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.

ETFs:

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)