- Call us at 866-664-4040
- About Us
- Trading Philosophy
- Municipal Bond Offerings
- Municipal Bond News
- Contact Us
- Client Login
..Market News Commentary - From The Desk of David Loesch 07.09.2020Submitted by Tax Free Municipal Bonds/Fixed Income Specialists/DRL Group on July 9th, 2020
- Rates have fallen so low that America's states and cities are embracing a refinancing boom that seemed to disappear after Trump was elected, and for the first half of this year. Barclays boosted its forecast for taxable municipal bond sales this year to as much as $115B up from $90B. Taxable Muni's have jumped +380% this year as compared to last. Tax-exempt paper has also increased by about 25% for the balance of the year.
- Two US Senators are advancing legislation that would subsidize the interest on bonds sold by state and local governments for infrastructure projects. This bill would seek to make direct payments to the issuer at 35% of debt service after the enactment passes. It is the first bill of its type, where language indicates "direct payments” are made on behalf of the issuer.
- Seven more municipal issuers disclosed yesterday that they are filing for default due to the virus. All of these are uninsured and low rated—nearly 25% of the impaired bonds, primarily for hospitals, project facilities, and Continuing Care Centers sold in 2017. We do not trade in this market, and I predict you will see many more like this file.
- Trading desks are, for the most part, light in inventory. I spoke with multiple dealers yesterday, all indicating that buying muni products is not the problem; keeping it in inventory is the issue due to the mountains of cash in the street. Bonds are trading very quickly because of this point. As we move into the next three weeks, I anticipate markets getting slightly tighter, with prices continuing to move up due to lack of product.
- 10-year yields have effectively been unchanged since late May at about .8% and just about at the record lows established before the pandemic. Mutual funds continue to draw in massive amounts of cash each week, and the volatility of MUNI's has slipped to the lowest since 2001.
- It feels like we are in the eye of a storm with the lack of reaction towards increased COVID cases across the US. Congress should push out another package soon; this one directed towards municipalities and states. This discussion has been ongoing for a while, with no concrete results. Once the government got into the "do what it takes mode," many investors have become “comfortable” with where we are and how we have “gotten” here.
- MTA will issue $500MM of Bond Anticipation Notes and $600MM of mandatory tender bonds next week. S&P has lowered the rating to BBB+ from A- and removed the “negative watch." This underwriting is the second-largest bond issue in the last few months; the first issue was uninsured, a 5.375% coupon, with an extended maturity. I suspect that MTA will receive money from one of these stimulus packages as well.
- I believe overall rates will continue to be +/-15bpps from here. We are in an excellent trading range and will remain here for the summer.
- Chicago expects to turn to the muni market to refinance debt later this year using some of those savings to cover city budget shortfalls. I anticipate many cities to be doing the same in the coming months, particularly as we return to a "normal" lifestyle and economy.
- NYC indicated that no commercial building construction would be shuttered due to COVID. There is a massive development around Penn Station, clearing the way for a 14MM sq. ft project of new offices, an enormous addition of space which will accelerate the shift of Manhattan’s core towards the west side of the island.
605-B Park Grove
Katy, TX 77450
This report has no regard to the specific investment objectives, financial situation, or needs of any specific recipient. This report is based on information obtained from sources believed to be reliable, but no independent verification has been made, nor is its accuracy or completeness guaranteed. This report is published solely for informational purposes and is not construed as a solicitation or an offer to buy or sell securities or related financial instruments. Opinions expressed herein are subject to change without notice and the division, group, subsidiary, or affiliate of MACC., which is under no obligation to update or keep the information current. The securities described herein may not be eligible for sale in all jurisdictions or to specific categories of investors. MACC accepts no liability for any loss or damage of any kind arising out of the use of this report. Please contact your tax advisor regarding the suitability of tax-exempt investments in your portfolio. Income from municipals may be subject to state and local taxes as well as the Alternative Minimum Tax. Corporate and Municipal securities are subject to gains/losses based on the level of interest rates, market conditions, and credit quality of the issuer. As with any security, there is an inherent market risk possibility as to principal if the security is not held to maturity. The bonds that are non-rated (NR) should be considered for investment by knowledgeable and sophisticated investors. Additional information will be made available upon request.
Securities are offered through Mid Atlantic Capital Corporation (MACC), a registered Broker-Dealer, Member FINRA/SIPC.
The DRL Group. is not a registered entity or a subsidiary or control affiliate of MACC.
Bonds are subject to market and interest rate risk if sold prior to maturity. Prices and availability may change at any time without notice. Insured bonds are subject to the claims-paying ability of the insurance company.
Reminder: Email sent through the Internet is not secure. Do not use email to send us confidential information such as credit card numbers, change of address, PIN numbers, passwords, or other important information. Do not email orders to buy or sell securities, transfer funds, or send time sensitive instructions. We will not accept such orders or instructions. This email is not an official trade confirmation for transactions executed for your account. Your email message is not private in that it is subject to review by the Firm, its officers, agents, and employees. Unless expressly stated in this email, nothing in this message should be construed as a digital or electronic signature.