Skip navigation
#headerOverlay{
color: #ccd6df;
font-size:11px;
line-height:130%;
}
#headerOverlay strong{
color: #ffd226;
}
#headerOverlay a {color:#ccd6df;text-decoration:none;}
#headerOverlay a:hover {color:#ffd226;}
#headerOverlay a:visited {color:#ccd6df;}
#headerOverlay a:visited:hover {color:#ffd226;}
Symbol Lookup
onloadAutoSuggest();
var pgValue = "CNBSEB";
var cmsKeyWord = "alternative investing";
var cmsNewPG = "CNBWAB";
if ((cmsKeyWord.length > 0) && (cmsNewPG.length > 0)) { var newPG = cmsNewPG.split(';'); var group = cmsKeyWord.split(';');
if (newPG.length == group.length) { var description = cnbc_pagedesc.toLowerCase();
for(var x = 0; x < group.length; x++) { var keyWord = group[x].split('|'); for (var j = 0; j < keyWord.length; j++) {
if (description.indexOf(keyWord[j].toLowerCase()) != -1) { pgValue = newPG[x]; j = keyWord.length; x = group.length; }}}}}
if (cnbc_DARTFlag=="new")
{
cnbc_DARTAdCall(88,31,pgValue);
} else {
dapMgr.enableACB("SearchBox88x31",false);
dapMgr.renderAd("SearchBox88x31","&PG=" + pgValue + "&AP=1071&PN=CNBC",88,31);
}
cnbc_displayUsername("cnbc_usertime","cnbc_username");RegisterSign InMember CenterSign OutRegistercnbc_toggleUserState();HOMENEWSMARKETSEARNINGSINVESTINGVIDEOCNBC TVCNBC 360CNBC PROU.S.Asia-PacificEuropeEconomyEnergyGreenTechnologyBlogsWiresSlideshowsSpecial ReportsCorrections
if (cnbc_DARTFlag=="new")
{
cnbc_DARTAdCall(728,90,"CNBGE7");
} else {
dapMgr.enableACB("USNewsBlogs728",false);
dapMgr.renderAd("USNewsBlogs728","&PG=CNBGE7&AP=1390&PN=CNBC",728,90);
}
NetShredding As Much As We Can
var cnbcSubHeaderId = document.getElementById('subheader_'+ 38911124);
cnbcSubHeaderId.innerHTML = document.getElementById('renderReaderContent').innerHTML;
Email: document.write("");document.write("NetNet"+"@"+"cnbc.com");document.write('');Call: 201-735-iNet (4638)Text Message: Text NETNET followed by your tip to 26221.
if (cnbc_DARTFlag=="new")
{
cnbc_DARTAdCall(300,250,"CNBGE3");
} else {
dapMgr.enableACB("USNewsBlogs300x250",false);
dapMgr.renderAd("USNewsBlogs300x250","&PG=CNBGE3&AP=1089&PN=CNBC",300,250);
}
Current DateTime: 11:27:56 25 Feb 2011LinksList Documentid: 38910464Expiration DateTime: 2/25/2011 11:30:44 AM
cnbc_commentCountMapObj.cnbc_commentCountMap_put("", "38910464_1","cnbcCommentsTxt" );
Austerity, Oil Prices Helping Put the 'Stag' in 'Stagflation'
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41782866", "38910464_1","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41782866", "38910464_1","cnbcCommentsTxt" );
It's Friday, Here's a Treat: Princeton Swim Team Does Katy Perry
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41783292", "38910464_2","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41783292", "38910464_2","cnbcCommentsTxt" );
Don't Bash the Bears, Everyone Was Wrong About 2010
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41781682", "38910464_3","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41781682", "38910464_3","cnbcCommentsTxt" );
The Muni Bond Market Signals Danger Ahead
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41780371", "38910464_4","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41780371", "38910464_4","cnbcCommentsTxt" );
Will Oil Price Shock Kill the Recovery ?
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41781131", "38910464_5","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41781131", "38910464_5","cnbcCommentsTxt" );
Nicole Lapin's Short & Long List
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41779728", "38910464_6","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41779728", "38910464_6","cnbcCommentsTxt" );
World Gold Council: China and India Will Be Supportive of Gold Market No Matter the Price of Oil
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41779194", "38910464_7","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41779194", "38910464_7","cnbcCommentsTxt" );
Wisconsin Assembly Passes Bill Taking Away Union Rights
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41778327", "38910464_8","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41778327", "38910464_8","cnbcCommentsTxt" );
Undervalued Renminbi Kills US Manufacturing Competitiveness
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41766520", "38910464_9","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41766520", "38910464_9","cnbcCommentsTxt" );
What Is This Mortgage Settlement Anyway?
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41764160", "38910464_10","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41764160", "38910464_10","cnbcCommentsTxt" );
Obama Official Leaves Energy Department for Soros Backed Cleantech Fund
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41763103", "38910464_11","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41763103", "38910464_11","cnbcCommentsTxt" );
Has MERS Captured the Government?
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41761015", "38910464_12","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41761015", "38910464_12","cnbcCommentsTxt" );
Budget Cut Storm Hits National Weather Service
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41760522", "38910464_13","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41760522", "38910464_13","cnbcCommentsTxt" );
25 Guys to Avoid on Wall Street
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41759013", "38910464_14","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41759013", "38910464_14","cnbcCommentsTxt" );
Inside Ex-Lehman CFO Erin Callan's Hamptons Hideaway
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41758191", "38910464_15","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41758191", "38910464_15","cnbcCommentsTxt" );
Will Gaddafi Survive?
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41756484", "38910464_16","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41756484", "38910464_16","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("", "38910464_1","cnbcCommentsTxt" );
Current DateTime: 10:40:05 25 Feb 2011LinksList Documentid: 39085620FacebookTwitterRSSCurrent DateTime: 10:40:05 25 Feb 2011LinksList Documentid: 38852222John Carney
Runs this joint.
Cadie Thompson
Really, really runs this joint.
Ash Bennington
NetNet Special Reporter
Kate Kelly
Reports on the major Wall Street firms, trading, and regulation.
Jeff Cox
A staff writer with CNBC.com, covering the gamut of issues affecting the stock market and the economy.
Lori Spechler
A Senior Editor at CNBC, commodity trader in a former life.
Lori Ann LaRocco
A Senior Talent Producer at CNBC.
Nicole Lapin
Runs the graveyard.
Current DateTime: 11:27:35 25 Feb 2011LinksList Documentid: 38910635Expiration DateTime: 2/25/2011 11:30:35 AM
cnbc_commentCountMapObj.cnbc_commentCountMap_put("", "38910635_1","cnbcCommentsTxt" );
Gaddafi Vows to Fight On, Triumph Over Enemies
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41779625", "38910635_1","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41779625", "38910635_1","cnbcCommentsTxt" );
Oil Could Hit $120 a Barrel: Boone Pickens
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41780773", "38910635_2","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41780773", "38910635_2","cnbcCommentsTxt" );
CBS Stock Hits Highest Mark in 'Two and a Half' Years
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41781754", "38910635_3","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41781754", "38910635_3","cnbcCommentsTxt" );
Economy Slows on Cuts from State Governments
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41777804", "38910635_4","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41777804", "38910635_4","cnbcCommentsTxt" );
Greenberg: Ex-Employees Spill the Beans on Green Mtn.
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41782775", "38910635_5","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41782775", "38910635_5","cnbcCommentsTxt" );
BlackRock's Doll Says Worst May Be Over
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41782175", "38910635_6","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41782175", "38910635_6","cnbcCommentsTxt" );
Saudis Stress Oil Actions Are Important, Not Words
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41753331", "38910635_7","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41753331", "38910635_7","cnbcCommentsTxt" );
Time to Plot Fed's Exit Strategy Getting Closer: Lacker
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41777343", "38910635_8","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41777343", "38910635_8","cnbcCommentsTxt" );
US Will Be the World's Third Largest Economy: Citi
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41775174", "38910635_9","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("41775174", "38910635_9","cnbcCommentsTxt" );
View From the Ground in Libya
cnbc_commentCountMapObj.cnbc_commentCountMap_put("15840232?video=3000007436&play=1", "38910635_10","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("15840232?video=3000007436&play=1", "38910635_10","cnbcCommentsTxt" );
cnbc_commentCountMapObj.cnbc_commentCountMap_put("", "38910635_1","cnbcCommentsTxt" );
» HelpCurrent DateTime: 10:40:06 25 Feb 2011LinksList Documentid: 38851925Subscribe to this RSS feed
Stay up to date with NetNet.
if (cnbc_DARTFlag=="new")
{
cnbc_DARTAdCall(300,250,"CNBAL3");
} else {
dapMgr.enableACB("ContextBlog300",false);
dapMgr.renderAd("ContextBlog300","&PG=CNBAL3&AP=1089&PN=CNBC",300,250);
}
setDefault('cnbc_textbody');The Muni Bond Market Signals Danger Ahead Published:
Friday, 25 Feb 2011 | 12:24 PM ET Text Size By: John CarneySenior Editor, CNBC.com
window.fbAsyncInit = function() {
FB.init({appId: 'your app id', status: true, cookie: true,
xfbml: true});
};
(function() {
var e = document.createElement('script'); e.async = true;
e.src = document.location.protocol +
'//connect.facebook.net/en_US/all.js';
document.getElementById('fb-root').appendChild(e);
}());
var sUrl = window.location;
var str = ''
$(".fbButton").html(str);
//alert("1 :::: " + jQuery("#ssShare").length);
Twitter
cnbc_createTwitterURL();LinkedIn
addthis_pub = 'cnbccomrssfeeds';
addthis_hide_embed=false;
addthis_options = 'linkedin, digg, delicious, google,facebook,more';
More Share
Simon Willms | Stone | Getty ImagesMunicipal bond issuance dropped to an 11-year-low in January. It has not picked up substantially in February, according to the muni bond people I speak to.
January saw $12.2 bil
Really, really runs this joint.
NetNet Special Reporter
Reports on the major Wall Street firms, trading, and regulation.
A staff writer with CNBC.com, covering the gamut of issues affecting the stock market and the economy.
A Senior Editor at CNBC, commodity trader in a former life.
A Senior Talent Producer at CNBC.
Runs the graveyard.
Stay up to date with NetNet.
Simon Willms | Stone | Getty ImagesMunicipal bond issuance dropped to an 11-year-low in January. It has not picked up substantially in February, according to the muni bond people I speak to.
January saw $12.2 billion of new debt, a decline of nearly 63 percent from January 2010. Volume hasn't been this low since January of 2000.
The standard explanation for this is the end of the Build America Bond program, which offered qualified issuers a 35 percent federal tax subsidy to issue taxable debt.
But the BABs"”the bonds' colloquial name"”accounted for just 24 percent of the $757.6 billion of state and local debt issued from April 2009 through last month. So obviously, the decline goes much further than the end of the BAB program would warrant.
The muni bond people say that the excess decline comes from front-loading that occurred in the end of 2010, as issuers rushed to get BABs in before the program died. There's some evidence for this: issuance spiked as the program neared its end, totaling $133.8 billion for the fourth quarter, the second-highest quarterly volume ever.
RELATED LINKSCurrent DateTime: 10:40:06 25 Feb 2011LinksList Documentid: 41723108Part 1: The Bulls and Bears Agree: Muni Default Risk Is Greater Than EverPart 2: There's No Such Thing as a Muni ExpertPart 3: The Uses and Misuses of Knowledge and Math in Muni Bond MarketsPart 4: Fund Managers Are Playing the Wrong Game With MunisPart 5: The Myth of Markets Shunning Muni DefaultersPart 6: The Biggest Risk for Muni Bonds: Contagion
Some say that issuers are holding for a more borrower-friendly market. Yields on triple A-rated 10-year munis reached a 24-month high of 3.46 percent in mid-January, according to The Bond Buyer. Many states and cities seem to think that they can wait out the high-yield environment.
This could be a dangerous game. It has the potential to result in a pent-up demand for credit. If yields remain elevated for long enough, borrowers could find themselves forced to come to market when everyone else is also trying to sell bonds. This surge would likely push down prices and raise yields even further.
We've heard this kind of talk about "temporary market dislocations" before"”back when the market for mortgage-backed securities began to fall apart in 2007 and 2008. There was lots of confident talk back then, about market prices not reflecting fundamentals and too much risk being priced into mortgage bonds. As it turned out, market prices were accurately reflecting the climb in mortgage delinquencies and decline in revenue streams from the bonds.
A far less benign explanation for the decline of issuance could be that the muni market is freezing up. We've now seen month after month of outflows from muni funds, forcing funds to sell bonds to pay off exiting investors. It's very likely that some of the decline of issuance results from advice from bankers, who fear they cannot sell the bonds at yields attractive to the borrowers.
The mortgage-backed security market froze up in a similar way prior to the finance crisis. Take a look at the chart above, which shows the decline of private label mortgage backed securities that began in mid-2006. That decline, as it turned out, anticipated a huge jump in mortgage defaults.
It might make sense to take another look at the effect of the BABs. Instead of seeing the end of the program as an explanation for this decline, I can look at the beginning of the program as an artificial boost to the market. Without BAB, the evidence of trouble in the muni market may have been apparent even earlier.
I don't think that the muni market is transparent enough to allow for accurate forecasting"”which is why I'm not predicting a surge of defaults. But I do think it makes sense to watch for potential warning signs in the market"”and the dramatic drop in issuance could well be flashing: DANGER AHEAD.
_______________________________________
Questions? Comments? Email us at document.write("NetNet"+"@"+"cnbc.com");document.write('');
Follow John on Twitter @ twitter.com/Carney
Follow NetNet on Twitter @ twitter.com/CNBCnetnet
Facebook us @ www.facebook.com/NetNetCNBC
Read Full Article »
