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MMA Muni Outlook > September 2010

Market Summary

Municipals Weakened, As Headline Risk Intensified

Municipal investors were confronted with bold headlines challenging the safety of their participation in the sector. Harrisburg PA's flirtation with default dominated the first half of the month, while Meredith Whitney's foray into the municipal market amplified investor concerns of a potential "sub-prime" crisis in the public sector. Interspersed were observations and attention by the SEC and FINRA on municipal issuer disclosure laxity that may be leading to retail investor misunderstandings of their investment risk. Historically, many of the most adverse periods for municipal bond investors have been associated with the sharp and emotional withdrawals of individual investors from mutual funds that exposed the limits of the secondary market to provide execution near expected evaluations. Despite municipal’s headline risk and fund managers’ publically targeting the investment risks of CA, IL and NJ (and ratings services’ negative outlooks for IL and NJ), investors had not exited municipal investments. However, weekly fund flows into municipal bond funds slowed, falling below $1B... (For continuation of Muni Outlook, click link below.)

Full Report: MMA Muni Outlook for September 2010