{"id":15309,"date":"2011-06-10T20:39:27","date_gmt":"2011-06-11T00:39:27","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=15309"},"modified":"2011-06-10T20:39:27","modified_gmt":"2011-06-11T00:39:27","slug":"june-10-2011","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=15309","title":{"rendered":"June 10, 2011"},"content":{"rendered":"

I find the US Municipal bond market of great interest, simply because the investor profile is so similar to that of Canadian preferred shares. I was recently looking for some estimates of holdings by investor group; now that I don’t need it any more, of course, I found it<\/a>:<\/p>\n

Citigroup Inc. analysts say there\u2019s something missing from the Federal Reserve\u2019s tally of the municipal-bond market\u2019s size: more than $700 billion of the securities were bought directly by individual investors.<\/p>\n

The Fed\u2019s quarterly figures, released yesterday, put the market at $2.9 trillion, 37 percent of which the central bank says is owned by households. Citigroup\u2019s analysts George Friedlander, Mikhail Foux and Vikram Rai say individuals play an even larger role, holding half of a $3.7 trillion market that has been whipsawed by speculation about municipal defaults that is now starting to ebb.<\/p>\n

\u201cThe instability in the muni market in late 2010 was exacerbated by individual investors becoming overly concerned about the fiscal strength of state and local governments,\u201d Rai said in an e-mail after Citigroup\u2019s report on the market was published on June 3. \u201cUnsurprisingly, as credit fears abated, it resulted in lower volatility and a rally in the tax-exempt and taxable market.\u201d
…<\/b>
Citigroup\u2019s analysts didn\u2019t challenge the Federal Reserve\u2019s data on holdings by institutional investors such as mutual funds and insurance companies, which can be gleaned from corporate filings and other outside data sources. Without similar information on households, the analysts say, the Fed had to guess.<\/p>\n

By underestimating the market, they\u2019ve also diminished the extent to which individuals dominate it, they said. Citigroup estimates individuals they held $1.8 trillion, or half, of the municipal bonds outstanding at the end of 2010, compared with about $1.1 trillion estimated by the Federal Reserve.<\/p>\n

\u201cWe always believed that the influence of retail investors in the municipal market was understated,\u201d Rai said.<\/p>\n

The Federal Reserve said it\u2019s looking into the discrepancy, said Susan Stawick, a spokeswoman.<\/p><\/blockquote>\n

S&P Discusses Some Observations On Canada’s Consultation Paper For A Proposed Legislative Regime For Covered Bonds<\/a>:<\/p>\n

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