More Credit Easing

The municipal bond market continues its march to normalcy.

The court’s decision comes as the $2.6 trillion municipal-bond market and other fixed-income markets begin to recover from the credit crunch. The Federal Reserve’s actions to shore up liquidity and revive banks’ functioning have lessened fears of a systemic financial collapse.

Investors fled from the muni market in the early part of the year as concerns grew about muni-bond insurers with subprime-mortgage-debt exposure. In addition, the muni-bond market was hurt after the auction-rate securities market seized up, depriving many municipalities of a principal source of funding.

The average yield on a high-quality 30-year municipal bond has declined 0.7 percentage points, after reaching a peak Feb. 29 when a wave of hedge-fund selling depressed prices

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Recession Deemed Unlikely

First Trust Advisors published a new, and optimistic report on the predicted recession:

Monetary policy is not tight. In fact, the Fed is holding interest rates below inflation. Tax rates are still relatively low and have not been hiked, yet. And

productivity is still growing strongly. When these three things have been true, the US has never fallen into recession. When these three things are true, a financial

market collapse is highly unlikely.

So far, the data have corroborated this historical and fundamental view. Real GDP growth remained positive in the first quarter of 2008.