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Market News Commentary - From The Desk of David Loesch 06.11.2020Submitted by Tax Free Municipal Bonds/Fixed Income Specialists/DRL Group on June 11th, 2020
- The MUNI market has declared the pandemic to be over. The NY Transportation Corp is selling a $344MM issue for JFK on behalf of AMR for a new terminal. This loan tells you that airline travel is going to revisit the levels before the pandemic shut down, and business is "getting back to normal." The paper will be B rated and not in our wheelhouse; however, I suspect this deal will be oversubscribed 5x over.
- New issues were oversubscribed ~3x, and all are getting bumps in pricing. Allocations are light and demand is high, I suspect that this will continue through this month and perhaps into July, a heavy interest-paying month.
- The FED remained resolute in its dovish assessment of the medium-term economic outlook estimating it would take nearly three years for the economy to return to previous activity. They are assuming the economy contracts by 37% in the 2Q, and US GDP will need to recover roughly 13% on average to achieve their forecast of -6.50% for the full year. The FED also signaled that it finished tapering long-term asset purchases, for now, pledged to buy securities at least at the current pace, and will not move rates until 2022.
- With rates staying at or close to zero for the foreseeable future, you can expect all fixed-income assets to continue to perform through 2021. In line with market expectations, the Fed Funds Rate remained unchanged at 0.00, and they do not anticipate a "V-shaped" recovery.
- Fund flows continue to pick up; investors added 2.30B to MUNI funds in the week ended 6/3.
- Chicago's budget shortfall will be $700MM reflecting the latest data from April. This number continues to rise, however overall, Chicago paper, along with IL paper, continues to move lower in yield.
- NYC projected its Hotel Occupancy Tax Revenue to fall to $37.6MM in the Q ending June 30th, a decline of almost 80%. You should see similar results in this asset class in areas across the country.
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