. “Retail interest has clearly slowed, especially on the long end. Most of that investor-type’s activity was in the primary today, which sold mostly attractive levels.” [ report w/no-risk trial sign up ]
Munis Head Into Full Primary With Firm Tone
(INSIGHT: pub. July 15, 2008; 12:30p EST)
Municipal bonds traded with a firmer tone today in sympathy with the Treasury market as several New York issuers coming to market took precedence over a thinly traded secondary:
”The muni market, when it trades, it stronger than it was yesterday,” a trader said. “But the lack of secondary volume is not the focus as the primary is rolling with a lot of new issuers – some from well known issuers and others that are not, so we are getting a good variety of paper.” [ report w/no-risk trial sign up ]
Munis Better But Greatly Underperform Taxables
(INSIGHT: pub. July 15, 2008; 10:30a EST)
Municipal bonds gained slightly in spots in limited trading, underperforming the Treasury market again as most are waiting to see the slate of new issuances:
”We are better in spots and some of the high-grade paper is getting bid well,” a trader said. “But again, the secondary is not getting actively traded so it is hard to tell where the market is really at. With primary pricings today it could help that process along.” [ report w/no-risk trial sign up ]
Munis Underperform Taxables In Light Trading
(INSIGHT: pub. July 14, 2008; 3:30p EST)
Municipal bonds were thinly traded with prices paralyzed versus large gains in the Treasury market that virtually erased losses of Friday’s session :
”The municipal market seems to be in hibernation as participants take in headlines and anticipate supply,” a trader said. “We see the market as roughly unchanged. Market participants tend to react slowly on Mondays and the rather respectable calendar is likely causing them to sit on their hands rather than pay up today.” [ report w/no-risk trial sign up ]
Munis Little Changed While Taxables Gain
(INSIGHT: pub. July 14, 2008; 10:30a EST)
Municipal bonds were little changed and lightly traded in the midst of a Treasury rebound while the primary market kicked off what promises to be a heavy calendar week with retail pricing for New York’s Triborough Bridge & Tunnel Authority:
”We started out pretty flat and quiet this morning and for the most part we are lagging behind the Treasury bounce,” a trader said. “I bought a good piece of some bonds one basis point better than offered so that tells me that guys are pretty willing to part with bonds in the current market environment.” [ report w/no-risk trial sign up ]
Munis Lose Ground In Illiquid, Challenging Marketplace
(INSIGHT: pub. July 11, 2008; 4:30p EST)
Municipal bonds declined today but still outperformed Treasuries in a down market as liquidity dried up in the afternoon, likely not allowing munis to fall farther:
”High-grade munis declined slightly today while nothing else seemed to trade in a recognizable fashion,” a trader said. “If there were more people trying it would be worse that it is right now. Such little liquidity is helping munis because we don’t...” [ report w/no-risk trial sign up ]
Munis Lose Week's Momentum As Larger Market Forces At Work
(INSIGHT: pub. July 11, 2008; 10:30a EST)
Municipal bonds were little changed but moreover paralyzed by the barrage of information hitting the markets this morning as Treasuries declined for many of the same reasons:
”The market is taking a bit of a step back from yesterday as there is more concern and caution on the news out of Fannie, Freddie and Lehman,” a trader said. “People are mesmerized by all that is happening. There seems to be more bonds available than yesterday and the bid isn’t holding up. That being said, there is not selling pressure either. We are just sort of stuck with all the conflicting messages.” [ report w/no-risk trial sign up ]
Munis Up With Notable Front-End Gains
(INSIGHT: pub. July 9, 2008; 3:30p EST)
Municipal bonds gained on the front end of the yield curve today as Treasuries also increased in the afternoon and secondary trading of high-grades and inside of 10-years was pursued by various types of participants:
”The municipal market has a positive tone to it,” a trader said. “Much of the interest seems to be down the curve. Today competitive deals were strongly bid with Washington GOs selling at aggressive spreads to high grades.” [ report w/no-risk trial sign up ]
rimary Market Gets Going With Moderate Secondary Flow
(INSIGHT: pub. July 9, 2008; 12:30p EST)
Municipal bonds were slightly firmer in spots but largely little changed in others along with a flat Treasury market while the muni primary kicked into high-gear with two offerings from Washington state:
”I see the market as unchanged despite some yield scales reporting big bumps on the front end,” a trader said. “I just don’t see it but with the Washington sale getting priced so rich I expect that the market will finish firmer on the day.” [ report w/no-risk trial sign up ]
Munis Little Changed While Swap Markets Impact Felt
(INSIGHT: pub. July 9, 2008; 10:30a EST)
Municipal bonds were little changed with a firmer tone and Treasuries were mixed this morning while the tax-exempt market braces itself for a significant new-issue calendar today:
”We seem to be trading with Treasuries right now with a slight delay and that means overall we are probably unchanged to a few better,” a trader said. “Unless there is a complete meltdown in the Treasury market I expect to see munis continue to outperform. Of course high-grades are leading the way as they have been for the past few weeks.” [ report w/no-risk trial sign up ]
Re-inflating the bubble
(OUTLOOK: pub. July 7, 2008; 9:00a EST)
Re-inflating the bubble. Municipals were stronger last week, with: 1) the start of a new quarter giving dealers and investors fresh capacity to hold and trade bonds; 2) individual investors looking to avoid a faltering stock market by reinvesting their July 1 principal and interest payments in tax-exempts; 3) a thin market; and 4) renewed investor fears over the economy and credit crisis. Still, high grade pricing has been forced into repeated boom/bust cycles, affecting secondary liquidity and demand from the less adventurous.
This week, momentum implies lower yields, and we expect an increase in secondary market trading activity. Momentum is now strongest 5-14yrs, but the long end of the yield curve looks uniformly aggressive. Pricing of earlier maturities may have been dulled by the exceptionally high yields available for MBIA– and Ambac-insured VRDOs that have poured out of money funds.
Also, new bond insurers have a reasonable potential for getting used so long as they’re not being rated on the same scale a their municipal issuer clients. Limited P&L expectations imply these companies will be niche players.
Please see above link for the full report which includes the MARKET UPDATE, RECOMMENDATION AND CREDIT EVENTS sections. [ report w/no-risk trial sign up ]
Munis Little Changed After Barrage Of Data; Little Trading
(INSIGHT: pub. July 3, 2008; 10:30a EST)
Municipal bonds were little changed this morning as Treasuries went back and forth while secondary trading remains very light ahead of the early close:
”With Treasuries rebounding somewhat there continues to be a bid for high-grade munis but the offered side is still too rich and there are not many sellers out there,” a trader said. “I’ve bought one or two things today and see us pretty much unchanged. Trading is thin.” [ report w/no-risk trial sign up ]