Chart Of The Day: Build America Bond Yields Hit 11 Month High

Yesterday's highlighted chart was the plunge in the 30 Year bond. Today, we take it one step further and demonstrate what happens to an asset class once it become clear (or unclear) that the government may not prop it in perpetuity. Presenting the average yield on Build America Bonds, which has just hit an 11 month high. If this collapse is a harbinger of what will happen once a Federal props are removed, feel free to just imagine what would happen to stocks if and when the Fed were to withdraw its support of the stock market...

Some observations from Bloomberg on why the shaky BAB domino (whose biggest casualty by far would be PIMCO) better be caught before it plunges and takes down the entire credit (and this equity) market with it.

The average yield on the taxable securities climbed to 6.35 percent yesterday, the most since Jan. 7, as investors demanded a larger premium to buy the debt, according to a Wells Fargo index. Signs that the global economic recovery is gathering pace also pushed down Build America Bond prices, which move inversely to yields, along with U.S. Treasuries and other fixed-income markets.

“It’s uncertainty, the fact that people don’t know the future of the program,” said Christopher Mier, a municipal strategist at Chicago-based Loop Capital Markets LLC, in an interview at Bloomberg headquarters in New York today. Some investors are saying they “may not participate in a market that won’t exist in two weeks,” he said.

The San Francisco Public Utilities Commission today postponed a $524 million debt sale, including $350 million in Build Americas, after the surge in borrowing costs.

States and local governments are set to sell $4.3 billion of the taxable securities this week, the fourth-highest since borrowers began offering the debt in April 2009, according to data compiled by Bloomberg. The New Jersey Turnpike Authority boosted its bond sale to $1.9 billion from $1.5 billion today, Bloomberg data show.

“Outside forces are putting pressure on municipal-bond prices, and investors want to get out now rather than later,” she said in a telephone interview. “Those outside forces are the Build America Bond program possibly not being extended, additional supply in the tax-exempt market and a rise in interest rates.”

In other words, expects chants of "the end is nigh" within 2 days, as the idiot politicians realize that letting BABs expire will first lead to the collapse of PIMCO, immediately followed by that of civilization as we know it (which can not possibly operate without the witty banter of the most self-serving bond manager in existence).