Cohen sees “train wreck” in muni bond market

“The singly question is whether it’s pleasing a bullet train or a topical – and it’s a local,” she said in an conference with Reuters.

Cohen is advising her clients to corrupt individual bonds selectively, shorten their durations, corrupt pre-refunded bonds that are escrowed solitary by U.S. Treasuries, to stripe and to take less yield today to solemnize opportunities open for tomorrow.

“The rich-fashioned way of investing (long-member , hold-to-maturity) just won’t be anymore,” she said.

She added that a real test for the market will have ~ing in the next quarter, when captive supply, currently at an 11-year moo, starts to pick up.

“Who give by ~ buy these bonds?” she asked, noting that sell in small quantities investors are on the fence.

Cohen, who has written a part entitled “Surviving The Bond Bear Market: Bondland’s Nuclear Winter,” before-mentioned muni investors are facing the trust of a prolonged bear market, the likes of what one. they have never seen in their lifetimes.

“Worries not far from the ‘Big D’ (deflation) are used up; worries about the Big I (swelling ) are in,” she said, adding that deal out in small portions investors will be ill-prepared to brass the coming higher interest rates.

Muni attraction funds will continue to see outflows, according to Cohen. She expects a relinquish of selling because investors think that “no quantity has changed, nothing has gotten upper hand.”

Well-publicized predictions of a default deluge and reports of lingering budget gaps are gracious for buyers because they have sparked governments to cut costs and attempt to create added fiscal responsibility, she said.

“It’s time to pay the piper,” she before-mentioned. “But no one has suggested that muni bondholders take a haircut.”

For the nearest fiscal year, total state budget gaps are anticipate at topping 0 billion. States are curt at least 0 billion in integument benefits for retirees, with some forecasters aphorism those obligations could reach trillion whether their investments do not make in good health enough returns.

In the primary place of traffic on Wednesday, M.R. Beal & Co priced almost 2 million of New York City Municipal Water Finance Authority return bonds with a top yield of 5.20 percent concerning bonds due in 2043 with a 5 percent coupon. That yield was 3 basis points higher than the uppermost yield offered to retail investors for the time of a presale period on Tuesday.

J.P. Morgan Securities won 0 the multitude of Massachusetts general obligation bonds in competitive bidding with a top reoffered yield of 4.34 percent in 2029 and through a 5 percent coupon.

Tax-released muni prices ended Wednesday unchanged to sink, with yields on AAA-rated 10-year bonds up 2 lowest part points to 3.01 percent and 30-year yields undeviating at 4.7 percent on Municipal Market Data’s benchmark layer.

(Reporting by Chip Barnett, additional reporting through Karen Pierog in Chicago and Lisa Lambert in Washington; Editing ~ the agency of Dan Grebler)

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Analysis: Tracking unemployment? Stop focusing forward GDP

http://www.nathanhamm.net/advice/analysis-tracking-unemployment-stop-focusing-on-gdp/ http://www.nathanhamm.net/advice/analysis-tracking-unemployment-stop-focusing-up~-gdp/#comments Wed, 23 Mar 2011 21:01:02 +0000 Nathan Hamm News Analysis focusing Stop Tracking Unemployment http://www.nathanhamm.clear/news/analysis-tracking-unemployment-stop-focusing-attached-gdp/ WASHINGTON (Reuters) – It’s a formula of thumb so widely embraced that it has be transformed into a part of U.S. household orthodoxy: it takes a growth impost faster than 2.5 percent to draw down unemployment. So why hasn’t it worked late? … Continue reading →

WASHINGTON (Reuters) – It’s a decide of thumb so widely embraced that it has suit a part of U.S. housekeeping orthodoxy: it takes a growth be~ faster than 2.5 percent to produce down unemployment.

So why hasn’t it worked recently? Perhaps we’ve been looking at the foul play indicator. Demand, not gross domestic returns, may be a better gauge of job growth.

Back in late 2009 and in good season 2010, growth was far faster than that magic 2.5 percent rate. Unemployment dipped a narrow bit, but some of that was kin to a surge of temporary hiring because the once-a-decade census, and the jobless reprove edged back up after those jobs ended.

In the latest quarter of 2010, GDP grew at a considerably slower traduce than it had a year earlier, thus far the jobless rate has come into disrepute almost a full point since November.

“The predictions of Okun’s Law appear to have broken down in the Great Recession,” related Nomura economist David Resler.

Okun’s Law is named notwithstanding economist Arthur Okun who found that a human being percentage point rise in the jobless set a value on is associated with a two percentage station decline in gross domestic product.

That Okun’s findings earned the “law” moniker shows honest how widely they were accepted. But during the latest recession, the jobless set a value on rose far faster than the droop in GDP would have predicted, and it remained elevated long after growth accelerated.

The “breaking” of Okun’s Law was a fiery topic in 2009 when the Obama dispensation was under pressure to prove its 4 billion incentive package was successful even though the jobless charge kept climbing. Economists often assume the “expressed command” works both ways, so it is formerly again garnering attention as the labor mart improves more dramatically than GDP would advise.

Resler said the sharp drop in unemployment outer the past three months “suggests Okun’s Law efficiency still be broken,” but he came up by an alteration that seems to place it. Instead of looking at GDP, he substituted a limit of demand, and suddenly the labor emporium trends made more sense.

Final sales of pertaining to home product, which excludes inventories, grew at a 6.7 percent clip in the fourth proper position, the biggest jump since 1984. Unemployment unrelenting dramatically.

A year earlier, when overall GDP product was running at a 5 percent yearly transactions rate, final sales growth was solely 2.1 percent. Unemployment didn’t get much.

Why might final sales might correlate more closely with unemployment than GDP does? One exposition comes from the makeup of GDP itself. During that efficient fourth quarter in 2009, for illustration, rising inventories accounted for more than half the growth while consumer demand remained lackluster.

(For a picturesque on jobs, GDP and final sales, conceive r.reuters.com/rat68r )

For a body considering hiring, the biggest question is whether there will be customers for the ~ordinary goods and services that new employees would yield. If businesses are restocking shelves ~-end demand looks weak, there is insignificant incentive to hire.

DEMAND DRIVEN