Market News Commentary - From The Desk of David Loesch 03.19.2020

• With spreads widening and the MMD benchmark shooting through the roof, many new issues have been canceled; this will help in the near term for supply.  Many municipal bond issues that were "teed" up to be called based on "old" pending refundings, will no longer be called.  The best commodity right now in our markets is time, there is a ton of uncertainty, which will keep issuers away from the markets.
• Many believe that the FED should consider extending financial support to state and local governments.   Some have indicated that the FED is using the "old" playbook in trying to calm funding markets by flooding the markets with liquidity.  I think the FED is taking the appropriate steps to bring back "order" to our markets. I continue to believe that this will move past us; however, it will not be until the summer (or end of summer) that we see an orderly market.
• Airports have asked the government for 10B in aid to offset at least 8.7B in losses.  I believe the government will accommodate this request, reminiscent of 9/11, when the airports were shut down.
• America’s local governments are asking the FED for massive amounts of aid as the fallout from the virus threatens to produce budget shortfalls.  US conference of Mayors requested 250B to help cushion the blow to cities stung by the disappearance of tourism, layoffs and the shutdown of schools.
• The FED last night indicated that it was launching a program to support MM Mutual funds as the alarm of the virus continues to cause strains in short term money markets.  Treasury suggests they will provide 10B of credit protection.
• Moody's has cut its 2020 outlook for higher education from stable to negative as universities face shrinking revenue and higher costs from the virus outbreak.  With the unprecedented enrollment uncertainty, I believe that risks to revenue streams and potential material erosion to their balance sheets in fiscal 2021 will create many downgrades as we move through this.  

David Loesch

dloesch@drlgroup.net

www.drlgroup.net

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