Public Finance and Fixed Income

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Public Finance is a topic which has surged to the front headlines over the past few years. The issues of sovereign debt, municipal default, regulatory overhaul, and the debt ceiling are all subjects that many more people are aware of that was the case prior to the financial crisis.
The economic impact of governmental decisions related to taxation, spending of social resources, and financing are much more obvious.
From an investment perspective, Treasury securities and tax-free municipal bonds have always been an integral part of many portfolios. Today, successful fixed income strategies are much more complex.

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Today’s Discussion

February 22, 2012

 

US Treasuries are moving higher this morning, for
the first time in four days, on renewed concerns for the Greek bailout package.

The latest Greek bailout totals €130 billion ($172
billion), while the first aid package in 2010 was €110 billion ($146 billion).
This time around, private bondholders will also forgive €107 billion in Greek
debt. Meanwhile, the nation’s debt-to-GDP ratio reached 160% in the fourth
quarter of 2011. Clearly, investors have reason to be concerned that we will
see Greece back at the table in the not-too-distant future.

New data in Europe also showed that the Euro-zone
PMI contracted unexpectedly this month, which has raised concerns that the
region is slipping back into recession.