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MMA Muni Outlook December 2010

Market Summary

Worst December for Municipals in 20 Years

MMA’s municipal price index posted a -2.8% loss, surpassing the prior largest losses for December in 1996, 2001 and 2006. The month’s poor performance followed a historically weak Novem-ber so that municipal investors were left confused into year-end. Similar to periods when December was unable to follow its sea-sonal positive bias, the combination of a perceived change in FOMC monetary policy, an improving economy, credit concerns and above average primary issuance resulted in price losses and negative total rate of return. Participants were focused on the potential constructive contribution to US economic growth from the Federal Reserve’s QE ($600B Treasury buyback) as well as the extension of the Bush tax cuts. The Congressional negotia-tions regarding the tax cut extensions also provided the con-tinuation of jobless benefits, but at the cost of the loss of the Build America Bond (BAB) program.

MMA Muni Outlook December 2010