The biggest municipal-bond rally in five years, which dropped yields to near the lowest since June, has Barclays Plc and Citigroup Inc. differing on which direction the $3.7 trillion market will move next.
The price of protecting municipal bonds against default is dropping by an unprecedented amount, signaling that investors are separating Puerto Rico’s economic woes from a broader fiscal rebound by states and localities.
The biggest exchange-traded fund tracking the $3.7 trillion municipal-bond market sold this week at the highest premium to the value of its assets since May, an early sign that local debt may avoid a second year of losses.
Inventiv Health Inc. , the provider of sales and marketing services to science companies, is selling debt as slowed issuance of high-yield, high-risk debt in May will likely interrupt the record pace of earlier this year.
The fading notion that the largest U.S. finance companies are too big to fail led Moody’s Investors Service to cut ratings on $5.5 billion of bank-backed debt used to buy natural gas. Investors see the bonds as too cheap to pass up.
The cost of derivatives protecting against economic meltdown have jumped to the highest since May on speculation banks will need to buy the contracts as funds seek to restructure a type of Canadian structured note, according to Citigroup Inc.
The cost to protect U.S. corporate debt from losses rose to the highest level this week amid concern the economy is slowing. The perceived risk of Bank of America Corp. and Goldman Sachs Group Inc. grew.
Investors are pouring the most money since September into the riskiest U.S. local debt, a boon to lower-rated issuers such as Puerto Rico that plan to borrow in the $3.7 trillion municipal market in coming weeks.
The euro will fall 9 percent against the dollar should Greece default, according to Citigroup Inc. prices for quanto credit swaps that allow investors to bet on currency volatility and sovereign debt risk.