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SummaryThe municipal market began last week with what might have been painful price concessions as dealers began to sell the huge Wisconsin bond issue. However, the Fed's announced intention to buy both Treasury and mortgage securities helped set a floor, at least for now, on interest rates, encouraging more risk taking by institutional buyers and heating up demand for bonds.
Market UpdateMuni spreads are wider, creating opportunities for buyers
RecommendationWhile high-grade bonds have shifted back into neutral on last week's rally, lower rated, safe sector bonds now demand attention. We exhort income-oriented buying of safe-sector loans, regardless of rating, insured status or geography (i.e., Michigan). Pre-refunded bonds have better liquidity and near-term price performance. We also advise generic caution with respect to health care issuers, but higher yields in this sector are also creating attractive opportunities for selected credits.