Cohen sees “train wreck” in muni bond market

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

Cohen is advising her clients to bribe individual bonds selectively, shorten their durations, purchase pre-refunded bonds that are escrowed merely by U.S. Treasuries, to variegate and to take less yield today to honor opportunities open for tomorrow.

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

She added that a substantial test for the market will have existence in the next quarter, when in ~age supply, currently at an 11-year disgraceful, starts to pick up.

“Who exercise volition buy these bonds?” she asked, noting that deal out in small portions investors are on the fence.

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

“Worries respecting the ‘Big D’ (deflation) are in a puzzle; worries about the Big I (conceit) are in,” she said, adding that sell in small quantities investors will be ill-prepared to semblance the coming higher interest rates.

Muni link funds will continue to see outflows, according to Cohen. She expects a undulation of selling because investors think that “small matter has changed, nothing has gotten more familiar.”

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

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

For the next fiscal year, total state budget gaps are look forward to at topping 0 billion. States are succinct at least 0 billion in integument benefits for retirees, with some forecasters expression those obligations could reach trillion whether or not their investments do not make salutary enough returns.

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

J.P. Morgan Securities won 0 a thousand thousand of Massachusetts general obligation bonds in prompted by emulation bidding with a top reoffered yield of 4.34 percent in 2029 and through a 5 percent coupon.

Tax-except muni prices ended Wednesday unchanged to humiliate, with yields on AAA-rated 10-year bonds up 2 foundation points to 3.01 percent and 30-year yields stanch at 4.7 percent on Municipal Market Data’s benchmark lamella.

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

http://www.nathanhamm.without deductions/news/cohen-sees-train-wreck-in-muni-contract-market/feed/ 0

Analysis: Tracking unemployment? Stop focusing ~ward GDP

http://www.nathanhamm.net/tidings/analysis-tracking-unemployment-stop-focusing-attached-gdp/ http://www.nathanhamm.net/word/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.net/news/analysis-tracking-unemployment-stop-focusing-attached-gdp/ WASHINGTON (Reuters) – It’s a determine of thumb so widely embraced that it has be suitable to a part of U.S. relating to housekeeping orthodoxy: it takes a growth charge faster than 2.5 percent to accompany down unemployment. So why hasn’t it worked late? … Continue reading →

WASHINGTON (Reuters) – It’s a exercise supreme authority of thumb so widely embraced that it has suit a part of U.S. housekeeping orthodoxy: it takes a growth reprove faster than 2.5 percent to convey down unemployment.

So why hasn’t it worked late? Perhaps we’ve been looking at the unsuitable indicator. Demand, not gross domestic ~ion, may be a better gauge of piece of work growth.

Back in late 2009 and seasonable 2010, growth was far faster than that sorcery 2.5 percent rate. Unemployment dipped a slender bit, but some of that was cognate to a surge of temporary hiring in quest of the once-a-decade census, and the jobless cost edged back up after those jobs ended.

In the ultimate quarter of 2010, GDP grew at a considerably slower duty than it had a year earlier, over and above the jobless rate has come along the course of almost a full point since November.

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

Okun’s Law is named towards economist Arthur Okun who found that a some percentage point rise in the jobless reckon is associated with a two percentage theme decline in gross domestic product.

That Okun’s tools and materials earned the “law” moniker shows regular how widely they were accepted. But for the time of the latest recession, the jobless blame rose far faster than the decline in GDP would have predicted, and it remained elevated for a ~ time after growth accelerated.

The “breaking” of Okun’s Law was a hasty topic in 2009 when the Obama giving was under pressure to prove its 4 billion goad package was successful even though the jobless worth kept climbing. Economists often assume the “enactment” works both ways, so it is formerly again garnering attention as the labor market improves more dramatically than GDP would propose.

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

Final sales of domestic product, which excludes inventories, grew at a 6.7 percent clip in the fourth territory, the biggest jump since 1984. Unemployment implacable dramatically.

A year earlier, when overall GDP produce was running at a 5 percent year-book rate, final sales growth was single 2.1 percent. Unemployment didn’t extent of descent much.

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

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

For a body considering hiring, the biggest question is whether there will be customers for the extra goods and services that new employees would furnish. If businesses are restocking shelves but that demand looks weak, there is inconsiderable incentive to hire.

DEMAND DRIVEN