Bad News from Illinois…Good News from California…Muni Bond Exemption Under Fire…and more!

Best of the Bond Market for August 29th, 2012

Chicago Tribune: – S&P lowers Illinois credit rating over pension’s deficit. – Standard & Poor’s lowered its rating on Illinois to A from A-plus and said its outlook is “negative.” Standard & Poor’s credit analyst Robin Prunty said “The downgrade reflects the state’s weak pension funding levels and lack of action on reform measures intended to improve funding levels and diminish cost pressures associated with annual contributions,”.

Reuters: California strikes pension reform deal which should save $30 billion. – California Governor Jerry Brown has reached a deal to raise public employees’ retirement ages, have them pay more into their pension accounts, and cap retirement payments in a vast overhaul of the state’s pension system that he says will save $30 billion. The deal has yet to be signed and may be contested by unions however.

Bloomberg: – California defies the gloom and creates more jobs.California added 365,100 nonfarm jobs in the year ending in July, a 2.6 percent increase and the state’s largest 12-month gain since 2000. This along with the pension reform deal is sure to be good news for bond holders.

Christian Science Monitor: Should congress get rid of tax exempt municipal bonds?  - Mitt Romney’s economic adviser Glenn Hubbard, The Wall Street Journal editorial page, and the American Enterprise Institute’s Matt Jensen are among those who in recent weeks suggested limits on tax-exempt bonds.

InvestorPlace:  Why you should care about credit spreads - Credit spreads not only provide valuable additional context for bond investors, but can have some forecasting power that can be used to stock investors’ advantage as well.

Brinker Capital Blog: The state of municipal bonds - We feel the technical factors in the municipal bond market remain positive. Demand is very strong. While supply has been higher in recent years, most of it is refinancing, so net new supply remains at low levels. The budgets of state governments continue to improve while local governments remain under pressure.

SFGate: – Worst month for bonds since 2010 lures buyers back to treasuries. – Investors from London to Pittsburgh are plowing money back into Treasuries after the biggest decline in 19 months, betting that even an improving global economy won’t ignite a bear market in bonds.

Charles Margolis: Baylor College of Medicine issues corporate bond with 5% yield. – The School located in Houston, TX, issued the $111M 5.25% taxable corporate bond along with a number of other municipal bonds in order to fund a new hospital.

Learn Bonds: 4 solid benefits of using savings bonds for retirement. – Here are 4 sound reasons why you should think about using savings bonds to supplement your 401K or IRA and increase your retirement fund.

Bloomberg: Bond holders not convinced by Richard Schulze buy out of Best Buy. – Best Buy bondholders remain unconvinced by the recent takeover approach by founder Richard Schulze. Schulze counteracted by saying his takeover offer gives the world’s largest electronics retailer its best shot at competing with Amazon and Wal-Mart.

BondSquawk: Top 3 non-cyclical corporate bond issuers. – With the immediate economic outlook uncertain here are three investment grade corporate issuers, featuring bonds maturing in the intermediate and long end of the maturity spectrum. The purpose of showing both is to allow investors the opportunity to tailor their bond investments in accordance with their investment objectives.

TheTimes Tribune: Scranton’s employees can rest easy; they’re getting paid – So long as the loan comes through. – Scranton’s next employee payday on Friday hinges on a loan closing on Thursday, city officials said today. Mayor Chris Doherty expressed confidence that the closing between the city and Amalgamated Bank of New York and Washington, D.C., would occur as scheduled on Thursday and payroll would be made Friday.

 

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