Asia Stock Markets Slammed Again On Tuesday

It looks as though the Asian markets got beat up again on Wednesday.  There doesn’t seem to be an end in sight for the writedowns that continue to ooze out of the balance sheets of Banks, Brokers and Insurance Companies.  The bond market is suffering one of the worst declines that it has ever experienced.

Yields on muncipal bonds continue to skyrocket.  The tax equivalent yield for muni’s out 20y and 30y are now in excess of 8%, assuming a 28% tax bracket.   When tax rates are increased, as they will have to be to pay for our debts, the tax equivalent yields should start to approach 10%.

The yields on the Treasury debt have not kept up with the munis.  The market is saying that there’s more risk in the muni debt.  30y Treasuries are yielding 4.13 vs. tax equiv. yields on muni debt at 8.18%.  That’s 4%+ spreads.  Not bad considering the historically low default rates on munis. Or, is the market trying to tell us something that we don’t know?

After weeks of declining prices, it looks as though the last few days things might have started to improve for the better; however, the trend is still down…..no doubt about it.  We’ll see if this is truly a reversal of trend, or just a pause in the longer down move.

Subscribe by RSS Subscribe by Email