Thursday, June 24, 2010

Beware Municipal Bonds: About To Implode

The Federal Reserve Flow of Funds report says that there are $2.8T in outstanding municipal debt. With many municipalities and states on the verge of bankruptcy and their fiscal year starting on July 1st, the question is who owns this junk:

Professor Kevin Depew from Mynianville shows a list:

  • Households ­ $1 trillion
  • Banks ­ $220 billion
  • Insurance companies ­ $350 billion
  • Mutual funds ­ $500 billion
  • Money markets ­ $370 billion
  • Broker/dealers own just $40 billion.

More bailouts can definitely be expected as it will be another big disaster if most of these holders were to lose their money.


Here is a list of muni bond ETFs:

Short term:
  • iShares S&P Short Term AMT-Free National Municipal Bond Fund (SUB)
  • Market Vectors-Lehman Brothers AMT-Free Short Municipal Index ETF (SMB)
  • PIMCO Short Term Municipal Bond Strategy Fund (SMMU)
  • PowerShares VRDO Tax-Free Weekly Portfolio (PVI)
  • SPDR Lehman Short-Term Municipal Bond ETF (SHM)
  • SPDR S&P VRDO Municipal Bond ETF (VRD)
Intermediate-Term National Municipal Bond ETFs
  • Grail McDonnell Intermediate Municipal Bond ETF (GMMB)
  • Market Vectors-Lehman Brothers AMT-Free Intermediate Continuous Municipal Index (ITM)
  • Market Vectors Pre-Refunded Municipal Index Fund (PRB)PIMCO Intermediate Municipal Bond Strategy Fund (MUNI)
Long-Term National Municipal Bond ETFs
  • iShares S&P National Municipal Bond Fund (MUB)
  • Market Vectors-Lehman Brothers AMT-Free Long Continuous Municipal Index (MLN)
  • PowerShares Insured National Municipal Bond Portfolio (PZA)
  • PowerShares Build America Bond Portfolio (BAB)SPDR Lehman Municipal Bond ETF (TFI)

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