Select Page

Half of the country is seemingly under a blanket of snow. Political upheaval is rampant in Egypt. With these storms in the headlines, the press appears to be easing back on some of the doom-and-gloom municipal bond stories. While Meredith Whitney’s research piece, “Tragedy of the Commons,” released in September 2010, contributed to some of the widespread fear in the municipal bond market, some market participants believe the fear mongering is perhaps overblown.

The municipal bond market experienced a prolonged selloff beginning in early November. Some of the selloff was attributed to the election cycle and the extension of tax cuts. Lower tax rates can make municipal bonds less appealing to investors subject to income taxes. But some investors were also afraid of the municipal bond market after some headlines were overwhelmingly negative on the sector. For 11 consecutive weeks beginning in early November 2010, municipal bond funds experienced outflows totaling approximately $22.5 billion, according to Bloomberg data. As a result, some fund managers were required to sell assets to accommodate for the redemptions, which helped some municipal bonds trade at relatively favorable levels.

The municipal bond levels have helped bring new types of buyers into the municipal marketplace. Historically, the typical buyers of municipal bonds have included high net worth individuals seeking tax free income. With yields of municipal bonds often exceeding those of comparable treasuries, international buyers, private equity companies, and lower tax bracket individuals have joined in the mix.

Private equity firms have been attracted to the ability to buy the debt of distressed revenue producing municipal projects, and turning them into viable enterprises. Some of these projects include toll roads, power plants, hotels, and stadiums. By purchasing a majority stake in an entity’s debt, the firm may be able to control the trustee.

While the municipal bond market is not in as bad of shape as some preach, there is reason to continue to be diligent. With the proper analysis, great value may be found in parts of the municipal marketplace. If you are looking to put money to work, consult with your Alamo Capital Representative to help identify investment opportunities that could be optimal for your situation.

Billy Schmohl
Investment Information Coordinator

This report is prepared for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or service.  Market prices and other data may be obtained from outside sources and is not warranted as to completeness or accuracy. Any comments, statements and/or recommendations made herein are subject to change without notice, and may not necessarily reflect those of Alamo Capital.  Alamo Capital has no affiliation with any political party. Investing involves risk. Consult with a Financial Professional for additional information to determine the suitability of this or any other financial product or issue as it relates to your particular situation.

Billy Schmohl
Investment Information Coordinator

This report is prepared for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or service.  Market prices and other data may be obtained from outside sources and is not warranted as to completeness or accuracy. Any comments, statements and/or recommendations made herein are subject to change without notice, and may not necessarily reflect those of Alamo Capital.  Alamo Capital has no affiliation with any political party. Investing involves risk. Consult with a Financial Professional for additional information to determine the suitability of this or any other financial product or issue as it relates to your particular situation.

Website developed by Ryan McBride