The muni bond market seemed to face a perfect storm this week.  A back-up in Treasury yields, a slew of new issuance, withdrawals from muni funds, prominent downgrades, fears that the Build America Bonds program would not be extended and good old fashioned panic all lead to a big drop in muni bond prices.  The question is whether the sell-off is over?  For now it seems the market has come to terms with the near term issues.  The bigger question is what happens over the long run.  There still seems to be a fair amount of risk of muni/state defaults over the next few years.  Nor is it at all clear whether the bond rating agencies have a good handle on the issue.  In today’s screencast we look at the week’s muni market meltdown.

Items mentioned in the above screencast:

The backup in AAA muni bond yields.  (WSJ, chart)

The fear factor in the muni market.  (Dealbook)

Bond Girl, “What is going on now is that muni issuers are scrambling to get deals done to take advantage of the program before it expires, and this is pulling the number of new issues that would ordinarily be coming to market forward.”  (self-evident also Breakingviews)

Muni mutual fund outflows.  (Reuters, WSJ)

The risk of further Michigan municipality bankruptcies.  (Bloomberg, Money Game)

Are bond rating agencies doing an adequate job with munis?  (Felix Salmon)

Daily chart of the iShares S&P National AMT-Free Muni Bond ETF (MUB).  (Finviz)