I don’t usually pay much attention to Muni bonds, but in today’s environment I think it’s worth keeping on the radar given what’s happening in sovereign debt and our own state finances. Hell, Illinois is going to try to raise income taxes by 75% because they are broke.
Many states are surely going to need their own bailout and I believe this is the year we start to see individual states start to pony up to Uncle Ben’s Bar for a handout. And this is going to be reflected in the health of the Muni bond market.
The MUB is the iShares S&P National Muni bond fund. It holds bonds from many states and typically the higher quality bonds. You would think there would be no real fluctuation in such pristine assets, right? Think again……
As you can see, MUB is hanging on for dear life. I’ve got an alert set at 98.50, where if it breaks this level, it could be a catalyst for the markets as a whole to sell off. Surely the gov’ment will aid in some way, but the news flow and subsequent fear will drive prices lower before a new trend can be set.
It’s all about social mood, and these “things” keep adding up (i.e. Arizona) to keep me on high alert.
Trade the extremes and good trading!