NOTE: See top comment of this thread for what to expect next on the "news before it happens" blog!
Aw, hell yeah! You gotta admit...for news before it happens in the City of Los Angeles, you gotta go to LADailyBlog.com. LA Times finally reports today (Friday 2/29/08) what Zuma Dogg already reported about two weeks ago. (If you are an investor, do you know how much difference two weeks makes, in a situation like this? Someone should sue the LA Times for not reporting this sooner. After all, if Zuma Dogg already knew...how come LAzy Times didn't?)
Friday, February 15, 2008
MUNICIPAL BONDS FAILING TO SELL ON WALL STREET!!! TAXPAYERS TO LOSE BIG ON CRA ISSUED BONDS!
2/15/08 PARKSIAN FISCAL ALERT: CRA & Municipal Bonds are failing to sell on Wall Street due to bond insurer downgrades. Will have to offer 8% interest (or more) to attract buyers. OH MAN IS THE CRA AND MUNICIPAL BONDS IN TROUBLE!!! Hope LACER/CALPERS ISN'T HOLDING THESE. Taxpayers are set up for a bigger burn than Malibu. click here
AND NOW, LA Times (2/29/08) re-hash of ZD's two week old blog posts. (Wow! Better renew your newspaper subscriptions.)
State, preparing to borrow, faces cold market for munis
Tax-free bonds attract few buyers amid risk fears and tight credit
The credit crunch is taking a heavier toll on the municipal bond market, a favored sector for individual investors.
Yields on tax-free muni bonds surged Thursday for the 12th straight session as many buyers stayed away. That's bad news for California, which plans to sell bonds next week to raise $1.75 billion for infrastructure projects.
"There are very few buyers out there now" for munis, said Bob Fields, an expert on the market at bond giant Pacific Investment Management Co. in Newport Beach.
The normally low-key muni market, where states, cities and other municipalities borrow to fund their operations, has suffered a series of punches since late last year that have left investors wary.
The first punch was financial trouble at major bond insurance firms, which guarantee about half the muni market nationwide. With those companies reeling from losses on mortgage-backed bonds they insured, some investors have wondered whether the insurance the firms provide on muni bonds could become worthless.
With buyers now scarce, particularly for floating-rate issues guaranteed by struggling insurers, most of the weekly or monthly auctions used to reset yields on the securities are failing to attract enough new money. That leaves current investors stuck with them or causes the bonds to be dumped on banks -- and triggers higher, "penalty" interest rates for the issuers.
On Thursday the California Department of Water Resources had to pay an annualized 5.44% on $47 million of auction-rate securities that reset every 35 days, up from the previous rate of 4%, according to the state treasurer's office.
Many muni bond analysts emphasize that the main problem facing the market is excess supply at a time when nervous investors are conserving cash. Supply and demand are "deeply out of balance" in the muni market nationwide, according to a recent report from Municipal Market Advisors, a Concord, Mass.-based research firm.
The city council of Vallejo, Calif., had planned to vote late Thursday on whether to file for bankruptcy protection because its employee-benefit costs are soaring even as tax revenue declines. The vote was put off after officials said they had reached a tentative deal with their major unions.
Even high-quality muni issuers that have no credit problems may pay more if they borrow soon, simply because of the heavy supply of bonds expected to hit the market.
In Sacramento, state Treasurer Bill Lockyer intends to proceed with next week's planned sale of general obligation debt, said Paul Rosenstiel, head of public finance.
Although the state may have to pay higher yields on the bonds than it would like, "we have a need to get into the market because we have a lot of projects to build," Rosenstiel said, noting the numerous infrastructure programs approved by voters in recent years.
"We have a schedule, and we're probably going to stick with it," he said.
Full article
(See top comment on this thread for what this means/what will happen next.)
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