4.84%
That’s the yield on high-grade, tax-exempt 30-year Muni bonds, now the highest level since March 2009, when investors thought the world was ending. Why then, in December of 2010, when everything is “fixed” are we back to our market crash lows? David Fry’s chart on the right tracks the broader MUB but that too is falling at an alarming rate, erasing 18 months of progress since mid-October.
Despite the Fed buying over 1/3 of everything that goes up for auction, the yield on 10-year TBills has shot up to 3.5%, that is 40% HIGHER than it was when The Bernank announced his brilliant QE2 plan at the last Fed meeting in November. That’s a national crisis for a government that borrows $140Bn a month to service a $15Tn debt! Of course the pain filters right on down to the local level too as spreads on Illinois 10-year notes widened from 1.60 to 1.90 since Nov 1st and California’s general obligation bond spreads jumped 30%, from 0.97 to 1.30.
We have so many bigger fish to fry (our own deficit, unemployment, Greece, China, Spain…) that we’ve forgotten about the estimated $2.8Tn municipal bond debt, a number that is up 100% over the past decade. As the year winds down to a close, we may be seeing our first round of municipal defaults as local governments simply run out of money. The pressure will certainly mount between January and June, 30th, when most fiscal years wrap-up and Governments will be forced to take drastic measures to balance their books.
Here’s a nice video of how well Rome is taking austerity measures this week (that’s a police van they’ve set on fire):
See, it’s easy to push austerity measures – just leave a little room in the budget for extra vehicles and tear gas. We’ve been buying TASR for quite some time on the global unrest premise and it looks like they’ll be needing a lot of cartridges in 2011 to control those crowds! I still like them at $4.60 as a long-term hold. Athens is rioting this morning as well and that’s Ka-Ching! for our TASR shares. This is a good example of how, when the global markets give us lemons, we just make lemonade!
These are not 3rd World nations, people – these are places some of you…
