Improving the Municipal Bond Market

The municipal bond market may soon experience a bevy of important changes, if the ongoing hearings conducted by the SEC are successful. Although investors look to municipal bonds as a safe haven from the volatility and uncertainty often associated with the securities markets, the consensus is that the muni bond market could use some improvement, particularly in the areas of transparency and municipal bond ratings. However, as can be expected, you are bound to encounter a wide variety of opinions regarding ways in which reform should and should not be implemented.

Sure enough, when the SEC had once again requested to have more oversight added to the often murky muni bond market earlier this week, ensuing opinions were polarized. For example, the municipalities themselves feel more regulation would hinder their ability to gather money as needed in order to prevent succumbing to muni bond defaults.

As an aside, in municipal securities, the actual municipalities don't do the underwriting -- the banks do -- and these entities aren't always so accommodating when it comes to providing pertinent information that investors should be aware of before making their bids. Thus, this push for reform is also unlikely to be a popular move among the underwriters on Wall Street. However, changes made to this particular area could prove to be widely popular, because these groups have often been accused of hiking up the fees to their own benefit.

SEC Holds Hearings on Municipal Bond Ratings & Disclosure Standards

In an effort to improve the standards for information disclosure and municipal bond ratings assessment, a series of hearings are to be held in several of the nation's capital cities, including Tallahassee, Florida and Austin, Texas. Among the requests made by Elisse B. Walter, who was appointed to lead the hearings, was more timely dissemination of important financial information and municipal bond ratings with improved accuracy.

The municipal bonds market is far from perfect in the eyes of many, and those who favor this form of investment have to wade in deep, cloudy waters when it comes to receiving the same information more willingly offered to those who invest in stocks or junk bonds. It doesn't help that the municipal bond ratings agencies have been all too willing to turn a blind eye to the municipal bonds that are doomed to fail. Regardless of where one should stand on the issue of municipal bond reform, there's no denying that a safer, more transparent market would greatly benefit investors in a time of economic uncertainty.