Favorable price execution for a particular credit, be it secondary market or primary market, in the disparate municipal market, is often for securities that are actively marketed and sold.
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Last year, according to data from the Federal Reserve, fewer individual investors were opting for the DIY ("Do It Yourself") model of managing individual bonds on their own, and there was growth in the use of professionally managed ("Do It For Me," or DIFM) mutual funds and ETFs.
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Many have voiced their opinions on why "hundreds of billions" of defaults in municipal securities within the year is an inaccurate reflection of the market. Promoting outlandish default predictions does a disservice to the investing public, as well as to the issuers, rating agencies, insurers, credit analysts, portfolio managers, and other market participants who work diligently to provide their respective services.
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To close an estimated annual $6.5 billion tax gap, the California Franchise Tax Board ("FTB") amended the state's tax code to impose 7% backup withholding on its residents. Although effective January 1, 2010, financial institutions were granted one year by the FTB without penalties for failure to make the necessary withholding - effectively given until January 1, 2011 to implement withholding on distributions subject to California withholding.
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Should an investor expect bankruptcies to swamp the municipal bond market? How would that differ from defaults? Will it be the Great Recession, or political activism to limit government and reduce taxes, that might bring about bankruptcy or default, or both?
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