Provident Capital LLC is an independent municipal financial advisory firm based in St. Louis, Missouri. We act solely as financial advisors to governmental, educational, and not-for-profit entities. We firmly believe that advice in planning and managing debt must come from an independent advisor. By independent, we mean that the advisor cannot be a part of an investment banking firm. There is an inherent conflict of interest in investment bankers offering advice.
May 8 , 2008. The Bond Buyers ® 20-Bond Index stands at 4.62, only one basis point lower than the previous week. Yields on high-grade municipal bonds continue to be above those for comparable maturities of U. S. Treasury securities, a situation that will continue until the credit markets settle down.
During the week, the City of Vallejo, California, filed for bankruptcy. The proximate cause was labor contracts entered into when the economy was strong. Now, with tax revenues falling and costs of operations up, the City Council found itself unable to meet is past commitments. This may be a harbinger of further municipal bankruptcies. According to various reports, a municipal bankruptcy is quite different from a corporate or individual bankruptcy in that the federal courts have less power over an entity that is a subdivision of a state government. Nevertheless, this development bears watching.
Below are links to The Bond Buyer's ® 20- Bond Index along with a chart showing the trend of the Bond Buyer's ® 20-Bond Index for 2005 to 2008 year to date.
Historical Trivia
Prior to the late 1960's, the weekly Bond Buyer's ® 20-Bond Index moved only a few points from week to week. Beginning is the second half of 1967, the effects of the federal spending for the Vietnam conflict along with expenditures for the Great Society programs of the outgoing Johnson administration combined to start an upward movement of interest rates that culminated with the Bond Buyer's ® 20-Bond Index hitting a peak of 13.44 in the second week of January, 1982. In many states, the statutory maximum interest rate allowed was well below the prevailing market rates, preventing many bond issues from coming to market. Several states, including Illinois, changed their statutory maximum allowable rate by tying it to a percentage of the Bond Buyer Index. For additional information, click here.
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Modified May 9, 2008