Municipal bond defaults doubled in the past two years….From 2.7 to 5.5

March 7th, 2012

Tweet and Article by @BBchappatta

U.S. Municipal Bond Defaults Rose in Past Two Years, Moody’s Report Says –  Our Take: With all the press that Meredith Whitney has gotten calling for big problems in the municipal bond market headlines like these grab a lot of attention.  In reality however as @Cate_Long pointed out when retweeting Brian’s article, and as he states in the article itself: “Defaults rose to 5.5 per year in 2010 and 2011, from 2.7 in the previous 39 years.”   For a $3 Trillion+ market, 6 defaults a year is still pretty darn low.

Tweet by @counterparties

Gives us a link to the article that everyone was talking about today from @WSJ, Fed Weighs Sterilized Bond Buying. Our Take:  There is a really good summary explanation of the following in the article:

  •  Quantitative Easing:Fed prints money, uses that money to buy long term treasury bonds and mortgage debt.
  • Operation Twist: Fed Sells short term treasuries and uses the money they get from that to buy long term treasuries.
  • Sterilized QE: Fed prints money, uses that money to buy long term treasury bonds and mortgage debt, then borrows the money back for shorter periods effectively taking that money out of circulation again.

Basically the gist of all this is the Fed buying treasury securities in order to keep interest rates low and spur the economy.  As the article points out the only thing that is changing is where the money they use to do so ends up.

Tweet by @BondBuyerJen

Gives us a link to an article from @bondbuyer – MSRB Proposes Rule Changes, Guidance on Retail Order Periods Our Take: This seems to be all about keeping bond dealers from manipulating the Retail Order Period, which is supposed to give individual investors a chance to get in on a municipal bond offering before institutions.  Sounds like some dealers are buying bonds for themselves during the retail order period to get in at favorable rates and then turning around and selling the bonds as soon as the deal comes to market. We will be doing more on retail order periods, which are otherwise a great thing, here at LearnBonds soon.

Tweet by @jake_f

Gives us a link to another article from @WSJ Vulture Picks Morgan Stanley Trade Ideas for Distressed Investing. He likes the American Airlines and Muni Picks the best.  Our Take: Judging by his twitter feed Jake knows a lot more about this stuff than we do so we will defer to him on this one.

Tweet by @dvandeventer

Gives us a link to the Municipal securities rulemaking board Fact Book 2011.  Pretty thick stuff for the individual investor however still worth a skim.  Most interesting part of the report for me was the total par amount traded which was $3.2 Trillion for 2011.

Have a link that should be included in tomorrows best of the bond market?  Email us at or find us on twitter @learnbonds.

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