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Bond Accountability Commission 2 Recommendations Page 57

Market Conditions

Recovery The municipal securities market is continuing to adjust to the credit crisis. Current conditions, however, are considerably more favorable than at the end of 2008, when the market was extraordinarily volatile and when many institutional investors had abandoned the market for what was perceived to be safer ground, primarily U.S. Treasury securities. Individual investors supported the higher quality credits in the market at that time. During 2009, market conditions improved significantly, and in Fall 2009 re-adjusted as a number of institutional investors took profits from a rally in prices. Individual investors, both directly and through mutual funds, again provided important support. Much of the market activity into mid-2009 stemmed from the declining economy and associated market disruptions. Then, in later 2009, the market experienced a slow recovery, and returned to life, with low tax-exempt yields fed by a diminished tax-exempt securities supply and issuer use of Build America Bonds (“BABs�) and other taxable and tax credit bonds.

Interest Rates To review the history of the market during the financial crisis, in Fall 2008 taxexempt interest rates rose sharply, and for the first time since the New York City default in the 1970s, the market came very close to a cessation of activity. The Bond Buyer 40Bond Average, which had been 4.59% on January 10, 2008, climbed to 7.82% on October

BAC2 Recomendations Final 04062010  
BAC2 Recomendations Final 04062010  
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