Moody's Cuts Rating on $1 Billion Sacramento Sanitation Bonds

(Mar. 10) -- The downturn affecting the area around the state capital also has dragged the rating a notch lower on $1.07 billion of sanitation district debt.

California's Preliminary Retail Yields Include 4.24% in Nine Years

(Mar. 9) -- The preliminary yields for the California G.O. bond sale include 4.24% tax-exempt in nine years. Even if you're in a lower 28% federal income tax bracket that's a Taxable Equivalent Yield of roughly 6.5% for a California resident. San Francisco priced double-A G.O. bonds today and a nine-year maturity yielded 2.89% tax-exempt.

Pondering Cash Management Bill as California's Bond Sale Begins

(Mar. 9) -- As California starts to take retail orders today for its G.O. bonds, there are several media reports about the governor vetoing a deficit-reduction ploy on prison spending. He did the right thing. We talk about that veto and also remind investors about a helpful cash management bill that we doubt the governor will oppose. Elsewhere in the market, we flag yet another higher-quality deal in the new-issue hopper.

Added Update on Two Downgraded Hercules Redevelopment TABs

(Mar. 8) -- S&P's fuller report on the Hercules downgrade discussed below (March 7)includes a paragraph worth considering. Go here to see why. In an update on something we last discussed in November, an Oceanside wastewater rate increase prompted S&P to remove the credit rating from a list for potential downgrade.

Two Hercules Redevelopment Bonds Downgraded by Six Notches

(Mar. 7) -- We talked about rating changes worth monitoring in our March print edition. A six-notch downgrade certainly gets our attention, and the details are here.

Highlights from March's Print Edition: Headline Risk and Real Risk

(Mar. 6) -- Our March print edition explains exactly how the State of California allocates general fund revenue for bond payments, important information every investor should know. We continue an informal series on bond portfolio ideas if inflation and/or rising interest rates are your concern. Given continuing media headlines about municipal default and bankruptcy risk, we try to provide some perspective. We also discuss some municipal bond default history over 40 years. We also mention the "bombs falling on the horizon" for a long-cherished advantage for buying municipal bonds. Subscribe now to get the print edition and hear about expanded coverage plans in our April 2010 edition.

Some Thoughts About Protection for California General Obligation Bonds

(Mar. 5) -- We rarely post such a lengthy commentary for "free" but will do so ahead of California's upcoming general obligation bond sale.

Week in Review: Downgraded County Pays a Price in New Sale

(Mar. 5) -- Municipal bonds continued to rally this week, pushing  tax-exempt yields lower. That might be news to Sacramento County, which paid higher yields over recent downgrades. How high? The county's five-year maturity paid a full two percentage points more than a water district's new sale. Ouch! See the details in our weekly review.

Local, State Governments Face Long-term Threat Over Health Costs

(Mar. 5) -- Health care costs will be a growing problem for local and state governments over the next half century, a new report says. Anything causing stress for bond issuers is also worth monitoring by bond investors. Speaking of stressed-out bond issuers, California's general obligation bond sale will get lots of attention next week. We list even more higher-rated alternatives for investors seeking diversification. However, as our March print edition explains oh so clearly, even "conservative" investors can buy the state's G.O. debt. Still, this example is worth pondering before next week's state sale.

What Is a "Retail Order" Period? Here Is a Short Definition

(Mar. 4) -- Our March print edition discusses the important "cushion" for California general obligation bonds. Someone asked about the "retail order" terminology. Here is an answer. Due to work-related travel, our updates on this site have been a bit "light" yesterday and today. We'll make up for it later today or tomorrow. In market news, S&P has downgraded the Hayward Unified School District.

A Reason to Pull for MBIA in Court, At Least for Muni Bondholders

(Mar. 3) -- If you hold municipal bonds insured by the "old" MBIA, you know that in the past they have been moved into a segregated company called National Public Finance Guarantee Corp. We explain here why it would be good for municipal bondholders if MBIA prevails in court over its decision to move its public finance exposure into this separate subsidiary.

Higher-Rated Deals to Compete With State Offering Next Week

(Mar. 2) -- Investors seeking higher-rated municipal bond deals will find some next week, just before the State of California sells its lower-rated issue. The Mill Valley School District was just upgraded to AAA by one rating agency, and San Francisco will sell double-A bonds next week. A research institute founded by Andrew Carnegie is also lining up a bond issue through a California authority; the bonds are rated Aaa by Moody's, though we're not sure of the sale date yet. Last week we mentioned a downgrade by S&P of a Rohnert Park 2005 issue, but didn't have a reason. Here is the explanation.

Inglewood's 1991 COPs Raised to BBB+ from BBB- by S&P

(Mar. 1) -- The City of Inglewood's 1991 certificates of participation were upgraded to BBB+ from BBB- by Standard & Poor's. See the rationale here.

Warren Buffett on Chaos: A "Climate of Fear" Is Investors' Friend

(Mar. 1) -- Remember when the Bond Advisor said in 2008 that you should even tear the copper pipes out of your home to raise cash for buying municipal bonds? Our point at the time was that municipal bonds were a screaming buy. Famed investor Warren Buffett agrees, and he regrets not buying more munis than he did. His comments in the annual report of Berkshire Hathaway Inc. also talk about a "climate of fear" being a friend of investors. In other market news, tax-exempt bond sales in the U.S. dropped last month over February 2009. We give one reason. Our March print edition was mailed the other day and it even includes comments about a city in Georgia as a warning for California municipalities and their management of certain liabilities.

Week in Review: AG Municipal Guarantees Several New Issues

(Feb. 26) -- Tax-exempt yields were a bit lower this week. In the new-issue market bond insurer AG Municipal guaranteed several new issues in California. This insurer (the former FSA) is going back to the "old" days of financial guarantors and limiting its risk to the municipal bond market. Some investors seem to like that idea. The AGMuni-insured deals get discussed in our weekly review. AG Municipal's parent had some good news to report yesterday on the earnings front. Stock investors seem more optimistic about the insurer's future, with shares now around $20. The 52-week low was $2.69 last March. Details about California's rescheduled G.O. sale were moved here. We also noted a two-notch downgrade of Rohnert Park sewer COPs yesterday.

California's Tax-exempt G.O. Sale Now Planned for March 11

(Feb. 25) -- California plans to sell a delayed $2 billion tax-exempt general obligation bond on March 11. We have moved the details here.

Bankrupt Hospital's G.O. Rating Confirmed; AGC Drops Fitch Grade

(Feb. 25) -- Moody's Investors Service affirmed its general obligation rating on the Sierra Kings Health Care District, which is in bankruptcy. Go here to see why. Elsewhere in the market, Assured Guaranty Ltd. asked Fitch Ratings to withdraw its grades on the company's bond insurer subsidiaries. It isn't because of a problem with the ratings, but rather reflects a policy change by Fitch. San Francisco, an issuer with double-A general obligation bond ratings, plans to sell such debt in March. Fitch Ratings has changed the city's outlook to "negative" from "stable."

California G.O. Sale Delayed; Pricing Won't Occur Next Week

(Feb. 24) -- California postponed its $2 billion general obligation bond sale after the legislature stalled on a cash management bill the state treasurer wants in place. Late yesterday we noted that Los Angeles general obligation bonds were downgraded a notch to AA- from AA by Standard & Poor's, mirroring a similar move by Fitch Ratings in November. The city's other debt that was rated AA- fell to A+.

Federal Bill Would Kill Off Tax-Exempt Bonds; It Isn't Going to Pass

(Feb. 24) -- The Bond Advisor was the first to point out that all this industry gushing over taxable Build America Bonds could eventually pose risks to tax-exempt debt in unexpected ways. A friend in the industry just pointed us to a new proposed bill in the U.S. Senate that would do away with tax-exempt bonds altogether. We don't think it has a chance of passing but the fact the idea gets floated at all is troubling.

Rating Agencies See More Fiscal Stress; No Bankruptcy "Wave"

(Feb. 23) -- In 2010 local and state governments will see lingering financial stress. Those that want to can protect credit ratings with good "management," Fitch Ratings noted in a report on tax-supported debt. The economic downturn raises the risk for more defaults or Chapter 9 bankruptcies, at least compared to historic standards, but in reality these events will remain rare for traditional municipal bond issuers, Moody's Investors Service said in its outlook for 2010.

Update: California Expects a Taxable G.O. Sale Later in March

(Feb. 22) -- Beside the tax-exempt sale planned next week (see item below), the State of California also expects to sell taxable G.O. bonds, perhaps late in March. Next week's sale will be unusual if it sticks to tax-exempt debt and leaves out taxable BABs, not that smaller investors would complain. In other news from recent days, the Palmdale Water District has been removed from a downgrade warning list by S&P. See why here.

California Plans to Sell "Up To" $2 Billion of G.O. Bonds in March

(Feb. 19) -- The State of California has scheduled a general obligation bond sale of "up to" $2 billion on March 4. So far we see no sign it will include taxable BABs (that could always change). Other sales by the California State University system and the Public Works Board also loom in March, according to the state treasurer's office.

S&P Lowers Certain Stockton Ratings to BBB+ from Single-A

(Feb. 19) -- The City of Stockton has just had certain certificates of participation downgraded to BBB+ from A by Standard & Poor's. The downgrade applies to COPs secured by net revenues of the city's wastewater enterprise.

"Beautiful Downtown Burbank" Has a Pretty Triple-A Look About It

(Feb. 19) -- Burbank has put in its time as a butt of television jokes, but the city can now boast about a triple-A issuer credit rating. Take that, Hollywood! Things aren't looking as good in Sacramento County after Fitch Ratings joined the downgrade bandwagon.

New Wave of Media Hype Over a Muni Bond "Threat"; Sky Is Falling

(Feb. 19) -- Watch your heads, the sky is falling on the municipal bond market. Since early February a wave of stories has been growing ever higher thanks to Chapter 9 bankruptcy talk in Harrisburg, Pennsylvania. These stories also throw in some other troubled examples using projects that were hardly "traditional" municipal bond credits in the first place (the monorail in Las Vegas, anyone?). The conclusion from all this, according to these stories? The muni "threat" is upon us, run for the hills. Once again, some of these stories start with and touch upon a valid point: local and state governments are in fact facing some very tough times. But from there, however, they reach some stunning conclusions, with a "quote" from some "pundit" high up in the story to make it all come together. Haven't we discussed "headline risk" a lot already? But we do so again here. Confuse this risk with actual credit and default risk at your own peril.

A $1 Trillion Hole: States Must Pay Employees Benefits ... Someday

(Feb. 18) -- One of our recent print edition stories noted that debt service costs are nothing compared with what state and local governments have to pay for certain public employee benefits. A new report notes that U.S. states were recently running $1 trillion behind on funding certain promised retirement costs. Elsewhere in the market, Moody's notes that everything isn't hunky-dory in Los Angeles, but that also isn't a surprise.

Moody's Also Downgrades Sacramento County; COPs Go to Baa2

(Feb. 17) -- Sacramento County was downgraded by Moody's Investors Service, a postscript to our item below about the S&P rating changes. Details are here in an update to our previous blurb.

Sacramento County Downgrade; Also, More Upcoming Bond Sales

(Feb. 17) -- Sacramento County gets some news no issuer wants before a planned sale: a downgrade. Of course, S&P cites a good reason for the one-notch cut. Speaking of planned sales, a few $100 million-plus deals will be in the market soon, including a couple for a private and public university. (Of course, we still love smaller bond sales, too.) Though it is a tougher operating environment for redevelopment agencies when property values decline, some existing bonds still can get good news.

Welcome Back: Some New, Old Business After President's Day

(Feb. 16) -- After everyone in the municipal bond market took a day off to observe President's Day, the new-issue market will feature a handful of deals this week. The Los Angeles Unified School District G.O. sale will be the biggest, though dominated by taxable BABs. Tustin's school district also could price a G.O. issue, including almost half as taxable BABs. Speaking of school bond sales, we flag a couple recent pricings just to discuss yields tied to AG Municipal bond insurance. We also flag a couple other school new-issue examples to throw in a mention about capital appreciation bonds. Every once in awhile we also like to flag statistics about "inflows" for municipal bond funds. They keep taking in money; tax-free money market funds aren't so lucky.

Week in Review: Tale of Two Ratings; 2.99% and 4.87% in 10 Years

(Feb. 12) -- Tax-exempt yields were relatively steady this week. In the new-issue market our weekly review looks at various yield examples, including one 10-year tax-exempt bond that yielded 2.99% and another yielding 4.87%. Of course, they don't share the same credit characteristics.

Moody's Default Review: Three G.O. Defaults Over About 40 Years

(Feb. 12) -- Moody's Investors Service updated its municipal bond default history. On deals it rated there were only three general obligation bond defaults since 1970. We also mention a taxable Build America Bond sale because the yield was so "low." Perhaps taxable buyers appreciate the low-default risk of munis vis-a-vis corporate bonds and are willing to accept such low yields. Speaking of taxable BABs, one proposal might curtail tax-credit muni bonds we dislike, but expand taxable BABs in place of them. We call that a lose-lose deal.

Bribery Charges Over Settlement Shouldn't Affect Validated Bonds

(Feb. 11) -- The San Bernardino County Flood Control District sold $103.78 million of judgment obligation bonds in 2007 to pay for a settlement with a developer. Yesterday two county officials were charged with accepting bribes and corruption for helping approve the settlement. We discuss here why that shouldn't affect the bonds, no matter how the allegations pan out in court.

California Controller Echoes Our Story about G.O. Bond Cushion

(Feb. 11) -- California Controller John Chiang made some comments that, in our view, completely ridicule those who talk about a state bond default. In fact, his comments pretty much echo our February essay about the state's general obligation bonds and people who say states can file bankruptcy (they can't). The investors who want to listen to kooks instead of the Bond Advisor (or the Controller) can keep buying money-market instruments and earn virtually zero. 

California's January General Fund Receipts Beat Estimate by 18.6%

(Feb. 11) -- California's January general fund receipts were $1.28 billion, or 18.6%, higher than the governor's fiscal 2011 budget estimated. The state controller called this a "positive," but warned state officials about getting "lulled into a false sense of security."

Higher-rated Bond Yields May Seem "Low," But Always Do TEY

(Feb. 10) -- We often note that tax-exempt yields for higher-rated new issues are "low," at least relative to the spread you can get on some single-A municipal bonds. As an example from a new sale yesterday shows, the Taxable Equivalent Yield still can look good even if you're in the 28% federal income tax bracket. It just depends on your benchmark for comparison. Obviously the TEY looks even better for higher brackets. What is California's "actuarial unfunded obligation" for health and dental benefits for state retirees? A new report says $51.8 billion, California's controller says. We usually don't mention certain remarks by the Federal Reserve Board's chairman because they get plenty of attention elsewhere. But once in awhile a quick mention is worthy if it ties in to our recent commentary.

California's Volume Bonanza in 2009; Thank the State's Appetite

(Feb. 9) -- An interesting fact: Municipal bond sales across the U.S. rose 5.1% in 2009. In California they jumped 36.8%. The state's massive bond sales drove some of that increase. Glendale, a city with "very low debt levels," saw its issuer credit rating boosted to AAA by Standard & Poor's. Last week we mentioned the big Los Angeles Unified School District G.O. sale. It will price next week.

February Print Edition Mailed: Bonds, Rising Rate Risk, a "Bubble"

(Feb. 8) -- As planned, our February print edition mailed Feb. 6. In March we'll be back to a mailing timed to the start of the month. February's edition discusses a tried-and-true approach to guarding against rising interest rates, though some smaller investors still balk at this strategy. We also make some audacious remarks about buying the state's bonds. So audacious, in fact, we included an insert to clarify our hyperbole. Once and for all, we discuss one risk states don't face in the municipal bond market. There is also an "example" TEY table for 2011 assuming federal taxes rise on higher-income brackets. We mention another item about a municipal bond market "bubble" here.

Week in Review: A School District  G.O. Yields 4.13% ... in 15 Years

(Feb. 5) -- Tax-exempt yields dropped this week. Our weekly review discusses recent new-issue pricing trends, including a school district general obligation bond that will pay you 4.13%, but only if you go out to a 15-year maturity. A single-A issuer paid 4.01% in 10 years. A bond insurer has lost its AAA rating, but this newcomer had already disappeared from backing new municipal bond deals. An upcoming sale of water revenue bonds features a triple-A rating on its own credit. Only one-fifth of the deal will be tax-exempt, though. Bonds that financed an important rail infrastructure project have been downgraded, with a decline in cargo traffic hurting revenue.

Los Angeles Unified School District Considers $2.2 Bln G.O. Sale

(Feb. 3) -- The Los Angeles Unified School District may soon sell up to $2.2 billion of general obligation bonds, according to a rating agency. Of course, wouldn't you know it, two-thirds of the sale might be offered as taxable Build America Bonds.

Quieter Week for New Sales; One Utility Plans a Triple-B Offering

(Feb. 3) -- This week seems relatively slow for new tax-exempt bond sales, at least based on pricings we expect. A power authority is lining up a triple-B sale of electric system bonds that are tax-exempt, even though the issuer isn't within U.S. borders. Update: We moved an item that was posted on this page yesterday (S&P downgrade of Pajaro Valley Water Management Agency 1999A certificates of participation to BB from BBB) to another page and have now added S&P's reasoning for the change.

How to Earn 0.70% More in After-Tax Yield Without Doing a Thing

(Feb. 2) -- The federal government  in 2011 wants to give some investors about seven-tenths of a percentage point more in Taxable Equivalent Yield. You don't have to do anything except maybe grit your teeth when you see why. At the other end of the spectrum, the bankrupt City of Vallejo wants to give a certain investor less tax-exempt yield for a time. That makes us grit our teeth. Recent rating agency commentaries on the nonprofit hospital sector point out the importance of monitoring trends that affect the forest. Still, some individual trees are healthier than others.

Obama Wants to Extend Taxable BABs Past 2010, Lower Subsidy

(Feb. 1) -- President Obama new budget is expected to propose making taxable Build America Bonds a permanent feature of the municipal market. However, some issuers might find them less attractive because the federal subsidy for interest costs would be reduced. In a related trend, new municipal bond sales set a record for the month of January. However, tax-exempt sales actually declined last month from January 2009. This reduction in tax-exempt volume also keeps a lid on tax-exempt rates. Of course, if you're a lower-rated issuer, there isn't much of a "lid" on what you must pay to attract buyers, as this recent hospital district pricing shows.

Second January Print Edition Mailed; February Mails Late This Week

(Feb. 1) -- Our second "regular" January print edition was mailed at the very end of January. Our regular February edition will be mailed Feb. 6.

Want a Extra Full Percentage Point of Yield? Puerto Rico Leads Way

(Jan. 28) -- Puerto Rico's sales of sales tax bonds showed that one trend from 2009 lives on in 2010. You can pick up plenty of yield on single-A versus double-A new issues. Our examples show the difference this week. Or, a warier investor could stay "shorter" on the Puerto Rico sale (six years) and still top the yields on new 10-year double-A maturities. Of course, it isn't as easy to find some longer-maturity tax-exempt bonds. A couple more issuers are having a love affair with taxable Build America Bonds.

Taxable BAB Cost Soars for Taxpayers, Just as We Said All Along

(Jan. 27) -- We have said all along that taxable Build America Bonds are popular only because the federal "stimulus" program is overly generous in subsidizing 35% of local interest costs. The Congressional Budget Office confirmed our suspicion in a new report that says the Feds underestimated the tab. Elsewhere in the market, we usually wouldn't flag a new bond sale just because it involves fixed-rate debt. But this issuer caught our eye because it has lots of variable-rate bonds outstanding, making its fixed-rate sale noteworthy. The issuer is also high quality, with COPs earning an AA+ grade. Puerto Rico is wrapping up its single-A sales tax bond pricing; "retail" buyers liked the shorter maturities, and the demand also reflects the fact the commonwealth's debt is state and federal tax-exempt for buyers across the U.S.

Vallejo School District Upgraded; Many Muni Ratings Remain Stable

(Jan. 26) -- Vallejo City Unified School District G.O. bonds and COPs were upgraded a notch by Standard & Poor's. This is worth mentioning because we have stressed in the past that the school district is a "separate" entity and not part of the City of Vallejo's bankruptcy filing. In a new report, Fitch Ratings confirmed a negative rating trend for municipal bonds in the fourth quarter of 2009. Even so, 87.3% of its muni ratings had "stable" outlooks at the end of 2009. Speaking of stability, don't forget to consider certain non-governmental issuers when pursuing diversification. We give one example in citing an upcoming tax-exempt bond sale by Pepperdine University.

An Update on 2009 Rating Changes, Plus More on Upcoming Sales

(Jan. 25) -- A report by Moody's Investors Service on 2009 rating trends won't surprise investors, but it does show how the recession affects the muni market. It also probably won't surprise investors that a single-A COP, even with bond insurance, yields more than a double-A water revenue bond. Still, a savvy income-oriented investor might conclude the school district COP is a good bet. We also explain that our list of upcoming sales is getting updated again, but add a plea that market participants let us know when new issues get delayed.

Several Higher-Quality New Issues Loom, Along With Puerto Rico

(Jan. 22) -- While the yields won't be anything to write home about, a handful of new issues next week will meet the need of safety-oriented investors who like bonds with double-A ratings or higher. Puerto Rico also plans a big $1.4 billion bond sale with single-A ratings. Municipal bond funds continue to have an appetite for new issues because they are still seeing "inflows." Our weekly review mentions yields on this week's prominent double-A issuer.

Wind Project Bonds, More Taxable BABs, and More Updates Return

(Jan. 21) -- A wind power project in Utah is driving a municipal bond sale in California, and the security is based on the strength of the utility participants. The looming 2010 stampede to sell taxable Build America Bonds keeps building (federal subsidy terms might change after 2010). Those of you who like to check a handy table of recent yields on new issues will be glad to know updates are returning. Our Upcoming Sales list, while blanked out temporarily as of Jan. 21, also will re-appear soon. We also have something to say about an unplanned trip to New York City, but you can read about that in our "regular" January print edition in just a few days.

A Quiz on Bond Insurers Most Municipal Bond Investors Can Pass

(Jan. 20) -- Do you know which bond insurer dominated the new-issue municipal market in 2009? You probably know the answer but the statistic is still amazing.

Another Prominent Issuer Favors Taxable Over Tax-Exempt Bonds

(Jan. 19) -- A prominent utility is selling taxable debt soon and we are guessing it involves taxable Build America Bonds. This will be a big trend again in the municipal market during 2010, for better or worse.

January "Bonus" Edition in Mail, Second to Mail a Week Later

(Jan. 18) -- The January "bonus" edition was mailed last week and will arrive for most of you after the Martin Luther King holiday. The January 2010 "regular" edition will follow in about a week, we've had a glitch with our annual Taxable Equivalent Yield tables. The "free" updates will resume on a regular basis beginning January 19.

Puerto Rico Readies Big Tax-exempt Bond Sale to Kick Off 2010

(Dec. 23) -- Puerto Rico plans a large sale of sales tax revenue bonds in early 2010. The debt is rated four notches higher than the commonwealth's own G.O. bonds. Interest earned also is state and federal tax-exempt in all 50 states. A health care district that recently sought bankruptcy protection had its general obligation bonds affirmed by Moody's. The rating agency doesn't anticipate payment interruption on the G.O. debt. The real estate downturn continues to narrow the financial cushions for some redevelopment bonds, and we mention two more downgrades. We noticed late Tuesday that S&P changed a lot of San Diego ratings to a "stable" outlook from "positive." Not a big change, but we are awaiting the reason.

Assured Guaranty Corp. Keeps Aa3 With a "Negative" Outlook

(Dec. 21) -- Late Friday afternoon Moody's Investors Service confirmed the Aa3 rating for bond insurer Assured Guaranty Corp. after its parent sold stock to bolster capital. Go here to see a brief update on why the outlook is "negative." In a separate Moody's rating action, a university that includes a chiropractic degree among its offerings has been downgraded to B3 from B1. On a happier note, municipal bond funds keep seeing "inflows." This December is far different from the "panic" of a year ago.

Week in Review: Municipal Bonds Continue to Outshine Treasuries

(Dec. 18) -- A ratio we often cite shows just how much municipal bonds have improved vis-a-vis U.S. Treasuries since a "panic" a year ago. Our weekly review mentions this trend again and also cites yields on a few new-issue pricings before the market slows down the next couple weeks.

Port of Oakland Bonds Cut a Notch by Moody's as Business Slows

(Dec. 17) -- Port of Oakland senior lien municipal bonds were downgraded to A2 from A1 by Moody's Investors Service. A slowdown in airport traffic and cargo shipping have meant less-than-expected revenue.

Valley Health System Vote to Sell Hospitals, Pay Off Bonds, Winning

(Dec. 16) -- The long-suffering and bankrupt Valley Health System might be on the verge of a victory. A proposal to sell its remaining hospitals, and in the process pay off its tax-exempt bonds, was running far ahead at the latest count. The "yes" vote was 87%, which provides a big margin as any final mail-in votes get tallied in coming days. Elsewhere in the market, a new pricing offered a 2.90% yield on a 10-year maturity. That prompted us to mention the "yield" Grinch for seasonal effect. We also note a "new" credit rating assigned to older bonds and guess at a possible reason.

The World Speaks: Give Us Indonesian Bonds Over California Debt

(Dec. 15) -- Using one type of measurement, Indonesia's bonds are considered safer than California's taxable general obligation bonds. Not that credit spreads are the only story, but for some reason this amused us.

House "Reform" Bill Would Cave In to Municipal Issuers on Ratings

(Dec. 14) -- The bill passed Friday by the U.S. House of Representatives to address financing regulatory reform might also help local and state governments get credit upgrades, even if they aren't well run. This issue keeps resurfacing but there is plenty of sausage-grinding to get before Congress comes up with a final bill. A new "story bond" we featured recently didn't carry a credit rating and ended up yielding a tax-exempt 5.55% in 10 years.

Week in Review: Low Yield Aches and Pains Persist from Rally

(Dec. 11) -- Tax-exempt rates continued to drop this week except for a reversal on Thursday. Our weekly review notes that some yields are getting "painfully" low again, with a few recent new issues paying less than 2% on five-year bonds. Ten-year yields around 3.35% aren't anything to write home about, either. We also include brief comments about the two Assured Guaranty bond insurers because their parent company's recent stock sale seemed to boost investor confidence in the value of the guarantees.

San Diego Natural History Museum Rating Cut; Gardena's Is Raised

(Dec. 11) -- The nonprofit San Diego Natural History Museum secures $12 million certificates of participation that are now rated Caa2 by Moody's Investors Service after a downgrade from B1. Readers of our print edition will recall the City of Gardena's problems from a few years ago. Gardena's rebound from those problems is continuing and Standard & Poor's has rewarded the city with a two-notch upgrade. Separately, California's Controller released its report on the state's November cash receipts. General fund revenue was close to projections made this summer, coming in less than 1% short of expectations.

S&P Withdraws 10 School District Ratings in California for QSCBs

(Dec. 10) -- Since we don't like taxable municipal bonds offering tax credits (they are far more confusing than straight tax-exempt bonds), we only mention this for the record. California has a technical problem with the way it allocated a new type of municipal debt known as Qualified School Construction Bonds. Until the problem is fixed, Standard & Poor's has withdrawn 10 ratings it already assigned. None of the affected bonds had been sold. This debt is another stupid concoction of the federal "stimulus" bill. Speaking of stupid "stimulus" bill ideas, our griping about more taxable BAB sales continues. In addition, the outlook for more taxable sales is a bad sign for 2010, based on a survey of municipal underwriters.

A Redevelopment Upgrade Is a Reminder There Also Is Upside Still

(Dec. 9) -- Certain San Francisco redevelopment bonds were upgraded a notch, which usually wouldn't merit a mention. However, since our print edition recently noted that downgrades can be more common during a real estate downturn, a little good news never hurts. Bond insurer parent Assured Guaranty also is hoping for a little good news after raising more than a half-billion dollars to address rating agency concern. Elsewhere in the market, another high-quality California issuer just priced taxable Build America Bonds to take advantage of the federal giveaway masquerading as a "stimulus" program. Sigh.

Our Fascination With "Territory" Bonds Leads to This Update

(Dec. 8) -- Most of you probably couldn't care less about "faulty water meters" in Guam, but we find them worth a mention when they affect tax-exempt municipal bonds. Some of you also don't care about low-rated municipal bonds and you can skip this short update about a pending double-B debt issue. Also, Moody's Investors Service had something to say about the United States and its triple-A credit rating, which isn't in danger. Still, it is noteworthy when the topic even gets discussed, and it makes us thankful for those safe "essential" local municipal bonds. 

Potential California Initiative Aims to Address Public Pension Costs

(Dec. 7) -- We noted once again in December's print edition that public pension costs continue to get more attention for credit ratings. A potential ballot initiative to address this issue will no doubt start a war in 2010 with public employee unions. Meanwhile, municipal bond funds saw "inflows" for the 48th week in a row. What a turnaround from the overblown muni bond "panic" a year ago. Speaking of turnarounds, 2009 will end up being one of the busiest ever for new municipal bond sales across the U.S. California issuers will do their share to close out the year with several sales this week or next.

Week in Review: Do You Want a 2.75% Yield in Five Years or 10?

(Dec. 4) -- Tax-exempt rates are starting to slide again and probably will keep doing so later in December on yearend technical factors. In the new-issue market this week, you could get a tax-exempt 2.75% yield by only going out five years, or you could get the same rate on a 10-year bond. This tale of two issuers is discussed in our weekly review, along with other trends.

Adelanto Public Utility Authority to Sell $77 Million of Unrated Bonds

(Dec. 4) -- The Adelanto Public Utility Authority plans this month to sell $77 million of unrated bonds. This is known as a "story" bond and we discuss it briefly, the preliminary official statement is the best source. The basic idea is to sell fixed-rate bonds to get out of more expensive variable-rate debt.

Our Printer Messed Up: A Small Number of Subscribers Need a Fix

(Dec. 4) -- Our printer made a mistake on a small number of December print editions for the newsletter. If you are missing page two (and have duplicate page threes) leave a message at the phone number on the newsletter and you'll get the corrected version.

Virgin Islands "Rum" Bonds Set for Another Round to Help Cruzan

(Dec. 3) -- More Virgin Islands tax-exempt "rum" bonds will be sold this month, this time on behalf of the Cruzan distillery. The last time these were in the market they paid about the same yield as a new California general obligation bond issue. This "rum" deal involves subordinate revenue bonds so yields will be a bit higher. Rum consumption is probably more predictable than the spending patterns of California's legislature. Pleasanton Unified School District G.O. bonds were downgraded a notch by S&P ahead of a new sale, mainly over lower reserve balances. The district remains a solid A+ credit.

Bond Insurer ACA's Latest Quarterly Statement and Footnote 11

(Dec. 2) -- We were reading the latest quarterly update from bond insurer ACA Financial Guaranty, which is still supposed to help cover any defaults on municipal bonds it backs as the company goes through its "run-off" process. We note an additional paragraph in Footnote 11 in the latest Sept. 30, 2009, statement. We are flagging that change just as an "FYI" since, in the future, investors will want to monitor how often ACA thinks it will have to step in for any defaults. Another bond insurer parent that has remained in far better shape, Assured Guaranty Ltd., plans a stock sale to boost capital. The move could help protect the ratings of its bond insurers at double-A levels.

Refunding Issuance Grows, and We Highlight Another "BB" Sale

(Dec. 1) -- About one-quarter of November's new municipal bond sales was driven by the refinancing of existing debt, thanks to lower tax-exempt interest rates. Meanwhile, we get to highlight yet another new bond sale with a double-B credit rating. Such sales are worth noting because they are uncommon. Also, our December print edition is being wrapped up and will go out in a day or two; the Thanksgiving weekend delayed the mailing just a little bit.

Week in Review: Beverly Hills Proclaims "Happy Thanksgiving"

(Nov. 25) -- We are posting our weekly review early because of Thanksgiving, though we will add something on Friday if needed. Usually the market winds down mid-Wednesday. We wish everyone a Happy Thanksgiving. So does Beverly Hills after seeing the yields on its pricing this week. Our weekly review also flags some of next week's planned new issues.

Los Angeles Bonds Lowered One Notch by Fitch on Budget Crunch

(Nov. 25) -- Fitch Ratings cut $3 billion of Los Angeles bonds by one notch as the city struggles to align its budget with a hard-hit economy. It also raised a red flag about the need for pension reform at the city to cut future costs. Fitch also has downgraded the Modesto Irrigation District by one notch. Beverly Hills isn't facing the same credit rating problems as neighboring Los Angeles and its bond sale this week gave another good example of what high-quality issuers now pay to borrow. An item that appeared on this page yesterday about Standard & Poor's downgrading bond insurer Radian Asset Assurance to BB has been moved here.

Misery Loves Company: All States Suffering, Not Just California

(Nov. 24) -- State tax collections kept dropping in the third quarter of the same period in 2008, a new report says, down 10.7% overall. California's collections didn't decline as much as the U.S. average but a personal income tax figure shows why the state remains in a world of hurt. Meanwhile, assets at municipal bond funds continued to rise in the latest week, but at the slowest clip since April. Our occasional highlight of good-quality nonprofits selling tax-exempt bonds focuses on a boarding school that can boast of diverse alumni such as a former state treasurer and Thornton Wilder. In other news, Moody's Investors Service said it is considering a downgrade for a couple City of Inglewood bond ratings. The warning doesn't mean Inglewood is facing a growing budget crunch. Rather, Moody's said it can't make that assessment until the city catches up on releasing tardy financial statements.

How About 8% Tax-exempt on New Bonds? There is a Catch .....

(Nov. 23) -- In our weekly review posted Friday we mentioned various yield trends. We forgot to mention that one bond deal we previewed ended up yielding a tax-exempt 8% on a 20-year maturity. As you can imagine there was a catch, and it had something to do with the credit rating. A couple deals also priced Friday after we posted our weekly review and we decided to discuss those yields here, in part to show what a new bond with Assured Guaranty Corp. backing now returns. Just a reminder, back on Nov. 9 on our Research page we flagged the high-rated bonds being sold by a Beverly Hills financing authority. That deal is one of a handful being priced in California's municipal bond market during the slow Thanksgiving week.

Week in Review: A Tale of "Good" Versus "Bad;" Buy the Bad Muni!

(Nov. 20) -- This week's new-issue market featured a "good" high-quality state water bond and a "bad" California Public Works Board sale (it isn't a "bad" credit, just "bad" because its name is linked to the deficit-ridden state). In this case "bad" is "good" for the income-oriented investor, with the PWB paying almost two full percentage points more than a local G.O. school bond on a 25-year maturity. Our week in review highlights the "good" versus "bad" deals. If you only want to hear about higher-quality municipal bonds, the Southern California Metropolitan Water District is lining up a couple smaller issues. The yields will be "small," too. Yet another report has been released about the woes facing government finances, this time focusing on cities. The upshot: their budgets will remain tight in 2010 and 2011.

Moody's Removes San Bernardino County From "Watchlist"

(Nov. 19) -- San Bernardino County has been taken off a Watchlist by Moody's Investors Service. The summary about this action is now here.

Taxable Equivalent Yield of 11%: Issuer Pays for "California" Name

(Nov. 19) -- Based on the preliminary pricing for "retail," investors in a top tax bracket can earn a taxable equivalent yield (TEY) of more than 11% on a new 25-year California State Public Works Board bond. Even if you are in the 25% federal income tax bracket, the TEY is just shy of 10%. We also would encourage investors to write a thank you note to our state's political leaders for creating the budget carnage that produces such juicy returns. Institutional buyers will probably rough the state up a little more at final pricing for the Public Works bonds today. Elsewhere in the market, we provide updates on two bankrupt health care systems. One of them (Valley Health System) has just defaulted on November bond payments, but a looming election could fix the mess. The other one (Sierra Kings Health Care District) plans to meet December 1 principal and interest payments on its 2006 revenue bonds. We also mention an example of how the Internal Revenue Service "routinely" examines municipal bonds to make sure they meet federal rules for tax-exempt status. We also tell bondholders to "stay calm." In another update, Moody's has downgraded Merced County solid waste bonds to Baa3 from A3.

More Bad News on California Budget; Is This Really a Surprise? No

(Nov. 18) -- A preview of a new nonpartisan report expected today shows California facing another budget deficit of $21 billion in the current and next fiscal years. That gap is equal to about one-quarter of the current annual general fund budget. We ponder whether this is all a "new" deficit or in fact exposes rosy projections, false hopes, and gimmicks used to "close" past deficits. [Nov. 18 Update: The report is now out and it observes that some of the projected deficit reflects a failure to make good on other past gap-closing measures.] The good news is that the report is expected to say state tax collections are stabilizing. As usual, the problem is that there is never a serious effort to bring spending down to match actual revenue, which is why these huge deficits keep showing up. The timing of the report is probably great news for investors seeking higher yields on this week's State Public Works Board bond sale. In an effort to provide some good news, too, the Bond Advisor goes outside the municipal bond market and mentioned the climbing stock price for the parent company of two bond insurance subsidiaries. This is happening even after Moody's Investors Service recently downgraded one of the Assured Guaranty bond insurers. Even though bigger municipal bond sales get the media attention, we have added more than $600 million of looming new issues to our list in recent days. Many of those sales are around $50 million or smaller.

Moody's Lowers Rating on Ripon Redevelopment Agency Bonds

(Nov. 17) -- Declining assessed value because of the real estate downturn prompted Moody's Investors Service to downgrade three series of Ripon Redevelopment Agency bonds. In an earlier version of this summary we also noted that Standard & Poor's has lowered the rating on a high school district to single-A with a "developing" outlook from triple-A "negative." Now we have the details. S&P said it was correcting an "administrative error" because the rating is based on an insurance policy from National Public Finance Guarantee (formerly MBIA). We did know this district has been facing a budget crunch, based on a past state "negative certification," but the rating change was because of another reason. So we were right to say, "be careful about jumping to conclusions," in our earlier item. Speaking of budget crunches, we talk about "headline risk" and yet another report on state "fiscal peril."

San Juan Capistrano Joins Triple-A Roster With Upgrade from S&P

(Nov. 16) -- San Juan Capistrano's general obligation bonds were upgraded by S&P to AAA before an upcoming sale of such debt. That is always a noteworthy accomplishment, more so when the economy has been weak. Palmdale Water District, which serves an area hit harder by the recession, had it certificates of participation dropped one notch to A by Fitch Ratings. The outlook is now "stable." Municipal bond funds are still gaining assets and tax-exempt money market funds keep seeing outflows. Just a reminder, we noted in last Friday's weekly update that this will be a busy week for new sales of California state and local municipal bonds. There will be a surge this week, a dramatic slowdown during Thanksgiving week, and then another surge of new sales in early December. Many recent new deals have been priced to sell and that will continue to be the case as dealers seek to avoid carrying too much inventory near yearend.

Moody's Cuts Assured Guaranty to Aa3, Leaves a Single-A "Threat"

(Nov. 13) -- Assured Guaranty Corp., the bond insurer that still lands some municipal bond business, was downgraded late yesterday to Aa3 by Moody's Investors Service. Moody's also left the insurer under review for possible downgrade. Moody's said that "capital strengthening initiatives under consideration" for the insurer, if fully implemented, could help protect the Aa3 rating. Our longer item about the Assured Guaranty downgrade has been moved from this page to here. The chief executive officer of AGC's parent company said there are plans to protect the double-A rating. In a bit of good news, the former FSA kept its Aa3 rating with a "negative" outlook from Moody's. FSA is now called Assured Guaranty Municipal Corp. after being acquired by AGC's parent company. In other Moody's rating actions, the Los Angeles Department of Water and Power now has a "positive" outlook rather than "stable" on its water system revenue bonds. In contrast, state governors and budget officers don't see much room for revenue optimism because the rebound in tax collections will lag any economic recovery.

Week in Review: Some New Tax-exempts Yield 5%+ in 10 Years

(Nov. 13) -- Following on last week's theme, we focus once again on lower-rated new deals that have to pay up. One issuer with a single-A rating plus bond insurance still paid a price (5% tax-exempt in 10 years). Of course, lease-revenue bonds aren't as popular with some investors. A health care issuer paid more than that, thanks to a triple-B rating. This week's big sale of four-year bonds to offset a state property-tax shift from local governments is generating criticism because of the way the "retail" pricing was handled (or mishandled, depending on your point of view). Next week's new sales calendar will be busy as deals get priced ahead of the short Thanksgiving week later this month. See our weekly summary here. "Generic" tax-exempt yields didn't change much this week: Pretty steady on the longer maturities, perhaps a bit lower on shorter maturities.

A 10-year Tax-exempt Yield of 5.75% on a Deal We Said to Watch

(Nov. 12) -- This week's sale from Palomar Pomerado Health didn't disappoint on the yield front. A six-year maturity yielded 4.80% and a 10-year, 5.75%. Of course, it is rated triple-B and that remains a tougher sell in today's market. We also include a brief summary of recent bond insurance news since there is still value in seeing the guarantees of the downgraded companies protected for municipal bonds. November 12 is the deadline for submitting bids to buy the bond-financed and bankrupt COPIA wine center property in Napa. This has a bond insurance angle, too, with ACA.

Final Score: California 4%, Local School District 1.9%; Buyers Win

(Nov. 11) -- The score in the headline above has to be read like a golf result. The loser has the bigger number. As usual, the State of California is the loser. Or perhaps we should say state taxpayers are the losers; they are the ones paying for the state's fiscal follies. Yesterday the California Statewide Communities Development Authority sold $1.9 billion of revenue bonds carrying state backing. (We moved yesterday's story about the pricing to a new page, as the next sentence's link will show.) All the debt was packed into a four-year maturity and had to yield 4% tax-exempt to draw enough buyers. In contrast, a local California school district paid 1.9% on a new four-year bond yesterday. The state lost, but buyers of that 4% yield won. Talk about a screaming "buy"! It wasn't all bad news for California yesterday. The state's controller said October general fund revenue came in higher-thank-expected. Even that didn't provide much to cheer about because the governor noted that more budget cuts will be needed to deal with multibillion-dollar deficits in the current and next fiscal years. Bond insurer Ambac also doesn't have much to crow about, but at least it rarely has any municipal bonds defaults to cover. As we note here munis aren't the problem for Ambac's parent. The municipal bond market is closed on Wednesday for Veterans Day.

A New Ba1 Bond; Also, Split Ratings at an Airport and Fund Intake

(Nov. 10) -- A regional center that serves the developmentally-disabled population in part of Los Angeles County will back bonds rated one notch below investment grade (Ba1) by Moody's Investors Service. Such regional centers don't rank as high as state G.O. bonds in payment priority and they received IOUs the past summer. In another upcoming sales, Long Beach's airport revenue bonds are rated investment grade, but at different levels, by three rating agencies. Go here to read about this "split" rating. We haven't mentioned municipal bond fund cash "gains" lately. They are still seeing more money coming in than going out, even though the intake has slowed recently. In a recent item we noted that $500 million of high-quality water bonds are coming to market soon. We didn't note that as much as $350 million might be those dreaded taxable Build America Bonds. There is growing talk that the taxable BAB program should be extended, regardless of our distaste for this unneeded federal giveaway ("stimulus") of taxpayer dollars.

Even Beverly Hills Needs Water Tanks (Financed by AA-plus Bonds)

(Nov. 9) -- The famed City of Beverly Hills will soon sell about $80 million of bonds to finance four city-owned water tanks. Times are indeed tough! Since when did Beverly Hills residents quit showering with bottled water? We mention the Beverly Hills sale in an item we moved from this page to here to mention a few upcoming higher-rated bond issues. There are plenty of double-A credits (or better) selling new bonds. Unfortunately you won't be writing home about the yields in exchange for getting "safer" bonds. Speaking of credit ratings, a recent Moody's Investors Service report says unfunded public pension liabilities could help influence the grades assigned to municipal bonds. A requirement that local and state governments provide better disclosure about this issue could help investors understand which entities are doing a decent job of addressing future retirement costs, and which ones are putting off a day of reckoning. Finally, this week's $1.5 billion bond sale to help local governments deal with a state property-tax grab will probably yield about 3% tax-exempt on the four-year bonds.

Week in Review: New-Issue Opportunities Beckon Below Double-A

(Nov. 6) -- Pitzer College and Pasadena aren't all that far apart as the crow flies along the Foothill Freeway. This week their tax-exempt 15-years bonds were 82 basis points apart for a simple reason. Pitzer College is in the single-A rating category and Pasadena's electric revenue bonds are double-A. The college's 15-year maturity yielded almost 5% tax-exempt while Pasadena's yielded 4.15%. On shorter maturities it was Pasadena 3.25% in nine years, Pitzer College 4.53% in 10 years, and single-A San Francisco Airport bonds at 4.46% in 11 years. We summarize all this in our weekly review. Of course, an electric utility also benefits from providing an "essential" service. Income-oriented investors have to consider those differences in choosing new issues. Investors who want the highest ratings possible give up a lot of yield for the privilege. Otherwise it wasn't an earth-shattering week for yield movement; tax-exempt rates were a bit higher.

Oceanside Hikes Rates for Bonds; Also, Buffett's Muni Star Fading?

(Nov. 5) -- As we anticipated, the Oceanside City Council did the right thing last night and raised its water and sewer rates to support existing debt tied to these services. Now the city will wait to see if the rate increases remove a rating agency's downgrade warning. In other news, Warren Buffett's love affair with bond insurance for municipal debt is looking more like a short fling. Standard & Poor's now says it might downgrade Berkshire Hathaway Assurance Corp. from triple-A, citing concern about the financial impact of Buffett acquiring the rest of Burlington Northern Santa Fe. We have no doubts about the sound backing provided by the BHAC financing backing but Buffett's once-promising municipal market star is fading if the trumpeted "triple-A" insurer ends up double-A. In the market, California wrapped up its latest tax-exempt general obligation bond sale. The taxable equivalent yield on a 25-year bond for some investors rose above 8% or even 9%, depending on your income bracket. In contrast, the state's taxable G.O. deal this week yielded 7.26% on a 30-year bond.

California Goes Neck-and-Neck With Puerto Rico; A Dubious Win

(Nov. 5) -- California's new tax-exempt bond sale suggests the state still can borrow a little cheaper than Puerto Rico, just a month after barely beating a Virgin Islands "rum" tax deal for a lower yield. How far the mighty Golden State has fallen! California also sold its taxable Build America Bonds and the U.S. government handout made that deal attractive. Our November print edition mentioned a new Palomar Pomerado Health debt sale because of intriguing yield possibilities. Moody's Investors Service just downgraded the health provider by one notch. That might kick the yields a little bit higher. Meanwhile, Moody's affirmed its credit ratings on the San Joaquin Hills and Foothill/Eastern toll road projects in Orange County. California's Assembly has joined the Senate and approved a gigantic 2010 bond election for water-related improvements. [Update:The bond election appears set to go in a year because the state Senate approved the overall water package early this morning.] Are you afraid there aren't enough billion-dollar bond sales coming out of California? Don't worry! The State Public Works Board now looks like it will sell $1.3 billion in a couple weeks.

Oceanside City Council Vote Looms on Water and Sewer Rate Hike

(Nov. 4) -- Late today (Wednesday, Nov. 4), probably into the evening, the Oceanside City Council will get a chance to do the right thing and approve a water and sewer rate increase that provides an appropriate financial cushion for existing debt. Oceanside's financial services director sent a memo to the city council in October and cautioned that Standard & Poor's is "closely watching" the outcome of their rate hike decision. We expect the city council will do the right thing. The background of how a rating warning came about can be viewed here.

Now Just Call California and It Will Sell Taxable Bonds on Demand

(Nov. 3) -- How appropriate. We barely got done noting the municipal frenzy over taxable debt (see item below) and a few hours later yesterday the State of California says it will sell $750 million taxable G.O. bonds. The 30-year taxable Build America Bonds will be sold today, just as the state also is kicking off its $1.5 billion tax-exempt sale. The really strange part? Someone contacted the state and expressed interest in buying a ton of taxable state bonds. The state's reply? Sure, why not! After all, the U.S. "stimulus" package will pick up 35% of the interest expense. As we note in our comment about all this, as long as the state is so eager to grant requests, we are tempted to pick up the phone and ask California to pass a budget that is truly balanced one of these years. Think the state would agree to that, too? As for another big planned sale, the November 10 debt offering that will help local governments offset California's property-tax grab is going to carry credit ratings equal to the state's own G.O. bonds. That is because repayment ranks high on the state's priorities, right behind education and G.O. bonds. If you don't think California already has enough voter-approved but unsold bonds on its plate, guess what? California's Senate last night gave a green light to ask voters to approve $10 billion of water-related bonds in an election a year from now. Now the Assembly is considering the proposal. In another piece of market news, bond insurer FSA will get a new name after it was recently acquired by Assured Guaranty Ltd.

Taxable Municipal Bond Sales Continued to Expand in October

(Nov. 2) -- Taxable Build America Bonds drained even more supply away from the traditional tax-exempt market in October. Overall taxable issuance in the U.S. reached 37% of the municipal bond market. In a long-running saga, a November 10 court hearing is near for the global settlement involving Los Angeles Regional Airport Improvement Corp. lease revenue bonds tied to United Air Lines, Inc. The bond trustee provided more details on the process late last week. Our November print edition discusses a barbell strategy and notes that the "long" end doesn't always have to be as long as 20 years and above. It can be tailored to suit your individual goals and risk tolerance, etc. However, if you are looking for really long maturities, this week's $1.5 billion California general obligation bond sale provides some candidates. By the way, the November print edition will arrive soon because it was mailed at the very end of October.

Week in Review: Longer Maturity Yields Up, State Reputation Down

(Oct. 30) -- Tax-exempt yields rose on longer maturities this week, not so much on bonds due over the next decade. If you don't understand our headline ("State Reputation Down"), it was mainly written to counter some crowing by a state treasurer's spokesman. The state is apparently thrilled it could lower yields a bit at the final pricing of the "deficit" bonds (AKA "economic recovery" bonds). These bonds carried a double-barreled security yet they still had to yield just a bit under 5% tax-exempt on a 13-year maturity. That is just another sign of how far the mighty have fallen. Nothing to crow about there. A health system also was in the market this week and paid 5% to borrow in 12 years. See a short weekly summary here.

As We Expected, Yields Dropping on California's "Deficit" Bonds

(Oct. 29) -- Yields are dropping in the pricing for bigger institutions as California wraps up its $3.5 billion sale of economic recovery ("deficit) bonds to refinance certain existing debt. We expected as much because the double-barreled security is too attractive for some to pass up. A 13-year maturity offered with a preliminary 5% yield a couple days ago probably will yield closer to 4.85%. A shorter maturity (four years) might end up yielding around 2.48% instead of the preliminary 2.55%. Individual investors who placed orders during the two-day "retail" period can always walk away from the lower yields, but most will no doubt hang on because the yield "premium" is still quite attractive relative to other higher-rated municipal bonds.

Thanks But No Thanks: Taxable 6.26% for a 40-year Municipal Bond

(Oct. 29) -- Is a taxable 6.26% on a 40-year municipal bond really all that appealing? Not when you consider the tax-exempt alternatives. And never mind that the issuer of that taxable bond can't keep 5,000-pound chunks of a bridge from tumbling to earth. Meanwhile, another rating agency has weighed in on third-quarter trends and noted that the ratio of municipal bond upgrades to downgrades was 0.8-to-1. Not a surprise during a recession; indeed, it might surprise some that there were that many upgrades. In a speech last night and comments this week, two Securities and Exchange Commission members rattled their sabers about increasing the SEC's oversight of the municipal bond market. As one of them said, municipal bond investors get treated as second-class citizens, a point we have made since the 1980s. We fear, however, that the commissioners might be speaking loudly and carrying a little stick. Congress might not be as enthused about reforming the regulatory environment for municipal issuers. The two-day "retail" offering period is now over and California's "deficit" bond refinancing drew about $2.5 billion of orders.

Big Bond Sale Looms by Local Agencies to Offset State Money Grab

(Oct. 28) -- In a recent print edition we discussed a way local governments could use bond proceeds to offset a state takeaway of property tax dollars for its own budget. That bond sale is expected to be priced on November 10. Meanwhile, the first day of California's deficit bond sale to refinance existing debt drew enough orders for about half of the overall offering. Juicy yields, as we noted below, drew investors' attention. Another municipal bond sale with higher-yielding potential is being prepared for a prominent healthcare provider in northern San Diego County. Fitch Ratings grades the bonds BBB. Yesterday we mentioned a Standard & Poor's downgrade warning for certain Oceanside Series 2008 wastewater certificates of participation. The reason is fleshed out in our update on another page. As we expected, it has to do with a city vote on rate increases.

California Deficit Bond Refinancing Sale Still Offers Juicy Yields

(Oct. 27) -- California's $3 billion sale of deficit bonds (euphemistically called "economic recovery" bonds) will offer investors some tasty yields, even though the debt is stronger than the state's general obligation bonds. Tax-exempt yields in 10 years could run around 4.6%, or roughly a full percentage point more than recent rates on higher-quality local bond sales. The longest maturity (due in 2022) might yield around 5%, based on current estimates. Bond proceeds will refund certain shorter-maturity 2004 economic recovery bonds to help the state stretch out the debt repayment schedule. The deficit bonds are secured by both sales tax revenue and a back-up general obligation pledge and carry a higher rating than California's own general obligation bonds.

Oceanside Sewer System COPs Get Downgrade Warning from S&P

(Oct. 27) -- While we haven't seen the actual reason yet [UPDATE: here is the reason], Standard & Poor's has put Oceanside certificates of participation (Series 2008 sewer system) on a watchlist for possible downgrade. The COPs are rated A+. The Oceanside City Council is facing a test over whether it will raise water and sewer rates to help preserve financial cushions for the bonds (or otherwise fire several water and sewer employees to help accomplish the same thing). We believe the city council will revisit this issue on November 4.

Now Congress Looks at Tax-exempt Bond Market As a "Regime"

(Oct. 27) -- We warned readers before about growing hostility to tax-exempt bonds and now the source of our concern has been formalized in a Congressional 50-page attack, or should we say "study," that discusses the current "regime" of tax-exempt financing. Wow. Even so, some issuers can't get enough of those taxable Build America Bonds, which is just going to help make a Congressional case for "regime change." Meanwhile, one rating agency expresses a little concern about the big capital improvement plan brewing at Los Angeles International Airport, even though this remains a solid credit with senior revenue bonds in the double-A rating category. 

Week in Review: Yields Steadier, Local Borrowers Mock State Deal

(Oct. 23) -- Tax-exempt yields ended little changed this week after a recent run-up. The run-up helped erase the nightmare of a certain borrower being able to pay only 2.50% tax-exempt on a 10-year bond in late September. A solid double-A borrower this week paid 3.40% on a 10-year maturity, still nothing to write home about for an investor. Meanwhile, if local borrowers aren't mocking the state, they should at least enjoy a private chuckle. The state's Public Works Board paid 5.79% to borrow in 20 years this week. A higher-rated local district paid 4.85% on a 30-year maturity. See our weekly summary for our discussion of all this. Maybe they should dock all the state legislature's pay and apply that toward the higher borrowing cost since this is the penalty for years of approving deficit-ridden budgets. Ha ha ha, as usual the joke is still on taxpayers. Speaking of jokes on taxpayers, we note that there is a downside to the state's plans to sell $3 billion of economic recovery ("deficit") bonds next week to refinance certain existing "deficit" bonds. In other news, an underwriting syndicate member passed along a public agenda item earlier this week about a big $1.6 billion airport bond sale. By the way, Fitch Ratings sees an upside to an assistance program for housing agencies we discussed the other day.

State of California Plans Another G.O. Bond Sale in Early November

(Oct. 22) -- If you are tired of hearing about the State of California or its various agencies tapping the new-issue market just about every week (or so it seems), stop reading now. The state plans to sell even more general obligation bonds during the first week of November; we're not aware that the size has been decided yet. In mid-November California's State Public Works Board, which also was in the market this week, plans to sell $769 million of bonds. (The 20-year PWB bonds that priced the other day yielded a bit shy of 5.7%. A local water district's revenue bonds were priced the other day to yield 4.45% on a 19-year maturity.) California's Department of Water Resources also plans to sell water system bonds in mid-November. In other short updates, we talk about "Ma" running for the hills over more "total return" lunacy. We discuss the Vallejo City Unified School District for a very old reason. And, state and local housing agencies hope federal assistance can get them back to selling more tax-exempt bonds.

Fitch Also Plans "Deficit" Bond Upgrade at  a Time "Downs" Prevail

(Oct. 21) -- We have moved yesterday's item about Moody's planned three-notch upgrade for the California economic recovery bonds to another page. We include another update to note that Fitch Ratings also plans a three-notch upgrade for this debt. All this is happening in conjunction with the state's $3 billion sale next week of such "deficit" bonds. The upgrades will be welcome because downgrades (or "downs" as we call them in the headline above) tend to dominate when the economy slumps. Go here to read about third-quarter trends in downgrades and upgrades. You already should know what the Bond Advisor thinks about the trend toward taxable Build America Bonds. Isn't it thrilling to know that yet another issuer might be close to jettisoning almost all tax-exempt bonds from a big sale? The good news is that it wasn't as bad as a dealer told us.

A Calif. "State" Bond Avoids Downgrade; Plus, More Recent Yields

(Oct. 20) -- The California State University system is certainly affected by state funding cuts. The good news, Moody's said, is that $3.6 billion of CSU debt won't be downgraded thanks to efforts to raise revenue and watch expenses. Bad for students, good for bondholders. A variety of deals were priced the other day in California's municipal bond market. Here are some quick tax-exempt yield examples. Fitch Ratings also is finished with assigning ratings based only on a financial guarantee. You can guess why but go here for the official reason. Investors have had to do some extra credit-related legwork when they made the mistake of buying a municipal bond based only on the financial guarantee rating. The "underlying" rating, as we have explained, is also crucial to know, but some insured bonds never received an "underlying" rating in the past.

Municipal Bond Fund "Inflows" Finally Slow; This Is a Good Thing

(Oct. 19) -- The pace of money pouring into municipal bond funds finally slowed in the latest weekly reporting period. We don't need all that demand with the drop-off in tax-exempt bond supply. This week the California State Public Works Board will do its part toward leaving only crumbs for the tax-exempt bond market. Most of its deal will be sold as taxable Build America Bonds. The Southwestern Community College District also is selling most of a G.O. deal on a taxable basis this week. Meanwhile, while some school districts are managing to get upgrades at a difficult time, not all of them are so fortunate.

Week in Review: Muni Yields Up; State Taxes Plunge in 2nd Quarter

(Oct. 16) -- Tax-exempt yields rose again this week, ending a quarter-point higher in some instances. Considering they were rising from levels seen in the 1960s, plenty of investors remain unenthused. See our summary here. Recent yield levels weren't the only thing to bring back memories of the 1960s. State tax collections across the U.S. dropped a record 16.6% in the second quarter of 2009 over the same period a year earlier, the Nelson A. Rockefeller Institute of Government reported. It was the largest drop in state tax receipts since John F. Kennedy was President, the Rockefeller Institute added. Local governments are faring better because they rely heavily on property tax collections, which tend to be more stable. Local tax receipts declined by only 2.8% in the second quarter (as expected, local sales taxes were down but property tax collections actually rose). In other news, another big issuer plans to sell $1.3 billion of taxable Build America Bonds. The bonds are backed by toll bridge revenue, a security that would entice tax-exempt buyers. But sorry, they are being sold taxable so the issuer can lap up the Washington D.C. interest-rate subsidy. Also, you do not see this everyday. The rating on a municipal bond is upgraded to Aaa from Ba3. Then again, the reason is different, too.

Yields Rise, We Shed No Tears for Issuers; Also, a Deal to Ponder

(Oct. 15) -- The tears are flowing for some issuers who are amazed they aren't entitled to borrow at tax-exempt yields seen when LBJ was President. So they are taking their marbles and going home, at least for now, with some new bond sales being postponed or reduced in size because yields rose from recent ridiculous lows. Wah wah wah, too bad. In a new bond sale pending as soon as this month, we suggest investors consider an issuer that went through a tough stretch a decade ago but is now back in the single-A category. As we also explain in that little item, nonprofit health care issuers of tax-exempt bonds are definitely not created equal.

A Bankrupt District: Bond Insurance Still Can Play a Back-up Role

(Oct. 14) -- We noticed when Standard & Poor's downgraded the "underlying" rating for the Sierra Kings Health Care District that bond insurance backs some of the debt. The insurance still could come in handy if the bankruptcy process caused a payment glitch. Speaking of bankrupt health care districts, we noted yesterday that S&P removed one of them from a "WatchList." We also find something encouraging about a recent poll and the state budget process.

Rating News: Bond Insurers, a Hospital, a Power Authority, a City

(Oct. 13) -- Fitch Ratings, after adjusting its loss expectations for certain mortgage-related products, decided to downgrade bond insurers Assured Guaranty Corp. to AA- from AA and Financial Security Assurance to AA from AA+. Fitch took both companies off a "watch" list for further downgrade. Standard & Poor's has downgraded Series 1993 revenue bonds backed by Downey Community Hospital to C from CCC and suspended the rating because of tardy financial statements. Fitch Ratings has lowered its rating on Puerto Rico Electric Power Authority revenue bonds to BBB+ from A-. And, just to throw in a downgrade from Moody's as well, that rating agency cut the grade by one notch on a small amount of Petaluma debt. The municipal bond market was closed on Monday for Columbus Day.

An Election to Watch on Dec. 15; Plus, Some Up and Down Trends

(Oct. 12) -- The bankrupt Valley Health System will be holding a December election with an obvious angle to follow for outstanding tax-exempt bonds. We have discussed this previously but the election date is official. In other recent developments, municipal bond fund "inflows" are up again as the 2009 comeback continues. Meanwhile, the State of California's tax revenue is down again, or at least coming in less than expected.

California Ponders Refunding "Certain" Economic Recovery Bonds

(Oct. 9) -- The State of California might refund as much as $4 billion of "certain" outstanding economic recovery bonds later in October. The Economic Recovery Financing Committee, which oversees such approval, plans to meet on Monday (October 12) to consider authorizing the bond refunding. The Bond Advisor always has preferred referring to the "economic recovery" debt as "deficit bonds;" it was authorized by Proposition 57 in 2004 after Gov. Schwarzenegger took office.

Sierra Kings Health Care District Files for Chapter 9 Bankruptcy

(Oct. 9) -- The Sierra Kings Health Care District has filed for Chapter 9 bankruptcy protection. In response, Moody's Investors Service downgraded the district's existing general obligation bonds to Ba2 from Baa3 and cautioned that more downgrades are possible. As always, bondholders need to be careful about knee-jerk reactions because panic selling won't take into account how the bonds ultimately fare (even if there is a payment glitch or two along the way).

Week in Review: Yields Finally Rise on Indigestion Over Low Rates  

(Oct. 9) -- Tax-exempt yields in California's municipal bond market finally rose this week, reflecting broader resistance to rates right out of the 1960s. California's big sale, most of which went taxable, also was a test of the market's appetite and institutions pushed for higher yields on the $1.3 billion tax-exempt portion. See our weekly update here. In another sign of how far the mighty have fallen, consider California's BBB G.O. rating from Fitch next to the new upgraded AA-minus rating for the State of Louisiana. As we have noted previously, Louisiana used to be the muni bond market's laughingstock, but you-know-who now wears that crown. As far as big upcoming sales, California's Public Works Board plans an $820 million lease revenue bond sale but almost three-fourths might be sold as taxable Build America Bonds. Catholic Healthcare West also might be in the market with single-A hospital revenue debt (tax-exempt). Meanwhile, a smaller community college district demonstrates that fiscal discipline pays off.

A County Gets "Negative" Outlook and State Sells One-Third to "Retail"

(Oct. 8) -- Riverside County's bond rating now has a "negative" instead of a "stable" outlook as the economy takes a toll on its budget reserves, according to Moody's. Meanwhile, "retail" investors offered to buy 33% of California's tax-exempt general obligation bonds and now bigger institutions take a crack at the deal. Yields might have to be sweetened even more. (UPDATE: Indeed, we hear as of midday Thursday that yields have gone up to attract institutional buyers, including talk about the 20-year bond yielding closer to 5% instead of 4.66% in the "retail" order period. However, we haven't seen the final pricing yet.) Finally, why not torture tax-exempt investors with yet another example of an issuer turning to taxable Build America Bonds?

California G.O. Preliminary Rates: State Raising Yields Just a Bit

(Oct. 7) -- The preliminary yields for the "retail" order period on California tax-exempt general obligation bonds aren't as compelling as earlier this summer, no surprise there. Then again, they don't yield a heck of a lot less than a triple-B Virgin Islands "rum" deal. However, we should note as of Wednesday that the state is sweetening the yields a bit on the tax-exempt portion. A bond due in 20 years is offering a preliminary yield of 4.66%, up from 4.63% earlier.

A Wrong Set Right; County Downgrade Warning, and Yield Humor 

(Oct. 7) -- Years ago when United Airlines used its bankruptcy to try to weasel its way out of certain tax-exempt bonds sold by Los Angeles Regional Airports Improvement Corp., the Bond Advisor called it a travesty. Although United convinced some courts to go along with its legal arguments, a U.S. appellate court set things right for bondholders in May and, the other day, a "global" settlement was finally announced to pay bondholders $75 million for their claims. In other news, when a county faces a possible downgrade on $1 billion of bonds, would you assume the recession is to blame? It isn't quite that straightforward as this little item explains. In need of some yield humor after seeing rates plummet? How about getting excited as tax-exempt yields finally rise by one basis point? We're rich! Ha! Here is an item just to keep bringing up depressing news. The Southwestern Community College District in southern San Diego County plans to sell $100 million general obligation bonds. Only $35 million will be tax-exempt; $65 million are planned to be taxable Build America Bonds.

A 4.37% Tax-Exempt Yield in 10 Years, But There is a Little Twist 

(Oct. 6) -- A tax-exempt bond issue we mentioned briefly in our October print edition did in fact get priced. It involved the Virgin Islands, rum, and decent yields, but not everyone would want to take a sip. Earlier this summer you would have seen tastier yields on California general obligation bonds, but not anymore. This week's California bond sale will see plenty of demand chasing too little supply. Pitzer College plans to sell bonds this month, offering investors a chance to diversify beyond state and local government debt.

Week in Review: A 10-Year Bond Yields 2.5% and Tons of Taxables  

(Oct. 2) -- This is getting old, isn't it? If you think yields can't keep dropping on high-quality new issues, then don't read our weekly update here. If you were ticked off when 10-year tax-exempt yields dropped well below 3%, how about seeing a deal with a 10-year maturity yielding 2.5%. Yikes! We'd be extremely cautious about buying at some of these yield levels just to get a higher-rated muni. There is too much downside risk. Then again, it isn't a lot of fun trying to find alternatives as credit spreads tighten. California's big G.O. sale will get attention next week but much of it will go taxable. Most of today's other brief updates are teasers from our October print edition, such as a single-C bond with possible upside; an old controversy about certain school bonds that still manages to stir up inflammatory stories, and bonds backed by the downgraded insurers that trade above par (the market rally is at least lifting a lot of ships). Finally, a draw on a reserve fund to cover a bond payment can help raise a red flag but, in and of itself, does it tell you all that much? These three examples suggest a draw is just one piece of information.

California's G.O. Sale: Will Taxable Bonds Eat Up Vast Majority?

(Oct. 1) -- California's $4.5 billion general obligation bond sale planned next week could be eaten alive by taxable debt. Between taxable Build America Bonds and other reasons the state is selling part of the debt taxable, the tax-exempt market might see $1.3 billion at best. Of course, those are just preliminary numbers, but we're just saying.

Taxable Munis Stole One-Quarter of U.S. Bond Volume in September

(Oct. 1) -- Today the Los Angeles Unified School District plans to sell $1.4 billion of taxable Build America general obligation bonds. So this is a good time to note that taxable BAB's stole roughly 28% of the September volume from the traditional tax-exempt bond market (roughly $7 billion), according to Thomson Reuters. This is why tax-exempt yields are so low because a record amount of cash keeps flowing into tax-exempt funds. There is a ton of demand and declining supply. Even so, the taxable yields can't compete with the after-tax return on a tax-exempt, even at the current paltry levels. And just how low are some of these tax-exempt yields? Look at what the East Bay Regional Park District paid to sell general obligation bonds this week (2.50% tax-exempt in 10 years!). Meanwhile, the Pasadena Area Community College District sold $52 million of bonds, but almost half went taxable.

Merced County Waste Bond Under Review; Also, "Barbell Strategy" 

(Oct. 1) -- Bonds issued by the Merced County Regional Waste Management Authority are being reviewed by Moody's for a potential downgrade. Also, with tax-exempt yields at "artificially" low levels right now, what can an investor do? A "barbell strategy" with a twist is one idea, especially because the twist involves a 2011 maturity yielding 3.05%. In our October print edition we also mention a new proposal that we suggested way back in the 1980s. It involves changes in the governing body of the municipal bond market's self-regulatory agency.

John Muir Health Plans Bond Sale; Plus, Tax Reform Plan Is D.O.A. 

(Sept. 30) -- John Muir Health, a prominent health care provider in the East Bay near San Francisco, plans to sell $102 million of revenue bonds soon. Meanwhile, we are assuming a tax-reform plan put forth by yet another California blue-ribbon commission is going to be dead on arrival. Also, another prominent issuer in the municipal bond market (but outside California) turns to taxable Build America Bonds. It never ends.

Our Fund Index Now Up 25% Since December; SF Airport Upgrade 

(Sept. 29) -- The Bond Advisor's California Municipal Bond Fund Index is now up 25% since December. You can see why we told sophisticated investors to buy municipal bonds last fall. Fitch gave San Francisco Airport Commission second series revenue bonds an upgrade to A+ thanks to good performance during a tough economic time. Also, while you may have heard about a downgrade for an MBIA insurer, it does not affect the single-A rating for the company's new and separate public finance unit (National Public Finance Guarantee Corp.) that backs all the old insured bonds.

Week in Review: Rates Lower; L.A. Schools to Sell $1.4 Bln Taxable 

(Sept. 25) -- What happened this week? Same old, same old. Tax-exempt yields keep dropping, issuers keep selling those taxable Build America Bonds. Go here for our weekly summary. If you really want to see low tax-exempt yields, watch the upcoming sale from a regional park district issuer with a triple-A rating from S&P and an Aa1 from Moody's. Separately, the Los Angeles Unified School District plans to price more than $1 billion of taxable bonds in coming days. Are these taxable BABs? Yes they are. The district also is selling more than $180 million tax-exempt G.O. bonds. We also understand a Pasadena Area Community College District bond sale we highlighted previously for its high ratings might be sold as taxable BABs. Remember, federal taxpayers, you are paying for these taxable BABs to the tune of a 35% interest-cost subsidy. It is an unneeded federal "stimulus."

San Francisco Airport to Sell Bonds to Replace Debt Subject to AMT

(Sept. 24) -- The San Francisco Airport Commission plans to sell as much as $625 million of bonds in an effort to refund certain existing debt subject to the federal Alternative Minimum Tax. This strategy is permitted by this year's federal "stimulus" legislation, though it only applies to certain existing AMT municipal bonds. A local school district was in the market with a deal mainly structured as capital appreciation bonds. And, "retail" investors ended up buying three-fourths of the state's massive RAN sale.

California Notes Expected to Yield About 1.25% in May, 1.5% in June

(Sept. 23) -- After California passed the $6.5 billion mark in "retail" orders for its revenue anticipation notes on Tuesday's second day or order taking, the word went out that the state probably will pay at the lower end of a yield range for the $8.8 billion borrowing. Institutional orders are being taken on Wednesday (Sept. 23). That means notes due next May would yield around 1.25% and the notes maturing in June, about 1.5%. That isn't a surprise because it is a seller's market, even for borrowers with reputations for chronic budget deficits. California isn't about to default on a note issue. The state also is paying a yield premium relative to what investors can get on higher-rated tax-exempt issues.

California Notes Attract More Than $5 Billion of Orders on Day One

(Sept. 22) -- California drew almost $5.4 billion of revenue anticipation note orders from "retail" investors on the first day of a two-day order period for smaller investors, equaling more than three-fifths of the total sale. The notes due next May may yield from 1.25% to 1.5% and the notes maturing in June, 1.5% to 1.75%, though that could change once the final order period for bigger investors ends on Wednesday. (Most of the orders submitted have been for the June maturity.) Retail buyers can cancel orders if the final pricing isn't to their liking. We note elsewhere that a California city recently paid 0.47% on notes due in a year and Massachusetts notes due next June yielded 0.31%. So California is paying roughly a full percentage point more for its massive $8.8 billion note sale. As we explained in recent print editions, if you really need to park money for a few months the state's yields give you a little more return over the other dismal alternatives in the short-term market. A few weeks ago most market participants had hoped the California deal would return even more, but yields have kept collapsing on the short end of the yield curve.

Several Deals Should Price This Week; Yields Still Depressing

(Sept. 21) -- Several of the Upcoming Sales on our list should be priced this week as issuers try to take advantage of a seller's market. Yields on higher-rated deals are getting downright depressing. As we note here, on one issue last week an investor had to go out 19 years to find yield above 4%. Part of the reason yields keep dropping is because municipal bond funds are still raking in cash. Meanwhile, California's big revenue anticipation note sale takes center stage in the short-term market.

Week in Review: Tax-exempt Yields Drop, One Index at 1967 Levels

(Sept. 18) -- Not enough supply, at least of tax-exempt bonds, and plenty of demand continues to push yields lower in the municipal bond market. (There is too much supply, in our opinion, of those taxable Build America Bonds.) Go here for our weekly review and see which bond index has dropped so low, it is at a 1967 level.

Cedars-Sinai Plans Big Hospital Bond Sale; Muni Yields Go Lower

(Sept. 17) -- Cedars-Sinai Medical Center, a prominent health-care provider in Los Angeles, plans to sell $535 million of municipal bonds in coming weeks. Given the paucity of supply and lack of bigger offerings, the deal will get a look from many investors. California also is looking at a sale of $5 billion of general obligation bonds in October, including some more taxable Build America Bonds. These issuers and others will be thrilled to know that tax-exempt yields, at least as measured by certain "generic" scales, are near record lows at certain parts of the yield curve. Of course, lower-rated issuers are still paying a penalty, but not as much as they were earlier this summer because investors are willing to take more credit risk to get added yield.

One Muni Tobacco Bond Takes a Rating Hit, Others Stay at Triple-B

(Sept. 16) -- We happened to look at a recent Standard & Poor's rating discussion on certain municipal tobacco settlement bonds and noticed that one $59 million local California issue dropped to B+ from BBB. You can read about it here. Most other deals remained triple-B, but with a longer-term "negative" outlook. In other "general news," there are signs California's economy is rebounding, even if slowly. Fitch Ratings also didn't give the state's revenue anticipation notes its highest rating. However, this doesn't necessarily come as a surprise, as we mention here.

Bond Advisor's Calif. Muni Bond Index Up 22.4% Since December

(Sept. 15) -- The Bond Advisor's California Municipal Bond Fund Index has now risen 22.4% since last December, thanks to another increase last week. We told readers last fall that municipal bonds were a screaming buy. In other news, California's revenue anticipation notes received ratings and are ready to sell next week. Also, the economic downturn has not only put a dent in passenger traffic at San Jose's airport; it also put a dent in the credit rating from Fitch, which downgraded the airport's revenue bonds by two notches to A-.

More Proof of Taxable Invasion; Plus, Schools and Credit Ratings

(Sept. 10) -- Let's go outside California's borders a moment and ponder what this tidbit means for the municipal market. Utah is selling more than $1 billion of general obligation bonds and about 70% will go as taxable Build America Bonds. Mark our words, and we've made this point in several recent print editions, the rush to sell taxable BABs just to seize on a federal "stimulus" giveaway could mean bad things for the traditional tax-exempt market down the road (apart from what the trend is doing to tax-exempt yields in the near term). Elsewhere in the market, the Bond Advisor has stressed during the credit crisis that smaller investors shouldn't get caught up in the "sky-is-falling" view of the muni market. A report noting that school district downgrades will probably be the exception, not the rule, only confirms what we have all along about "traditional" issuers, even during a steep economic downturn.

A Spotlight on Two New Sales, and a Ridgecrest Agency Upgrade

(Sept. 9) -- Upcoming bond sales from two issuers in the Pasadena area are worth a look from a variety of investors. Also, the Ridgecrest Redevelopment Agency gets rewarded with an upgrade after coming back from a tough stretch in the late 1990s.

Bond Advisor's Muni Bond Fund Index at Highest Point in a Year

(Sept. 8) -- Our September print edition discusses the rebound in the Net Asset Value of our California Municipal Bond Fund Index, which is at the highest point in about a year. The Index has climbed even higher in the last week, reaching $11.82. In addition, municipal bond funds continue to take in cash at record levels. Most of our readers buy municipal bonds directly and the slope of the yield curve should continue to be the biggest factor in your investment decisions, along with a willingness to take on some small credit-related risk.

Week in Review: Good Variety of Sales, Tax-exempt Rates Drop

(Sept. 4) -- Even though those irritating taxable "Build America Bonds" are taking volume from the tax-exempt market, this week saw a decent mix of traditional municipal sales in California. Most deals were relatively small, except for a San Francisco utilities offering. Longer-term rates dropped more than one-tenth of a percentage point. For more on recent market trends go here.

New Hospital Bond, Water Agency Deal Add to Growing Sales List

(Sept. 3) -- We are starting to rebuild our list of upcoming sales. A $200 million planned sale in a handful of weeks by the California Municipal Finance Authority on behalf of Community Hospitals of Central California is worth flagging. Moody's rates the bonds Baa2 so you know the yields will be alluring. Watch our September print edition for more discussion on this sale. Also, the Mojave Water Agency plans soon to sell $51 million of water revenue certificates of participation. Revenue bonds tend to be popular during an economic downturn, even if COPs are involved. Fitch rates these bonds AA-minus. 

Several Recent Sales Show Yield Trends; Some Are Depressing

(Sept. 3) -- We added a few recent bond pricings from this week to our chart showing examples of recent sales. Those of you who once considered a 4% benchmark the yield you desired (and needed) on a 10-year bond will be sorely disappointed by some of the recent sales. 

California's Revenue Anticipation Notes Planned for Sept. 21 to 23

(Sept. 1) -- California plans to sell its $10.5 billion of revenue anticipation notes from September 21 to 23. The "retail" period for individual investors will occur during the first two days, with bigger institutional investors stepping in on the 23rd. The "second part" of our August edition discussed the RAN sale at more length. Most income-oriented investors are better off on the longer-end of the yield curve, but the state's sale could be alluring if you need to park some cash over the next nine months or so. 

Massacring the Tax-Exempt Market; Taxable Sales Equal 1/3 of August Volume

(Sept. 1) -- We go off on another rant about these taxable "Build America Bonds" in the second part of our August print edition that subscribers will see soon. Here is another tidbit to justify our rant. In August about $33 billion of municipal bonds were sold across the U.S. Of that total, almost 31% were sold as "taxable" bonds, according to data compiled by Thomson Reuters. Isn't that depressing?

Second Part of August Issue Mailed at End of Month; Sept. to Mail on Sept. 5

(Aug. 28) -- The second part of our two-part August edition was mailed on August 31, a bit later than we planned, and the September print edition will mail on September 5.

Moody's Takes California Off "Watch" for Downgrade; More Deficits Expected

(Aug. 21) -- Moody's Investors Service is finished downgrading the State of California after taking the state all the way down to Baa1 earlier this summer (Baa3 is the lowest investment grade). Moody's took the state off a "watch" for possible downgrade and said the rating outlook is now "stable." However, Moody's said the state's amended budget last month relied on several one-time fixes that won't solve longer-term solutions. California will still have to deal with future deficits, partly because some of the "one-time" fixes have to be paid back over time. Income-oriented investors should consider the state's ratings almost irrelevant by now. The key factor to consider is the yield premium over other municipal issuers, and we mentioned that topic in August's print edition.

Week in Review: Tax-exempt Rates Keep Dropping as Taxable Munis Sap Supply

(Aug. 21) -- Be happy with your crumbs, supporters of the tax-exempt bond market. At least that seems to be the message in the "new" and distorted municipal bond market. The University of California sold more than $1 billion of taxable Build America Bonds this week and offered $300 million tax-exempt bonds. Elsewhere in the broader U.S. market the Texas Transportation Commission sold more than $1 billion of taxable BABs. Simple supply and demand dictates that these taxable sales will have an impact on the tax-exempt market, and it's not coincidence that tax-exempt yields were once again lower again this week. Taxable muni sales aren't the only reason but they are certainly a factor. Even so, lower-rated munis with a track record of safety still offer decent yield premiums for those of you who don't want to settle for a higher-rated tax-exempt offering about 4% in 15 years. For more on recent market trends read more here.

Our Web Updates Have Returned; Watch for More Changes in Coming Weeks

(Aug. 21) -- As you can see, we have replaced our "old" site with a new format and will soon add extra features. It is still in a "bare-bones" format but more changes are looming. For now we will feature some of the staples from our "old" site, such as periodic discussions of rate trends, highlights of upcoming sales, and various updates pertinent to California's municipal bond market. 

California Removed from S&P CreditWatch; Budget "Significantly" Cuts Expenses

(Aug. 18) -- Standard & Poor's removed California's credit rating from a list for potential downgrade because the revised fiscal 2010 budget "significantly reduces state expenses and provides a path to improved financial liquidity," S&P said in a report. The outlook from S&P is still "negative," which means the state's rating still could drop within the next year depending on how budget trends unfold.

University of California Sale Dominates Calendar; Big Part Goes Taxable ... Sigh!

(Aug. 14) -- The good news for investors looking for new municipal bonds? The Regents of the University of California are ready to sell about $1.4 billion of new general revenue bonds. (The deal has been priced and we have comments on this page.) These bonds are popular with safety-oriented investors because they are rated Aa1, only one notch below triple-A, by Moody's. The bad news? If you love buying tax-exempt bonds, a big part of the sale isn't designed for you. The University of California is joining the growing parade of issuers that is voting for taxable "Build America Bonds" instead of tax-exempts. In fact, slightly more than $1 billion of the deal is going the taxable route. Issuers continue to jump on this taxable bandwagon, which was authorized under this year's federal stimulus act, because the U.S. is subsidizing 35% of their taxable interest cost. In the end the issuers have concluded this federal giveaway lets them borrow even cheaper than the privilege of selling tax-exempt bonds. (Many of the taxable bonds also can target new investors bases, such as pension funds, that wouldn't buy tax-exempt debt.) The first part of our two-part August print edition mentions that these taxable Build America Bonds are helping to distort the tax-exempt market by shrinking supply. As long as demand for tax-exempts remain steady this means yields on some tax-exempt maturities will be lower than they would be without this taxable bond program. As we also discussed months ago, the Bond Advisor is concerned about the long-term implications for the tax-exempt market if the Feds decide to keep finding new ways to encourage issuance of taxable municipal bonds. A lot of blood was spilt in the past to protect the sanctity of tax-exempt bonds. We would hate to see those gains squandered. By the way, $325 million of the University of California bond sale is still being sold as traditional tax-exempt debt.

Week in Review: Rally in California G.O.s Slows, Taxable Munis Keep Coming

(Aug. 14) -- The euphoria over passage of California's budget led to lower yields on the state's general obligation bonds in the secondary market, with the rally most pronounced on shorter maturities. That rally petered out in recent days. The state will start selling revenue anticipation notes now that a budget is in place and that will probably provide some added reassurance over the state's cash-flow crunch. As our August part one edition explains, the "panic" over the state's bonds failed to take account the steps the state's Controller took in recent weeks to protect debt service payments. For more on recent market trends read more here.