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Market News Commentary - From The Desk of David Loesch 07.23.2020Submitted by Tax Free Municipal Bonds/Fixed Income Specialists/DRL Group on July 22nd, 2020
- DFW will issue $463MM bonds this week and $1.1B of taxable securities the week of 7/27 to refinance debt. This financing comes on top of the $392MM bonds it issued last week. DFW is one of the first airports issuing paper since the virus. These bonds were well received in the marketplace while demand outstripped the supply.
- I suspect the size of borrowing by municipalities will depend on how much aid comes from Washington. The 4th package in the works will get done and provide many states with needed funds at a cheaper rate than the current Municipal Lending Program. This financing should help bond insurance companies as well.
- State and local governments are increasingly selling debt with smaller coupons, which is expected to continue. The trend to lower coupons began in the mid-2019's and has gained much more momentum. This type of structure boils down to borrowing costs for the municipality - retail is not jazzed about the 2.00% handle coupon.
- Visible supply begins this week at $10.99B below the 2020 average of $14.3B; it will be a light week in new issues.
- UBS warns about the future of America's colleges and universities. I believe that the strong will survive; however, the smaller regional colleges will not. Many students will be forced into the online experience, which will shake out the weaker colleges.
- MTA indicated they would need additional funds from the FED this year to prevent service cuts and layoffs. CITI has reported they do not think the state, or the city will allow this credit to fail and risk its ability to access the credit markets. MTA is the poster child of the nation's infrastructure and mass transit programs; this credit should not fail, and I believe they will receive monies from the Treasury. I am surprised, however, with the last MUNI deal done for MTA just one month ago, they are already indicating they need operating capital.
- NJ approved borrowing up to $9.9B to cover lost revenue from the virus. They are looking to issue $2.9B over the next two weeks and will be State GO's, and I suspect, will be insured by AGM or BAM.
605-B Park Grove
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