Bond Accountability Commission 2 Recommendations Page 60
The resulting decrease in demand and increase in supply was accompanied by a rise in rates.54 In other words, the market was gradually returning to somewhat more normal supply and demand pressures, even if still a bit tenuous (especially for lower-rated or nonrated credits). By year end, fixed rate municipal securities sales volume was strong.55
Summary of Market Conditions Taking such experiences into account, we are cautiously optimistic about market conditions. Interest rates are low, although they still remain a bit unstable. 56 In addition, regulatory policies and proposed legislation relating to rating agencies are leading to greater formality in connection with obtaining ratings. It is important, however, to remain flexible and watchful. Clearly, the financial markets in general are not fully out of the woods. Consumers are not spending at the same levels as in the past. Debt, especially governmental debt, is increasing at substantial rates.57 According to reports, financial institutions are not lending or investing at past 54
Cooke, “Muni Market Faces $11.3 Billion in New Issues, Most Since June” (Bloomberg.com Oct. 19, 2009); Seymour, “Sell-Off Finally Staunches Municipal Fund Inflows” (Bond Buyer Online Oct. 19, 2009); Cooke, “Municipal Bond Market Absorbs Third $10 Billion Week Since June” (Bloomberg.com Oct. 23, 2009).
Cooke, “Muni Market Headed for Record Fixed-Rate Bond Sales This Year” (Bloomberg.com Dec. 23, 2009) (“after U.S. state and local governments shunned variable-rate issues and employed new federal subsidies to broaden demand for their debt”); Braun, “Build America Bonds Rush Propels Muni Debt Sales to $374 Billion” (Bloomberg.com Dec. 28, 2009).
See, e.g., McGrail and Marois, “Municipal Bond Yields Reach Four-Month High Amid Wave of Supply” (Bloomberg.com March 26, 2010) (“climbed to a four-month high amid the biggest weekly issuance of state and local debt since Dec. 11”).
Some sovereign debt has been subject to special concerns, notably in Dubai and Greece, with perceived weakness in Italy, Spain and Portugal also contributing to uncertainty.
Published on May 14, 2014