Muni Defaults 36 Times Previous Estimates?….Who’s Buying all the Treasuries…and more!

NY Fed: Municipal bond default rate is 36 X higher than previously reported – Rather than confirming Moody’s 71 listed defaults from 1970 to 2011, our database shows 2,521 defaults during this same period.

Marc Joffe Comment: That’s still pretty low.

David Merkel Comment: Tell us something we don’t already know.

Zero Hedge: Think China and the Fed have been buying all the treasuries?  Wrong.

Business Insider: Interest rates fly as the stock market snoozes. – A theory that’s going around is that this has something to do with the Fed not doing QE, and thus not doing much to suppress rates. But we’re skeptical, since rates have tended to rise during QE.

Learn Bonds: How to choose a municipal bond fund – Step by step instructions.

Bondsquawk: 9 high yielding “rising stars” to consider for your portfolio.  –  As prospects for these bonds improve, these “rising stars” may rise in price as yields decline to match those of their soon-to-be peers in Investment Grade space.

Deutsche Borse Group: Fed’s Fisher is concerned what’s going to happen when they Fed starts selling all these bonds?  – Fisher said the Fed could be causing distortions in the market now, but added, “I’m not worried about that now. I’m worried about when we’re on the sell side and how might that distort particularly the price structure.”

Mike Shedlock: Yesterday’s retail sales beat in question as California sales tax collections fall 40%.  – Sales taxes collections off 33.5% vs. budget and 40% from a year ago is not a “timing issue”. Either California data is extremely messed up, or retail sales nationally will be revised sharply lower.

Blackrock:  Municipal bond rates are at historical highs when compared to corporate bond rates. – Municipal bonds are currently yielding 89% of their corporate bond counterparts, and thats without the tax advantage included.  The historical average is 75%.

Businessweek: A 35 year old junk bond fund is outperforming both PIMCO and Blackrock by ignoring the rating agencies.  – Krug’s $5.7 billion Ivy High Income Fund (WHIAX) rose 9.8 percent in the past five years after adjusting for price swings, the best among 27 junk bond funds holding more than $2 billion in assets.

Marketwatch: In a typically slow month for corporate debt issuance, we are on track to double the monthly average in august – Half-way through the month, companies have sold $45.5 billion in high-grade debt, close to the monthly average of $48 billion, he said. High-yield bond sales in August average $7 billion.

Also Sprach Analyst: Inflation in the US, China, Euro Area, and the UK is headed in the same direction. – down.


  1. Why Worry? says

    Federal courts have recently rule that not only state judges change the terms of any contract including bonds, but once they do there is nothing you can do about it. The same court ruled that judges and states cant be sued and you are simply out the money or the rate is lowered on you. Stay away from Munis and in particular anything from California and states in the 9th federal court district.

  2. Shameer says

    Here’s a few other of Meredith Whitney’s finest prconetidis over the last two years:One year ago she said that Stocks are overvalued and the US economy is likely to fall back into a recession next year, well-known analyst Meredith Whitney told CNBC. In May of this year she called for a bleak second half in the stock marketThen in June she forecasted the following: •The local and state governments are about to eliminate approximately 2 million jobs. Furthermore, structural employment issues are not improving. •The states are underwater approximately $200 billion. •Massive mortgage modification programs have kicked the can down the road for consumers as consumers have tried to obtain better modification plans. Consumers have not been paying their mortgages, giving them excess cash to pay for retail purchases and other expenses. Consequently, retail spending is fading as banks are accelerating their foreclosure and short-sale programs. •Sees a double dip in housing. Increased short-sale programs will help drive housing prices lower as short sales normally reduce housing prices 20%. Furthermore, in 2009 nearly 45% of mortgages were first-time buyers. •The consumer is in worst shape in 2010 than in 2009 and 2008.Of all of the above, the only thing she got right was the renewed price declines in housing. The stock market continued to climb this year. The economy did not fall back into a double dip recession. Stocks have rebounded about 20% from their early July lows to their highs for the year now. Governments have somehow failed to lay off about 1.9 million of the 2 million employees she foresaw. The consumer is on a tear, with retail spending up at over a 10% rate since midyear.It’s also been reported that her math is, uh, challenged, and that the amount of potential defaults are $50 billion, not $500 billion.Why does Meredith Whitney merit attention? She is the Elaine Gharzarelli of our decade. One good call and then fail after fail after fail.

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