Elephants Stampede Over Munis .

[Joanne98]

Perhaps more municipal-bond investors should have voted Democratic.

Thanks in part to Republicans' blowout election victory, not to mention renewed inflation fears spawned by the Federal Reserve's latest round of bond-buying, munis have sold off sharply this month. Interest rates for the highest-quality long-term muni bonds have increased by more than half a percentage point since the beginning of November. That's the sharpest increase in nearly two years.

For starters, after gaining control of the House of Representatives, Republicans are well-placed to block further economic stimulus. That's bad for cash-strapped states. Deficits that were partly papered over with federal funds may now be more difficult to reckon with. That could be spooking investors. Also, the higher chance of tax cuts being extended makes munis comparatively less attractive. Flows into muni funds, strong since the beginning of 2009, according to data provider Lipper, suddenly flattened off after the election.

And lower demand is being met with higher supply, says Wells Fargo, as muni issuers race to sell paper before the year-end expiration of the Build America Bonds program. Another subsidy opposed by Republicans, BABs helped revive muni markets by allowing states to effectively market taxable debt at tax-exempt rates, attracting new investors. As BABs disappear, so too may those investors, who absorbed a fifth of muni supply this year.

http://online.wsj.com/article/SB10001424052748704648604575620610837699250.html

[leveymg]

1. Not good news for a lot of teachers, firemen, and state and county workers.

This is going to have a cascade effect pulling the rest of the economy down. I guess, that's what the Teapots want: a NASCAR race to the bottom.

[BrklynLiberal]

3. The tbaggers are also going to have to do without streetlights, policemen, firemen, garbage pick ups

fewer teachers, larger classes, less snow removal, fewer libraries, cuts in Medicaid - which many of them seem to be able to happily acccept receiving-, less public transportation, less and poorer quality of just about every public service that is now taken for granted by people who forget that when there are Federal cutbacks, it REALLY DOES affect your local town...including higher property taxes as well diminished services.

Those people are so damned stupid, it is amazing that they can actually get up, get dressed and out the door without supervision!!!

The DOUBLE IRONY, is that the states that were mostly so gung-ho tbaggers, are the very same ones that receive the MOST FEDERAL MONEY back per dollar they send to DC.

The NE states, and West coast..which receive far less than they send to DC, were the ones that swung toward the Dems...

Talk about voting against one's own interests!!!!!!

They are too damned stupid to even know how really stupid they are.

[dixiegrrrrl]

4. and pensions, IRAs, etc. are invested in Munis.

Wonder how these Congress critters can afford to get paid, ya know?

[BrklynLiberal]

5. Gee. Maybe they should volunteer to take pay cuts....or 1 week furlough each month...no pay.

They sure as hell better not give themselves any pay raises for the next decade or so!!

[BrklynLiberal]

2. The Law of Unforeseen Consequences strikes again.