Like many economic developments, it germinated much earlier, evolved sporadically and finally came to a more visible head. What’s happened since in the bond market (and obviously the broader market) is truly unrivaled in recent times. To put that in context, Jones was speaking in early September- before the financial market collapse at mid-month. “I’ve never seen anything as deep and as broad. He’s been with the company for 27 years, all in municipal finance. Davidson & Co., a bond underwriter firm in Great Falls, Mont. “To say that you’ve never seen anything like it almost sounds trite,” said Kreg Jones, senior vice president and managing director in public finance, D.A. A state-run housing program in Wisconsin had to suspend lending about the same time because it could not get the underlying financing for the program.īut many might not be aware that, much like the broader financial system, the municipal bond market has been in a state of flux for some time, enduring bouts of both subtle and obvious volatility since the summer of 2007. Treasury because it could not find a buyer for routine short-term bonds used for cash-flow purposes. In early October, the state of California sought a $7 billion emergency loan from the U.S. Governments accustomed to getting cheap financing were finding no takers, or they were having to swallow hard and pay much higher interest rates or be content to temporarily mothball projects and programs. Issue bonds, build the bridge, hit the snooze button until the next bridge.īut in mid-September, the crisis in the broader financial market gave the municipal bond sector a long, loud wake-up call, and the muni bond market has been anything but sleepy since. Treasuries, municipal bond issuers had gotten used to having access to affordable money when they needed it. Given municipal bonds’ relative safety compared with corporate stocks or bonds and their yield advantage over U.S. That’s kind of what makes the municipal bond market a bit boring: Governments don’t lose their job, skip town and stiff the bank on their debt. In the complex world of finance, most people see municipal bonds as a combination of Rip Van Winkle and Rodney Dangerfield: a little sleepy, and they get no respect.Īt some levels, the reputation is deserved: When governments want new roads and buildings, they borrow money, build new roads and buildings, and pay the bills about as predictably as the setting sun.
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