Municipal Bond News

•    Voters in AZ will be voting to save the state 275MM and help bail out two unfunded state regiment plans. 

•    Sales tax revenue from major cities soared in the 1st Q of 2018 and has continued through the year.

• Chicago Sales Tax bonds were downgraded to AA- with a stable outlook on 10/23/2018.

• Morningstar indicated that people should steer clear of Nuveen’s High Yield funds due to its “liberal use” of leverage.

• Atlantic City was upgraded two notches by S&P to B on 10/16/2018.  S&P indicated that this reflect their opinion of the city improved operating environment and structural financial improvement following the settlement of outstanding tax appeals and the continuation of extensive oversight. 

• Closed End Funds continue to get pounded in both NAV and net interest cost.  The discount between the share price and the underlying assets are averaging 11.1% as of 10/12/2018.

•    Overall street chatter is “how high will yields go?”. With the employment numbers on 10/03/2018 pushing the yield up, you will have ADP numbers again on 10/04/2018 that might move our markets even more.  With increased yields comes increased market (equity) pressures.

•    NY and NJ deals will spur supply over the next 3 weeks, stay and local governments will be brining 9B to market this week alone.  Higher yields should bring investors to the table this month, the volume of longer dated supply has dropped to 12% mostly due-to the elimination of Tax-exempt advanced refunding from the federal tax law changes at the end of 2017.

•    Banks continue to reduce MUNI holdings as other securities have a better appeal.  Many banks (JP Morgan, State Street, Wells, Citi, and BOA) reduced their holdings of MUNI’s by 16B for the first half of 2018.  The bulk of this decline came in the 1st Q of this year.  With this reduction, we have not seen any major decrease in pricing

•    State and Local governments are set to sell 11.8B of bonds this week; this will be the most since the rush to market in 12/17.  The largest bond will be on the Denver airport at 2.3B for improvements.