M BOND MARKET MONTHLY - janney.com Library/Unassigned/Janney-MBMM-Feb-2013.pdf · † BAB and Recovery Act bond issuers will lose small portions of their subsidy payments due to the

MUNICIPAL BOND MARKET MONTHLYJANNEY FIXED INCOME STRATEGYFebruary 27, 2013

JANNEY MONTGOMERY SCOTT

www.janney.com

© 2013 Janney Montgomery Scott LLC

Member: NYSE, FINRA, SIPC

MUNICIPAL MONTHLY • PAGE 1

TOM KOZLIK Municipal Credit [email protected]

ALAN SCHANKEL Managing [email protected]

See page 16 for important information regarding certifi cations, our ratings system as well as other disclaimers.

CONTENTS PAGE

SEQUESTER 2013 1

SECTOR CREDIT OUTLOOKS 4

SECTOR BY SECTOR OVERVIEWS 5

LITTLE PROGRESS IN PUERTO RICO 9

TECHNICAL MARKET COMMENTARY 11

SELECT RATING CHANGES 12

STATE ISSUER RATINGS 13

MUNICIPAL RATING DEFINITIONS 14

JANNEY MUNICIPAL PUBLICATIONS 15

DISCLOSURE 16

Sequester 2013 - An Unexpected Fiscal Shock - Mostly L imited for Municipals• We expect the Sequester to commence on March 1. This will likely have a somewhat meaningful

short-term economic drag on U.S. GDP, dropping the Janney FIS forecast by 0.6%-0.8%, so our growth expectation is only 1.2% to 1.5% for 2013, well below historical growth levels of 3.0% to 4.0%. But, the Sequester could also support longer term growth, especially as the U.S. debt to GDP ratio is further brought under control.

• The fall-out on the municipal sector will be rather limited to those areas and issuers who have been more reliant on federal spending.

• BAB and Recovery Act bond issuers will lose small portions of their subsidy payments due to the Sequester. Issuers are still on the hook for 100% of bond principal and interest, however. This violation of trust greatly reduces the chances of future issuer support for reincarnations of the program, especially at lower subsidy levels.

• BAB extraordinary redemption provisions triggered as a result of the Sequester will likely not be acted on now by issuers in large numbers, but could under certain market conditions.

• There has been little progress in Puerto Rico. This is not to suggest that default is imminent, but the fi nancial situation is likely to get worse before it improves.

• February has been a month of underperformance. However, technical underpinnings of the mu-nicipal market remain solid with investors continuing to add to municipal mutual fund positions.

• Puerto Rico was placed on Negative Watch by Fitch; Outlooks for Missouri and Kentucky were lowered; while California’s and San Francisco’s ratings were both upgraded. Davenport, IA and Amityville, NY suffered super downgrades.

SEQUESTER 2013 - MUNICIPALS NOT VERY VULNERABLE

A Little Less than a Week Away

The U.S. fi nancial markets and the U.S. municipal market specifi cally is a little less than a week away from the March 1 Sequester. At this moment it does not look like the political will to avert them exists, and assuming the status quo prevails, they will commence on Friday. This will likely have a

Declining Sentiment Illustrates Why Lawmakers Will Not Avoid the Sequester

-2.00

-1.00

0.00

1.00

2.00

29-Jan 5-Feb 12-Feb 19-Feb

Rep. Congress Sentiment Dem. Congress Sentiment

Obama Admin Sentiment Business Sentiment

Source: Bloomberg and Janney FIS. Scores sentiment of willingness to negotiate based on public statements. 2=VeryOptimistic; 1=Optimistic; 0=Neutral; -1=Pessimistic and -2=Very Pessimistic.

MUNICIPAL BOND MARKET MONTHLYFebruary 27, 2013


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We are about a week away from the implementation of the Sequester cuts instituted as part of the 2011 Budget Control Act.

somewhat meaningful overall economic drag on U.S. GDP, dropping the Janney FIS forecast slightly.

No Compromise - Just More Squabbles

Much of the drama related to the Sequester we are now faced with goes back to the August 3, 2011 signing of the Budget Control Act of 2011 (BCA), after the July 2011 U.S. debt ceiling showdown. In October 2011 we anticipated that D.C. lawmakers would not be able to come together and agree on a larger spending plan when we published the report titled, “Municipal Investors Should Expect Sequestration.” Turns out that we were correct- about four months after the BCA was passed, the 12-member Joint Select Committee on Defi cit Reduction, tasked with creating a spending plan to trim the federal budget, failed in its goal. This in turn triggered the Sequester. The original date for the Sequester to begin was Jan 1, 2013, but the American Taxpayer Relief Act of 2012 (or the fi scal cliff agreement) delayed its start until March 1. Most thought it would be avoided, but the Bloomberg Power Broker data illustrates why an agreement to avoid it has not been reached. The reason is mostly because lawmaker pessimism has dipped to the lowest levels of the year - making for conditions not very conducive to deal-making.

What is Sequestration?

The modern origin of the term “sequestration” goes back to The Balanced Budget and Emergency Defi cit Control Act of 1985, which established a “sequester” as a method to cap or cut spending. It is a statutory limit on discretionary spending. The modern Sequestration (2013) will cut from defense and nondefense spending. Those adjustments will be achieved by lowering the caps on discretionary budget authority by automatically cancelling budgetary resources (this is the actual “sequestration” in action) for programs and activities. The BCA exempts a signifi cant portion of mandatory spend-ing from sequestration. For example, programs exempt from sequestration include: Social Security, Medicaid, federal retirement, and disability programs among others.

Broader Economic Implications

The Janney Fixed Income Strategy Group, in December 2012, forecast that the potential effect of Se-questration would subtract roughly 0.6%-0.8% from overall GDP in 2013 if not avoided. Therefore,

Sequester: A spending control mechanism created by the BBEDC Act of 1985 where the Federal Offi ce of Manage-ment and Budget issues an order, using a formula set out in a statute, to cap spending of Federal programs.

Americans will decide “Whether societies of men are really capable or not of establishing good govern-ment from refl ection and choice, or whether they are forever destined to depend for their political constitu-tions on accident and force,” wrote Alexander Hamilton in Federalist No. 1.

Automatic Sequester Reductions Under the 2011 Budget Control Act

Category 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total Defense $55 $55 $55 $55 $55 $55 $55 $55 $55 $495

Non-Defense $55 $55 $55 $55 $55 $55 $55 $55 $55 $495Debt Service Savings $0 $6 $12 $18 $24 $30 $36 $42 $48 $216Total Spending Caps $110 $116 $122 $128 $134 $140 $146 $152 $158 $1,206

Source: CBO, Aug 1, 2011; www.whitehouse.gov and Janney FIS.

Potential Impact of Sequestration (2013)

$0 $10,000 $20,000 $30,000 $40,000 $50,000

Defense

Homeland Security

Education

Agriculture

Justice

Labor

Treasury

Interior

EPA

Judicial Total Seq. Cuts to Agencies and Contractors ($ in millions)

Source: Bloomberg estimates based on OMB data and Janney FIS.



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The Janney Fixed Income Strategy GDP growth ex-pectations are now closer to 1.2%-1.5% rather than 1.8%-2.3% for 2013.

our GDP growth expectations are now closer to 1.2%-1.5% rather than 1.8%-2.3%. The overall economic impact will be meaningful, but not meaningfully tremendous; in the way the fi scal cliff would have affected growth, for example. An important point about the Sequester, is that it is phased in year after year.

In addition, while the Sequester is a very small downpayment that helps to minimize the U.S. debt to GDP ratio relationship, a signifi cant amount of additional budget adjustments are still needed. Therefore, we still think the U.S. rating is under pressure because the commencement of the Seques-ter, if anything, illustrates the inability of D.C. lawmakers to come together and compromise. We feel even stronger now about our expectation that Moody’s will downgrade the U.S. rating before the end of 2013. For more on the U.S. Sovereign rating and its potential effects on municipals please see, “Possible U.S. Downgrade” in the Janney Municipal Bond Market Monthly published Sept 21, 2012.

Consequences of Sequestration on Municipal Sectors

It is diffi cult to judge specifi c issuers that will be most affected as a result of the Sequestration because much of the deciding factors are going to be determined during the annual appropria-tion process. We can, however, make a few general comments about the potential consequences to municipal sector credit quality. Issuers such as state and local governments, hospitals, or higher education institutions, which rely on federal related funds, will likely experience lower revenues. The magnitude will differ across the board. Some might not even notice. But, in general we believe adjustments will remain manageable for most municipal issuers.

At the U.S. state level, we believe the effects from the Sequester are alleviated by states’ fi nancial fl exibility and their sovereign power to cut spending and increase revenues, generally. Those most exposed to federal spending, as indicated in the U.S. map, show that the highest levels of exposure by states are rather few. However, we advise investors to investigate this exposure on an issue by issue basis. On the spending side, Medicaid, an expenditure averaging about 20% of states’ total expenditures, which is shared by the federal and state governments is exempt from Sequester. In fact, the Sequester, because it exempts Medicaid, is an outcome that could be more benefi cial in the short-term for state and local governments and other organizations which mainly rely on state funding than other federal defi cit reduction alternatives.

The “Dinner Table Compro-mise of 1790” was a symbol-ic and enduring agreement representing Alexander Ham-ilton’s view of what the new U.S. political process was ca-pable of, and that it would endure political squabbles.

In general we believe Seques-ter adjustments will remain manageable for most munici-pal issuers.

8.9%

13.3%

6.7%3.4%

4.0%7.0%

5.8%

1.3%19.7%

3.6%

6.9%

15.8%

5.3%

2.5% 3.1%

2.4%

6.3%9.9%

4.7%

4.8%

19.7%

4.9%2.4%

1.8%

5.4%

7.6%

4.8%

2.8%3.0%

3.1%

2.7%

12.8%

2.0%

4.5%

4.4%

2.8%

5.5%

2.1%

4.4%3.4%

7.4%

4.4%

4.9%

5.4%

5.56%

5.7%

19.7%

5.9%

4.6%3.2%

U.S. State Vulnerability to Sequester - Federal Spending

Source: Pew and Janney FIS. Data includes federal spending in procurement, salaries, and wages as a % of state GDP.

Higher ExposureMedium Exposure

Low ExposureVery Low Exposure



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However, it is important to note that there are several states which possess a sig-nifi cant higher exposure to the federal government than the average state.

We are, however, expecting some rating agency action on a limited basis. It is important to note that there are several states which possess a signifi cant higher than average dependence, directly or indirectly, on the federal government. Those states most exposed are: AK (13.3%); HI (15.8%); MD (19.7%); NM (12.8%) and VA (19.7%). We noted in our recent State Fiscal Health Update (Feb 2013) these statistics and even more details. Additionally, Moody’s in 2011 and in Feb 2013 identi-fi ed Maryland, Missouri, New Mexico, South Carolina, Tennessee and Virginia as higher rated or Aaa states that possessed a linkage with the U.S. government and could possibly see ratings deteriora-tion as a result of the U.S. rating and or exposure to federal activity.

Local governments and school districts are bearing and will continue to bear the brunt of some of the levers that states have at their disposal. State adjustments are resulting in lower state funding and reduced subsidies fl owing down to the local level. We believe local governments will ultimately be able to pull through the fi scal stresses even though potential consequences from lower federal spending could be more “painful” than at the state level. This will most strongly be felt in areas that are most exposed to the Sequester cuts, like defense or Washington D.C spending related. Investors should individually examine issues in the above areas and determine if D.C. related exposure is high.

BAB Subsidy Will be Cut

An item we know will be reduced is the amount of subsidy issuers of taxable Build America Bonds (BAB) will receive. We do not expect that this is going to result in any meaningful credit related events or ratings downgrades but it will reduce the faith state and local government issuers have in future federal subsidy payments. We think this puts to bed any potential revival of a BAB program, especially at the lower subsidy levels recently proposed.

It is also important to note for investors’ sake that this reduced subsidy does not reduce the obliga-tion of the municipal issuer. The municipal issuer is still on the hook for 100% of the bond principal and interest. One of the risks the issuers took when they chose to sell BABs was related to the security of the 35% subsidy was from the federal government. Most issuers, as you can imagine, are not pleased that the subsidy is lower than they originally expected. Some issuers, like the State of Florida, did not sell BABS, because this risk existed.

The Sequester will also trigger the ability for some issuers to now have the option to exercise an ex-traordinary redemption provision to redeem their BABs. While this is a structure development worth watching, especially under certain market circumstances, we currently do not expect it will affect many holdings now. Please also see the Janney’s February 11, 2013 commentary titled, “The Sword of Sequester-ocles” and the October 3, 2012 commentary titled, “Build America Bond Sequester Cut Concerns” for additional details. Tom Kozlik

JANNEY MUNICIPAL SECTOR OUTLOOKS

Summary of Janney’s Current Municipal Credit Outlooks

We now have more “Cautious” than we have “Stable” municipal sector outlooks. Although down-grades will likely outnumber upgrades in most sectors in 2013 we believe such actions will be at a pace that is slower than previously experienced. We still believe credit quality will not fall far from current median ratings. So, we generally expect municipal issuers will continue to utilize all the levers at their disposal to maintain their generally strong investment grade credit quality in 2013.

An item we know will be re-duced is the amount of sub-sidy issuers of taxable Build America Bonds (BAB) will receive.

The municipal issuer is still on the hook for 100% of the bond principal and interest.

Source: OMB and Janney FIS. ($ in millions).

The Sequester Cuts Will Impact All Recovery Act Bonds, Including BABs

Function BA Amount Sequester % Sequester AmtBuild America Bond Payments $3,351 7.60% $255

Qualifi ed Zone Academy Bonds 38 7.60% 3Qualifi ed School Const Bonds 820 7.60% 62

Qualifi ed Energy Conserv Bonds 32 7.60% 2$4,241 $322



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We now have more “Cau-tious” than we have “Stable” municipal sector outlooks.

JANNEY MUNICIPAL SECTOR OVERVIEWS

U.S. State Government (Sector Outlook- Stable)

We kept our “Stable” outlook on the U.S. state government sector again to start 2013 and do not anticipate a change to this outlook in the near term. U.S. states showed they were willing and able to pay debt service since the World Financial Crisis began, and we expect the same fulfi llment of debt service obligations in 2013 and beyond. Fall-out from Sequester-related cuts will be limited to a select number of states. Spending pressures from growing pension liabilities, questions about Med-icaid expenditures and uncertainty surrounding future federal defi cit reduction, while manageable in the short term, could build over time. We expect many of the solutions will need to be political in nature in order to become sustainable and result in long-lasting positive credit effects. Tom Kozlik

Fall-out from Sequester-re-lated cuts will be limited to a select number of states.

We expect many of the solu-tions at the federal and state level will need to be political in nature in order to become sustainable.

Janney Municipal Sector Outlooks

20%

10%

7%

6% 5%4%

4% 3%3%

2%

0%

10%

20%

DC, MD, VA

KY SC CT U.S. Avg.

PA FL RI NJ NY

The area around DC will be most significantly affected by federal spending reductions.

Source: Barclay’s as of Jan. 31, 2013 and Janney FIS.

Select Federal Spending in Procurement, Salaries and Wages as a % of State GDP

Source: Pew and Janney FIS.

SectorJanney Credit

Outlook

Last Month Change

Barclay's 12

Month Return

Key Sector TrendsRecent Janney Sector Review

Municipal Bond Index - - 4.80% Barclay's Muni Index, 46k issues -

State Government Stable Same 3.65% Some fall-out from Sequester expeected Feb 2013 Health

Local Government Cautious Same 4.17% Outliers are still not representative of conditions Aug 2012 MBMM

School Districts Cautious Same - Credit deterioration will continue, but remain limited Aug 2012 MBMM

Airports Cautious Same 5.74% Enplanements higher, funding questions June 2012 MBMM

Health Care Cautious Same 7.47% Bigger is better, Look to events in 2014 Apr 2012 MBMM

Higher Education Cautious Same 5.11% Public schools have pricing advantage Jan 2012 MBMM

Housing Stable Same 5.33% Structure overtaking credit as key concern again Dec 2012 Note

Public Power (Elec.) Stable Same 4.04% Essential purpose nature enhances stability Nov 2012 MBMM

Tobacco Cautious Same N/A More downgrades,ind. consumption dropping June 2012 MBMM

Toll Facilities Cautious Same 5.74% Activity is leveling off, still near 2004 levels June 2012 MBMM

Water and Sewer Stable Same 4.67% Essentiality factor, system upgrades looming Jan 2012 MBMM



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Local Government (Sector Outlook- Cautious)

Although most local government issuers have managed fi nances well in the post recession time-frame, challenges continue. Overall tax revenue has recovered to pre-recession levels, but annual growth has failed to keep up with modest infl ation increases. Property taxes, which comprise about 75% of local tax revenue, are vulnerable to ongoing property value reassessments. In its 2012 review of rating changes Moody’s noted the number of local government downgrades exceeded upgrades by a 5.4 to 1 ratio, with the ratio jumping to 17.8 to 1 if dollar amount is considered. In 2013 we expect that downgrades will continue to outpace upgrades, although the ratios will show improvement. Alan Schankel

School Districts (Sector Outlook- Cautious)

Metrics for school districts, like other local government issuers, start with weak property tax collec-tions, but school districts are also highly reliant on state aid payments. As states have struggled to balance budgets, K-12 school district fi nancing has often been reduced, adding stress to school district revenue streams. Pension funding and healthcare costs continue to rise, assuming a grow-ing portion of school district budgets. From a bondholders’ perspective, it’s import to note that many states employ bond support mechanisms such as state aid intercept programs, which enhance bondholder security. K-12 education is a priority governmental function for most states, and we believe the tide of state cutbacks has largely ebbed, but we remain “Cautious” on the sector. Alan Schankel

Aiports (Sector Outlook- Cautious)

Several factors are providing stress to airports in the near term, and although we believe their du-rable credit profi les will endure in the long term and rating deterioration will be limited, we expect factors that could apply negative rating agency pressure to airport issuers to intensify. Total en-planements (or passengers boarding planes) performance, while it has trended up generally, has not returned to levels that are close to 2007-08 levels. Enplanements are still only near 2004-05 levels and have contributed to stagnant revenues. We believe that lower enplanement data and expected prolonged uncertainty from near-term economic and political risk is important enough to warrant a “Cautious” outlook. Tom Kozlik

Overall tax revenue has re-covered to pre-recession lev-els, but annual growth has failed to keep up with modest infl ation increases.

From a bondholders’ perspec-tive, it’s import to note that many states employ bond support mechanisms such as state aid intercept programs, which enhance school district bondholder security.

Airports- Lower enplanement data and expected prolonged uncertainty from economic and political risk is important enough to warrant a “Cau-tious” outlook.

Local Government Tax Revenue Growth Slowed

Source: U.S. Census Bureau and Janney FIS.

$300 bln

$400 bln

$500 bln

$600 bln

$700 bln

$400 bln

$500 bln

$600 bln

$700 bln

$800 bln

Mar-02 Sep-03 Mar-05 Sep-06 Mar-08 Sep-09 Mar-11 Sep-12

State - Left

Local - Right

Recession Jan 08

to Jun 09



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Healthcare (Sector Outlook- Cautious)

We expect the healthcare sector will face continued pressure in 2013, but more defi nitive impacts to credit quality will probably not be seen until 2014 or later, once the full implementation of the Af-fordable Care Act takes hold. Issues currently challenging hospitals include sequestration’s Medicare cut, declining volumes, quality-measure fi nancial penalties, as well as increased costs for employed physicians and IT upgrades needed for clinical transformation. There are additional forces to watch in 2013. Which states choose to opt-in to Medicaid expansion will determine whether hospitals in those states will potentially be able to offset some of the reimbursement reductions with lower levels of bad debt. Federal defi cit reduction plans may add further reimbursement cuts to Medicare and even include Medicaid. Outpatient reimbursements may also face reductions. Other potential credit impacts are looming on the horizon. The individual mandate begins in 2014, but it remains ques-tionable whether the insurance exchanges will be ready. As they materialize, there are uncertainties regarding how many uninsured individuals will actually choose insurance versus the penalty, and how many individuals will choose potentially lower-reimbursing exchange products over employer-sponsored commercial insurance. With all these moving parts, increased mergers and affi liations are expected as providers seek economies of scale, increased market shares, better IT platforms, broader clinical services, and other survival strategies.

In the coming years, we believe smaller, lower-rated individual hospitals (particularly those classifi ed as Medicare Dependent, those receiving a signifi cant percentage of disproportionate share pay-ments, or those in competitive markets) are at greater risk for credit deterioration. That being said, some hospitals with weaker positions could be acquired by, or could partner with, a more viable facility seeking their market share. We believe it would be prudent to review your holdings with the looming impacts of reform in mind to ensure your investment decisions are proactive rather than reactive, at which point there’s greater potential for loss. Debbie Hontz

Higher Education (Sector Outlook- Cautious)

Although we retain a “Cautious” outlook on nonprofi t higher education, our views diverge within the sector, with future demand a key consideration. A particular concern is smaller, less selective private colleges, especially those with a primary student base from northeastern states, where high school graduation rates will fl atten or decline in coming years. Even as the recession recedes, more affordable public schools are still the best option for many potential students. Selective private universities, with diversifi ed revenue streams (endowment, grants, etc), should be able to manage future challenges which include reduction of federal Pell grants emanating from defi cit reduction efforts. Alan Schankel

Enplanements is a measure of passengers boarding planes.

We expect the healthcare sector will face continued pressure in 2013, but more defi nitive impacts to credit quality will probably not be seen until 2014 or later.

In the coming years, we be-lieve smaller, lower-rated individual hospitals are at greater risk for credit deterio-ration.

400

500

600

700

800

900

96 01 06 11 16

Growth expected at about 2.5% annually, lower than previous forecasts. 2001-

4.0% & 2008- 3.2%.

Scheduled Passenger Enplanements

Source: U.S. Bureau of Trans., FAA forecasts and Janney FIS. #s in millions of passengers.



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A particular concern is small-er, less selective private col-leges, especially those with a primary student base from northeastern states, where high school graduation rates will fl atten or decline in com-ing years.

Housing (Sector Outlook- Stable)

The worst of the fall-out to single family state housing fi nance agency credit quality has occurred. We are therefore maintaining our “Stable” outlook. Investors are (or should be) transitioning back to concentrating on structure and redemption considerations versus credit. State HFA credit qual-ity remains very strong and we have maintained our “Stable” outlook on the Housing sector. We are also continuing to see attractive state HFA single family housing bond spreads. Please see our December 10, 2012 Municipal Note titled, “Structure Related Factors are Once Again the Priority for HFA SF Housing Investors” for more details. Tom Kozlik

Public Power (Sector Outlook- Stable)

Unlike the municipal transportation sectors, where usage is still down closer to 2004 levels, electric consumption has almost recovered to the 2007 summit. This strong and generally rising demand bodes well for U.S. public power electric utilities. We still believe public power issuers’ monopolistic business models are strong. Debt service coverage ratios among public power issuers are recover-ing despite uncertain and sometimes volatile economic conditions in recent years. Pricing power is a likely key factor here, when politically feasible. Public power issuers can often use their ability to set rates to maintain ratings and meet debt service requirements. However, there continues to be a small number of cases where rate setting pressures are greater than normal, often due to high cost structures or legacy expenses. Tom Kozlik

The worst of the fall-out to single family state housing fi nance agency credit quality has occurred.

Public power issuers can of-ten use their ability to set rates to maintain ratings and meet debt service require-ments.

Source: Janney FIS.

Back to Structure, Versus Credit, as Priority for Housing Bonds

Adjusted Total Debt Service Coverage (Own Generation)

2.01

1.90

1.89

1.95

1.88

1.92

1.96

2.00

2.04

2008 2009 2010 2011Source: Moody’s and Janney FIS.

State HFA Single Family Bond

Credit Considerations

Issuer, program strength & rating comparison

Type of assets/ mortgages

StructureConsiderations

Ability/likelihood of cross-call

Type of bond, redemption priority

Chance of unexpended proceeds call?



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Tobacco (Sector Outlook- Cautious)

Uncertainty continues for bonds secured by tobacco settlement revenue streams, although some progress has been made in resolving the payments in limbo as a result of the non-participating man-ufacturers (NPM) dispute, with 17 states and two territories reaching agreement on resolving dispute arbitration. In the past we have argued that the yields offered on tobacco bonds made the risk reward proposition reasonable for investors with an understanding of the risk, but yield reductions on longer maturities in the range of 100 basis points over the past year make this argument less enticing. We await further clarifi cation on the NPM agreements as well as the National Association of Attorneys General report of 2012 year payments, scheduled for release in April. Alan Schankel

Toll Facilities (Sector Outlook- Cautious)

U.S. toll facility issuers have been and, in most instances, remain among the strongest credits and possess some of the most secure revenue streams in the municipal sector. Most issuers are in the “Aa2” to “A3” ratings categories, and currently, only a small number possess “Negative” outlooks. However, we expect the near-term economic and political uncertainties will create a perfect storm for these revenue issuers and could result in ratings downgrades in the near to medium term. Therefore, we revised our credit outlook on the toll-road sector to “Cautious” from “Stable” in ‘12. Tom Kozlik

Water and Sewer (Sector Outlook- Stable)

The essential nature of the services provided by water and sewer issuers combined with the monopo-listic nature of the sector support our stable outlook. In basic terms, consumers tend to assign high priority to utility bill payments. In its 2013 outlook for the sector, Fitch notes “some improvement to key fi nancial metrics on a year-over-year basis.” Challenges include potential increased capital and debt needs to meet environmental regulations as well as stress at the local government level, which in isolated cases may lead to use of utility revenues to supplement strained local government budgets. Alan Schankel

LITTLE PROGRESS IN PUERTO RICO

Tighter Spreads but Little Fiscal Progress

Although relative trading levels of long maturity Puerto Rico bonds have improved since year end, the fundamental metrics of the island’s economy and fi nances indicate little progress since the cur-rent fi scal year began on July 1. Last week, Fitch added to the pressure by placing the BBB+ rating

Uncertainty continues for to-bacco bonds, although some progress has been made in resolving the payments in limbo as a result of the NPM dispute.

We expect the near-term economic and political uncer-tainties will create a perfect storm for toll facility issuers and could result in ratings downgrades in the near to medium term.

Water and sewer issuers do face some challanges ahead.

Vehicle Miles Traveled Leveld Off- Still Not Higher Than 2004

1,500

2,000

2,500

3,000

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2012

Recession of the 1990s

Activity has leveled off, but is still not

above pre-recession levels.

Increased oilprices, more fuel efficient cars and the

Great Recession

Source: Dept. of Trans. and Janney FIS. #s in billions of miles.



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of Puerto Rico on watch for downgrade. This follows S&P’s June 2012 assignment of a negative outlook to its BBB general obligation rating and Moody’s two notch downgrade to Baa3 in Decem-ber. Although governmental challenges are many, the woefully undefunded pension plan and the growing current year defi cit defi ne the magnitude of the problem.

As the new administration and legislature settle in, there are reports of potential legislative action on pension reform, which could increase employee contributions as well as extend retirement age or raise the length of service needed to qualify for pension payments. The most recent numbers (June 30, 2011) show funding of the the largest government employee pension plan at only 6.8%, with the smaller teachers’ plan funded at 20.8%. The budget defi cit for the current fi scal year, ini-tially projected at $330 million, assumed $740 million in savings through pushing current year debt service into future years with a refi nancing bond issue. Government revenues have come in below original budget projections in the fi rst six months, and some estmates of the fi nal defi cit range as high as $3 billion. Issuance of bonds to fund the refi nancing is problematic until the administrations’ fi nance plans are fully communicated and evaluated.

After jumping from 23 basis points to 144 basis points between July and year end, the yield differen-tial (spread) between an index of 30 year generic Baa municipal bonds and like maturity Puerto Rico bonds narrowed to 105 basis points last week. This recent improvement was highlighted in a Wall Street Journal article titled “Bond Investors Wade Back Into Puerto Rico.” As the graph indicates, the story differs when considering 10 year maturities. The ten year spread widened from 26 basis points in July to as high as 160 basis points recently. Mutual funds are signifi cant holders of Puerto Rico debt, with the aforementioned WSJ article citing Morningstar reseach estimates that 80% of open ended municipal bond mutual funds had Puerto Rico exposure. Mutual fund holdings tend to be in longer maturities. The improvement in 30 year spreads in recent weeks suggests to us that mutual funds, ever seeking yield and fl ush with cash from strong 2013 investor infl ows, are lending support to the long maturity Puerto Rico market. The 10 year maturity statitics are less refl ective of mutual fund related volatility, and more indicative of direct investor sentiment.

In coming weeks the Commonwealth’s fi nancial strategy will become more evident, but given the continuing weakness of the island economy, it seems unlikely that further rating downgrades in coming months will be avoided. Although wider spreads have improved the risk reward calculus of owning Puerto Rico issues since our “Puerto Rico Debt Overload” report of last July, we continue to caution against overconcentration in Puerto Rico issuers. This is not to suggest that default is im-minent, but the fi nancial situation is likely to get worse before it improves. Alan Schankel

Last week, Fitch placed Puerto Rico’s BBB+ rating on watch for downgrade.

This followed rating actions by Moody’s and S&P.

As the new administration and legislature settle in, there are reports of potential legislative action on pension reform.

Puerto Rico 10 Year Spreads Have Widened

Source: Thomson Reuters and Janney FIS.

0 bps

25 bps

50 bps

75 bps

100 bps

125 bps

150 bps

175 bps

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

Jan-12 Mar-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13

Spread in Basis Points Generic Baa Yield PR GO Yield



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MUNICIPAL MARKET TECHNICAL COMMENTARY

Tax-Free Performance

February so far has been a month of municipal underperformance, with tax free yields rising at a quicker pace than Treasury counterparts. The technical underpinnings of the municipal market remain solid with investors continuing to add to municipal mutual fund positions. Based on Invest-ment Company Institute statistics, infl ows to funds totaled $8.3 billion in the six weeks through February 13, with this $1.4 billion weekly average exceeding average 2012 weeks infl ows by 40%.

The thus far gentle tide of rising yields should contine to attract investors, many of whom have increased incentive to consider municipal bonds in the higher tax environment of 2013 based on return of the 39.6% top federal tax bracket and a new 3.8% Medicare Tax on investment income (ex-cluding municipal tax free interest). Although municipal to Treasury ratios moved higher last week, they remain below 100%. The new issue calendar for the week of February 25th should exceed $8 billion, making it the busiest week of the year thus far. Alan Schankel

Technical underpinnings of the municipal market remain solid.

Based on Investment Compa-ny Institute statistics, infl ows to municipal funds totaled $8.3 billion in the six weeks through February 13.

Although municipal to Trea-sury ratios moved higher last week, they remain below 100%.

Tax-Free Tields are Up from October 2012 Lows

Source: Janney FIS.

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

Jan-10 May-10 Sep-10 Dec-10 Apr-11 Aug-11 Nov-11 Mar-12 Jul-12 Oct-12 Feb-13

Municipal to Treasury Ratios Remain Below 100%

Date 2 Year 5 Year 10 Year 30 Year1/3/2012 136.2% 105.8% 99.1% 121.1%4/2/2012 119.6% 97.1% 98.5% 105.7%7/2/2012 111.9% 123.1% 120.2% 120.1%10/1/2012 127.1% 112.7% 107.0% 104.3%1/2/2013 136.2% 107.2% 97.9% 95.3%2/1/2013 132.6% 93.0% 91.3% 91.4%2/22/2013 140.0% 102.8% 96.8% 95.8%

Source: Janney FIS.



Select Recent Changes to Ratings & Outlooks (as of Feb 26, 2013)

Source: Moody’s; S&P; Fitch and Janney FIS.

Issuer State Recent Rating Action DateUnderlying Rating(s)

Notes

Puerto Rico (State of) PR Placed on Negative Watch by Fitch21-Feb-2013

Baa3/BBB/BBB+ Structural defi cit continues

Bethlehem (City of) PA Raised outlook to positive from stable by S&P19-Feb-2013

NR/BBB Financial improvements

Amityville (Town of) NY Downgraded to BBB- from A- by S&P11-Feb-2013

BBB-Concern over ability to pay May

notesMerchantville (Town of) NJ Downgraded to A2 from A1 by Moody's

12-Feb-2013

A2 Tapping reserves, only 2% of revs

Missouri (State of) MO Lowered outlook to neg from stable by Moody's5-Feb-2013

Aaa/AAA/AAA Exposure to federal government

21 other Aaa ratings NA Moody's lowered the outlook to neg from stable5-Feb-2013

Several Exposure to federal government

San Francisco (City of) CA Upgraded to Aa1 from Aa2 by Moody's5-Feb-2013

Aa1/AA/AA- Strong and recovering position

California (State of) CA Upgraded to A from A- by S&P31-Jan-2013

A1/A/A- Improving fundamentals

Kentucky (State of) KY Lowered outlook to neg from stable by S&P31-Jan-2013

Aa2/AA-/AA- Very weak pension funding level

Davenport (City of) IA Superdowngrade to A from AA by S&P31-Jan-2013

Aa2/A Declining fundamentals

Binghamton (City of) NY Downgraded to A2 from A1 by Moody's30-Jan-2013

A2 Failure to fi le audits since 2010



Source: Moody’s; S&P; Fitch and Janney FIS. (*) Denotes a Lease or Issuer Credit Rating.

State and Other Select Issuer Ratings (Feb 27, 2013) Moody's S&P Fitch

State Rating Outlook Last Rating Outlook Last Rating Outlook LastAlabama Aa1 Stable 4/16/2010 AA Stable 8/3/2007 AA+ Stable 5/3/2010Alaska Aaa Stable 11/22/2010 AAA Stable 1/5/2012 AAA Stable 1/7/2013

Arizona (*) Aa3 Stable 2/8/2012 AA- Stable 12/23/2011 NR - -Arkansas Aa1 Stable 4/16/2010 AA Stable 1/10/2003 NR - -California A1 Stable 4/16/2010 A Stable 1/31/2013 A- Stable 4/5/2010

Colorado (*) Aa1 Stable 4/16/2010 AA Stable 7/10/2007 NR - -Connecticut Aa3 Stable 1/20/2012 AA Stable 9/26/2003 AA Stable 6/3/2010Delaware Aaa Stable 4/30/2010 AAA Stable 2/22/2000 AAA Stable 4/13/2006

Dist. of Columbia Aa2 Negative 9/20/2011 A+ Stable 9/30/2011 AA- Stable 4/5/2010Florida Aa1 Stable 4/16/2010 AAA Stable 7/12/2011 AAA Negative 4/5/2010Georgia Aaa Stable 4/16/2010 AAA Stable 7/29/1997 AAA Stable 4/13/2006Hawaii Aa2 Stable 5/17/2011 AA Stable 1/29/2007 AA Stable 6/15/2011

Idaho (*) Aa1 Stable 4/16/2010 AA+ Stable 3/30/2011 AA Stable 4/5/2010Illinois A2 Negative 12/13/2012 A- Negative 1/25/2013 A Negative 1/11/2013

Indiana (*) Aaa Stable 4/16/2010 AAA Stable 7/18/2008 AA+ Stable 4/5/2010Iowa (*) Aaa Stable 4/16/2010 AAA Stable 9/11/2008 AAA Stable 4/5/2010

Kansas (*) Aa1 Negative 4/6/2011 AA+ Stable 5/20/2005 AA Stable 2/13/2007Kentucky (*) Aa2 Negative 3/30/2011 AA- Negative 1/31/2013 AA- Negative 2/15/2011

Louisiana Aa2 Stable 4/16/2010 AA Stable 5/4/2011 AA Stable 4/5/2010Maine Aa2 Negative 5/17/2012 AA Negative 5/25/2012 AA Stable 1/23/2013

Maryland Aaa Negative 8/4/2011 AAA Stable 5/7/1992 AAA Stable 4/13/2006Massachusetts Aa1 Stable 4/16/2010 AA+ Stable 9/16/2011 AA+ Stable 4/5/2010

Michigan Aa2 Stable 4/16/2010 AA- Stable 5/22/2007 AA- Positive 7/27/2011Minnesota Aa1 Negative 8/1/2011 AA+ Stable 9/29/2011 AA+ Stable 7/7/2011Mississippi Aa2 Stable 4/16/2010 AA Stable 11/30/2005 AA+ Stable 4/5/2010Missouri Aaa Negative 2/5/2013 AAA Stable 2/16/1994 AAA Stable 4/13/2006Montana Aa1 Stable 4/16/2010 AA Stable 5/5/2008 AA+ Stable 4/5/2010

Nebraska (*) Aa2 Stable 4/16/2010 AAA Stable 5/5/2011 NR - -Nevada Aa2 Stable 3/24/2011 AA Stable 3/10/2011 AA+ Stable 4/5/2010

New Hampshire Aa1 Stable 4/16/2010 AA Stable 12/4/2003 AA+ Stable 4/5/2010New Jersey Aa3 Stable 4/27/2011 AA- Negative 9/18/2012 AA- Stable 8/17/2011New Mexico Aaa Negative 8/4/2011 AA+ Stable 2/5/1999 NR - -

New York Aa2 Stable 4/16/2010 AA Positive 8/27/2012 AA Positive 5/31/2011North Carolina Aaa Stable 1/12/2007 AAA Stable 6/25/1992 AAA Stable 4/13/2006

North Dakota (*) Aa1 Stable 4/16/2010 AA+ Positive 5/12/2011 NR - -Ohio Aa1 Stable 3/16/2012 AA+ Stable 7/19/2011 AA+ Stable 4/11/2011

Oklahoma Aa2 Stable 4/16/2010 AA+ Stable 9/5/2008 AA+ Stable 4/5/2010Oregon Aa1 Stable 4/16/2010 AA+ Stable 3/10/2011 AA+ Stable 4/5/2010

Pennsylvania Aa2 Stable 7/16/2012 AA Negative 7/19/2012 AA+ Negative 5/14/2010Puerto Rico Baa3 Negative 12/13/2012 BBB Negative 6/6/2012 BBB+ Negative 2/21/2013

Rhode Island Aa2 Negative 5/31/2011 AA Stable 4/22/2011 AA Stable 7/18/2011South Carolina Aaa Stable 12/7/2011 AA+ Stable 7/11/2005 AAA Stable 4/13/2006

South Dakota (*) Aa2 Stable 5/27/2010 AA+ Stable 3/25/2011 AA Stable 4/5/2010Tennessee Aaa Stable 12/7/2011 AA+ Positive 5/5/2011 AAA Stable 4/5/2010

Texas Aaa Stable 4/16/2010 AA+ Stable 8/10/2009 AAA Stable 4/5/2010Utah Aaa Stable 4/16/2010 AAA Stable 6/7/1991 AAA Stable 4/13/2006

Vermont Aaa Stable 4/16/2010 AA+ Positive 9/17/2012 AAA Stable 4/5/2010Virginia Aaa Negative 8/4/2011 AAA Stable 11/11/1992 AAA Stable 4/13/2006

Washington Aa1 Negative 1/30/2012 AA+ Stable 11/12/2007 AA+ Negative 1/27/2012West Virginia Aa1 Stable 7/9/2010 AA Stable 8/21/2009 AA+ Stable 7/8/2011

Wisconsin Aa2 Stable 4/16/2010 AA Stable 8/15/2008 AA Stable 4/5/2010Wyoming (*) NR - - AAA Stable 5/3/2011 NR - -



Municipal Credit Rating Scale and Definitions

Source: Moody’s; S&P; Fitch and Janney FIS.

Rating Agency

Moody's S&P Fitch Defi nition

Investment Grade

Aaa AAA AAA Exceptionally strong credit quality and minimal default risk.Aa1 AA+ AA+ Upper medium grade and subject to low credit risk.Aa2 AA AA Upper medium grade and subject to low credit risk.Aa3 AA- AA- Upper medium grade and subject to low credit risk.A1 A+ A+ Strong credit quality and subject to low default risk.A2 A A Strong credit quality and subject to low default risk.A3 A- A- Strong credit quality and subject to low default risk.

Baa1 BBB+ BBB+ Subject to moderate risk and possess some speculative characteristics.Baa2 BBB BBB Subject to moderate risk and possess some speculative characteristics.Baa3 BBB- BBB- Subject to moderate risk and possess some speculative characteristics.

Sub-Investment Grade

Ba1 BB+ BB+ Weak credit quality with speculative elements and substantial credit risk.Ba2 BB BB Weak credit quality with speculative elements and substantial credit risk.Ba3 BB- BB- Weak credit quality with speculative elements and substantial credit risk.B1 B+ B+ Very weak credit quality, very speculative with high credit risk.B2 B B Very weak credit quality, very speculative with high credit risk.B3 B- B- Very weak credit quality, very speculative with high credit risk.

Caa1 CCC+ CCC+ Extremely weak credit quality and subject to very high credit risk.Caa2 CCC CCC Extremely weak credit quality and subject to very high credit risk.Caa3 CCC- CCC- Extremely weak credit quality and subject to very high credit risk.Ca CC CC+ Highly speculative and are in or near default with some prospect for recovery.

C CC Lowest class of rated bonds and may be in default with little prospect for recovery.CC- Lowest class of rated bonds and may be in default with little prospect for recovery.

D D DDD Issuer is in default and/or has failed to make a payment.



Source: Janney Fixed Income Strategy.

Janney Municipal Bond Market Publications Title Date Pub Notes

U.S. State Fiscal Health Update February 11, 2013 Note There are a limited number of states exposed to SequesterSequester and BABs February 11, 2013 FI Weekly Subsidy cuts and ERP trigger as a result of Sequester

Credit to Reign Supreme, In 2013 January 30, 2013 Note Several factors to infl uence muni credit in 2013Assured Downgrade January 18, 2013 Note Despite decline of business, insurance has worked well

Cliff Bump and Medicare Tax Increase January 11, 2013 Note Cliff resolution moves top bracket higherOur List of Factors to Watch for 2013/Beyond January 8, 2013 Note 10 U.S. Strengths are reasons for Investor Optimism

Municipal Supply and Demand January 7, 2013 FI Weekly Volume to include lots of refundingsPuerto Rico Downgrade December 18, 2012 Note Moody's downgraded $46 billion PR related debt

New Issue Will Grow Modestly in 2013 December 10, 2012 FI Weekly Technical market commentarySingle Family Housing Sector Update December 10, 2012 Note Structure related factors are once again the priorityState Fiscal Health Scorecard Update November 27, 2012 Note There are potential spoilers for 2013

Impact of Elections on Municipal Bonds November 8, 2012 Note Highlight several noteworthy outcomesThe Elections are Next for Municipals November 1, 2012 Monthly Previewed elections, public power review

The Power of Premiums October 22, 2012 Note Steep premium prices are frequent in marketThe Threat to the Tax-Exemption October 19, 2012 Note Most hostile threat since 1986 Tax Act

Build America Bond Sequester Cut Concerns October 3, 2012 Note Potential trigger of redemptions and subsidy reductionConcerns for the Municipal Market September 21, 2012 Monthly Macro-level drivers to affect municipals

Municipals: Turning to a New Season September 17, 2012 FI Weekly Calendar is picking upMunicipals: Summer's Over, Right? September 10, 2012 FI Weekly Another quiet week in municipals

Municipals: Dog Days of August August 27, 2012 FI Weekly Municipal activity at 1/3 normal pacePuerto Rico Yield Update August 24, 2012 Note GO spreads are widening

Municipals: A Bankruptcy Revisited August 20, 2012 FI Weekly A review of CA cities by Moody'sTaxable Municipal Commentary August 15, 2012 Note Very Strong Relative Value

Municipals: Outliers in the Headlines August 12, 2012 FI Weekly Look at Distressed OutliersMunicipals: Dogish Days of August August 6, 2012 FI Weekly Market activity has slowed

Investors Should Continue to Note Outliers August 1, 2012 Monthly Outliers are not refl ective of overall credit qualityMunicipals: Rethinking a Rich Port July 30, 2012 FI Weekly A Puerto Rico Overload

Puerto Rico Debt Overload July 27, 2012 Note Investors should limit exposure to 10%PA School Intercept Enhanced Ratings July 23, 2012 Note PA School Intercept ratings are lower

Municipals: Summer Scoring July 23, 2012 FI Weekly Comm. of Pennsylvania downgradedMunicipals: States Standing in the Unemploy July 16, 2012 FI Weekly States selling debt related to unemployment insurance

Municipals: the Refunding Train July 9, 2012 FI Weekly Refundings continue strongState Fiscal Scorecard July 17, 2012 Note Restructuring continues most reserves are low

Municipal Healthcare: Post Supremes June 28, 2012 Note Increased certainty but not much changesGARVEEs Depend Upon Federal Funding June 27, 2012 Note Not facing negative credit pressure

Municipals: Pension Premonitions June 25, 2012 FI Weekly Increased skepticism on pension fundingLower Outlook for Toll Facilities June 21, 2012 Monthly Lower outlook on tolls and kept "Cautious" on airportsMunicipals: Returning Stateside June 18, 2012 FI Weekly CA, market commentary, state and locals

Tobacco Sector Update June 15, 2012 Note Remain "Cautious" on sector but see rewardMunicipals: Not Super Common June 11, 2012 FI Weekly Heavy calendar, commentary and credit notesTaxable Municipal Commentary June 4, 2012 Note Taxable municipals are valuable options

Municipals: Value in taxables June 4, 2012 FI Weekly Commentary and entry point for investorsStates Managing Well, Local Remain at Risk May 24, 2012 Monthly Review of how states and locals made it through recession

COFINA- Puerto Rico Sales Tax Fin Corp May 21, 2012 Note Among strongest Puerto Rico issuersM/T Ratios have Reached 100% May 21, 2012 FI Weekly Attractive M/T Ratios

Recent Increase in Super-Downgrades May 14, 2012 FI Weekly Rockland County, NY and other multi-notch actionsCharter School Strengths and Weaknesses May 10, 2012 Note We favor charters close to or above investment grade

Rating Agency Calibration May 7, 2012 FI Weekly Solid retail demand, rating agency dichotomyStrong Demand in the Modern Era April 30, 2012 FI Weekly Strong muni demand, improving outlook

Changes in the Modern Municipal Market April 24, 2012 Monthly M/T Ratios, yields, tight US spreads & PTM updateLower Municipal Activity for the Week April 23, 2012 FI Weekly Market Update, & super-downgradesState Fiscal Health Scorecard Update April 13, 2012 Note State fi scal recoveries continue, gradually

Insurer Portfolio Strategy April 11, 2012 Note 15-20 yr Taxable municipals are cheapMuni Technicals are Compelling April 11, 2012 Note Strong technical factors will support outperformance



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Analyst Certifi cation

We, Tom Kozlik and Alan Schankel, the Primarily Responsible Analysts for this report, hereby certify that all of the views expressed in this report accurately refl ect our personal views about any and all of the subject sectors, industries, securities, and issuers. No part of our compensation was, is, or will be, directly or indirectly, related to the specifi c recommendations or views expressed in this research report.

Defi nition of Outlooks

Positive: Janney FIS believes there are apparent factors which point towards improving issuer or sector credit quality which may result in potential credit ratings upgrades

Stable: Janney FIS believes there are factors which point towards stable issuer or sector credit quality which are unlikely to result in either potential credit ratings upgrades or downgrades.

Cautious: Janney FIS believes there are factors which introduce the potential for declines in issuer or sector credit quality that may result in potential credit ratings downgrades.

Negative: Janney FIS believes there are factors which point towards weakening in issuer credit quality that will likely result in credit ratings downgrades.

Defi nition of Ratings

Overweight: Janney FIS expects the target asset class or sector to outperform the comparable benchmark (below) in its asset class in terms of total return

Marketweight: Janney FIS expects the target asset class or sector to perform in line with the comparable benchmark (below) in its asset class in terms of total return

Underweight: Janney FIS expects the target asset class or sector to underperform the comparable benchmark (below) in its asset class in terms of total return

Benchmarks

Asset Classes: Janney FIS ratings for domestic fi xed income asset classes including Treasuries, Agencies, Mortgages, Investment Grade Credit, High Yield Credit, and Municipals employ the “Barclay’s U.S. Aggregate Bond Market Index” as a benchmark.

Treasuries: Janney FIS ratings employ the “Barclay’s U.S. Treasury Index” as a benchmark.

Agencies: Janney FIS ratings employ the “Barclay’s U.S. Agency Index” as a benchmark.

Mortgages: Janney FIS ratings employ the “Barclay’s U.S. MBS Index” as a benchmark.

Investment Grade Credit: Janney FIS ratings employ the “Barclay’s U.S. Credit Index” as a benchmark.

High Yield Credit: Janney FIS ratings for employ “Barclay’s U.S. Corporate High Yield Index” as a benchmark.

Municipals: Janney FIS ratings employ the “Barclay’s Municipal Bond Index” as a benchmark.

Disclaimer

Janney or its affi liates may from time to time have a proprietary position in the various debt obligations of the issuers mentioned in this publication.

Unless otherwise noted, market data is from Bloomberg, Barclays, and Janney Fixed Income Strategy & Research (Janney FIS).

This report is the intellectual property of Janney Montgomery Scott LLC (Janney) and may not be reproduced, distributed, or published by any person for any purpose without Janney’s express prior written consent.

This report has been prepared by Janney and is to be used for informational purposes only. In no event should it be construed as a solicitation or offer to purchase or sell a security. The information presented herein is taken from sources believed to be reliable, but is not guaranteed by Janney as to accuracy or completeness. Any issue named or rates mentioned are used for illustrative purposes only, and may not represent the specifi c features or securities available at a given time. Preliminary Offi cial Statements, Final Offi cial Statements, or Prospectuses for any new issues mentioned herein are available upon request. The value of and income from investments may vary because of changes in interest rates, foreign exchange rates, securities prices, market indexes, as well as operational or fi nancial conditions of issuers or other factors. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. We have no obligation to tell you when opinions or information contained in Janney FIS publications change.

Janney Fixed Income Strategy does not provide individually tailored investment advice and this document has been prepared without regard to the circumstances and objectives of those who receive it. The appropriateness of an investment or strategy will depend on an investor’s circumstances and objectives. For investment advice specifi c to your individual situation, or for additional information on this or other topics, please contact your Janney Financial Consultant and/or your tax or legal advisor.

Documents

M BOND MARKET MONTHLY - janney.com Library/Unassigned/Janney-MBMM-Feb-2013.pdf · † BAB and Recovery Act bond issuers will lose small portions of their subsidy payments due to the