I'm trying to find a good way to short municipal bonds. I don't want to buy a packaged ETN or 'super short' as those supposedly only track intraday movements. I'm looking for a non dividend ETF or stock I can short through buying a two year put. Does anyone have any suggestions?
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Well I doubt you could purchase CDS (credit default swaps) on the munis. You'd need to be institutional to even think about purchasing, and even if you could they're aren't a ton out there for municipal bonds. Finding naked municipal bond insurance (getting the CDS, without also getting the bond itself) isn't easy... and if you could buy them, and found someone to get them from, the reality is they would be priced in such a way that it just wouldn't be worth it.
Your best bet would probably be to short the insurers themselves. The issue with that is you aren't the first person to have this sentiment, a great deal of the bearish opinion of these insurers has already been priced in. Municipal Bond Insurance Association (MBI) is one of the largest Muni bond insurer. Take a look at the past 6 months they've experienced. Eeek. So that ship has probably set sail already.
Last (but not least), you could just go after the exchange traded funds that correlate to the muni bonds you want to short. iShares S&P National Muni Bond Fund (MUB) is a good start for you to check out.
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