Adding to the overall improved tone to the markets, muni-bonds got a boost of confidence today from S&P as the ratings agency bumped up its outlook for the state of California to “stable” from “negative.”
“You are going to see the balance in news in the muni market shift from negative surprises (mostly in 2009 and 2010) to positive surprises (2011)”, says Chris Mier, Managing Director at Loop Capital Markets. “One other positive news development that was not referenced by S&P is the fact that the State’s capital gain tax revenues will likely grow this year and next. In the past, capital gains taxes have contributed significantly to the State’s revenue collections” presumably making it easier to pay interest on bonds.
“Revenues are increasing, spending is being attacked”, says Elizabeth Fell, Barclays Wealth U.S. Fixed Income Strategist. “We have never thought that California was a candidate for default, this is a validation that credit is moving in the right direction”.
I don’t want to say I told you so, but check out my netnet postin early April and this one-year chart of the Lipper General Municipal Bond Index —can we all agree to say good-bye to the muni-bond crisis that never was?
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