On December 8, 2011, the Federal Reserve Board released its Flow of Funds Accounts report, which included updated data on the size of the municipal securities market and holders of outstanding securities. Due to new data and methodology used, the Federal Reserve estimates the size of the municipal market at $3.7 trillion at the end of the third quarter 2011, significantly higher than the previous estimate of $2.9 trillion.

According to the new estimates, the household sector now holds approximately half, or $1.9 trillion, of the overall $3.7 trillion outstanding. Mutual funds and money market mutual funds holdings account for approximately 22 percent of all municipal securities outstanding.

Source: Municipal Securities Rulemaking Board

Fed revises market data

MarketWatch

Last Week’s Headlines

• The exception becomes the rule: The Federal Reserve’s Open Market Committee announced that interest rates will remain at today’s exceptionally low levels longer than previously expected. Saying economic expansion continues to be moderate, the Fed forecast low rates will last through at least late 2014.
• Greece continued to negotiate with its private bondholders over a planned writedown on its sovereign debt. The sticking point is reportedly the interest rate on the bonds that will be exchanged for existing bonds. Meanwhile, leaders attending the Davos World Economic Forum said that despite economic uncertainty, they believe the European debt crisis has begun to come under control.
• The U.S. economy grew 2.8% in the final quarter of 2011. The initial estimate of gross domestic product is higher than the third quarter’s 1.8% GDP, but according to the Bureau of Labor Statistics, higher inventory levels were a major factor.
• Sales of new homes fell sharply in December, according to the Commerce Department. The 2.2% monthly decline put sales 7.7% below December 2010, and the 302,000 homes sold in all of 2011 was 6.2% below 2010′s total.
• Demand for transportation-related equipment helped produce a 1.8% increase in new orders from manufacturers in November. The Commerce Department said the strongest increase came in durable goods designed to last at least three years, which saw a 3.7% increase in orders. Even excluding transportation, new durable goods orders were up 0.3%, and non-defense-related orders other than aircraft were up 1.8%.
• The International Monetary Fund cut its forecast for 2012 global growth to 3.3%, slightly lower than 2011′s 3.8%. Rising interest rates on European sovereign debt and bank deleveraging could bring on a mild recession there, the IMF said, but it also warned that overly aggressive austerity programs could choke off growth.
•  The Conference Board’s index of leading economic indicators rose 0.4% in December to 94.3. The organization said the reading would have been stronger except that the index included for the first time a measure of credit conditions, which was negative and helped moderate positive contributions from 7 of the index’s 10 indicators.

Eye on the Week Ahead

Believers in the January indicator will be eyeing the end of the month on Tuesday for clues about how the rest of the year might go. A Greek bond agreement could produce euphoria, and a failure to come up with one could produce the opposite. Little change is anticipated in Friday’s unemployment figure, and data on the nation’s manufacturing and services sectors also will be watched.

Key dates and data releases: personal income/spending (1/30); home prices (1/31); auto sales, U.S. manufacturing, construction spending (2/1); weekly new jobless claims, business productivity and labor costs (2/2); unemployment/payrolls, U.S. services sector, factory orders (2/3).

Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: January 30, 2012

Official Statements