Salient to Investors:
The extra interest rate paid by municipalities over companies has fallen 76 percent in 2012, the most since at least 1994, and the smallest since July 2009.
Investors typically seek more yield from muni than from corporates because munis trade less frequently and feature annual financial disclosure instead of quarterly reports.
Moody’s says from 1970 to 2011, an average of 0.08 percent of investment-grade munis sold a decade or more earlier defaulted, versus 2.61 percent for investment-grade company bonds.
John Hallacy at Bank of America said munis were 9 percent of all issuance in 2012 versus 35 percent in 2010.
Peter Hayes at BlackRock sees no end in sight for the taxable muni rally because of real demand for high-quality, high-yielding assets, which taxable munis are. Any move to limit munis’ tax exemption would cause some issuers to switch to taxable securities.