Political, Economic & Financial Intelligence

Al Martin Raw: Political, Economic & Financial Intelligence

(2-18-08) Last week the marketplace revealed yet another consequence of Bushonomics, namely, that the municipal bond market (which we have been warning people to get out of) began to unravel in earnest as liquidity in the municipal bond market simply dried up.

By Wednesday’s session, we saw that three out of five municipal bond auctions were simply being cancelled due to lack of bids. In the daily municipal cash market where states, counties, municipalities have to turn to if they are unable to rollover securities, we saw that some districts, including the Port Authority of New York and New Jersey, were forced to pay as high as 20% for money last Thursday.

We also saw on Thursday in cash-market municipal borrowing that a wide variety of the nation’s counties, ranging from Harris County, Texas, to Bergen County, New Jersey, had to pay between 9% and 11% for money. This is an increase from 4% for money the week before – yet another ominous sign of the diabolical efficiency of Bushonomics.