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Minding the Market: Scarcity and Fear  

Author:  Matt Fabian.; Matt Posner.

Source: Volume 31, Number 01, Spring 2010 , pp.83-92(10)

Municipal Finance Journal

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In their regular quarterly review of market trends, Fabian and Posner analzye the scarcity of municipal bonds generally, and tax-exempt munis in particular. The American Recovery and Reinvestment Act’s (ARRA’s) Build America Bond (BAB) program has continued to more or less directly replace tax-exempt issuance with the more generously subsidized BAB product. the collapse of the bond insurers has meant that a smaller amount of new issuance is carrying high enough ratings to be marketed and sold to the individual investor. Liquidity—which has never quite recovered from the loss of hyperactive market making by the tender option bond programs and dealer proprietary arbitrage desks—has steadily eroded as prices have risen.

Keywords: Mutual Funds Inflow; Monthly Non-BAB Issuance; Estimated Pre-Refunded Bonds Outstanding; Ten-Year MMM AAA Muni Yield

Affiliations:  1: Municipal Market Advisors; 2: Municipal Market Advisors.

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