In the bond markets Cantor has always been known as the “outer boro guys”…. never a fancy shop like Goldman or Morgan Stanley… but they were a dominant broker before 9/11 wiped out the majority of their employees… it’s good to see them hunting around for new products to make markets and service customers…
In the BBG clip Cantor Fitzgerald CEO Shawn Matthews talks about their expansion into municipal bonds and the outlook for Federal Reserve policy. Fitzgerald LP, one of the 18 primary dealers authorized to trade U.S. government securities with the Federal Reserve Bank of New York, said it was entering the U.S. municipal bond business as municipalities may issue record amounts of debt. He also talks about transparency in the muni market…
Here is how it looks for states and municipalities…
Source: Muni underwriting fees at 8 year high Bond Buyer, August 21, 2009
“The fees issuers pay to bankers to underwrite municipal bonds are higher then they’ve been for eight years, as the financial crisis heightened risk and decimated competition in the industry.
State and local governments this year are paying underwriters an average of $6.46 for every $1,000 borrowed, according to Thomson Reuters.
That payment, known as the underwriting spread, is up sharply from last year’s $4.83 average spread.
The last time issuers paid higher fees was 2001.
Underwriters and other market participants cite a number of factors for the fatter spreads, some on the supply side of the equation and some on the demand side.”
…Created under the stimulus act, BABs (Build America bonds) allow municipalities to sell taxable munis and in lieu of the traditional tax exemption receive a subsidy from the federal government equal to 35% of the interest costs.
Issuers have sold $26.75 billion of BABs since the launch of the program in April, according to Bloomberg LP.
Bankers have charged more to underwrite BABs — an average of $8.04 per $1,000 face, compared with $6.27 for other munis, according to Thomson.