Market News Commentary - From The Desk of David Loesch 10.17.2019Submitted by Tax Free Municipal Bonds/Fixed Income Specialists/DRL Group on October 17th, 2019
- 108 borrowers have run into trouble grave enough where they have skipped debt payments or violated their convents as it pertains to bond contracts. This kind of trouble is a 30% jump from 2018 and the most since 2015. It indicates that there are yield chasers out there buying and getting things done in our markets on deals that should not have been issued. With yields at record lows, you will see this trend continue.
- Taxable MUNI deals could approach 25% of all new muni deals in October; this would be the first time this has ever happened.
- Fund Flows are still strong as investors added 1.52B to MUNI bond funds this week, the previous week saw 1.63B. I think investors are continuing to buy MUNI paper as it comes up. Putting capital into the equity markets is not as attractive as one might think.
- MUNI's have had a good year, and most likely, this will continue into 2020; however, deals are getting done that should not be as well. Four months after filing bankruptcy, the Las Vegas Monorail is coming back with another issue yielding 7.37%. The Official Statement is 928 pages with 28 pages of risk factors; it will be interesting to see how this and other deals in MUNI land shake out once issued and in the marketplace for a year.
- State and local governments have already borrowed at a faster pace than last year and are not showing signs of slowing down. The overall issuance could reach 400B this year; a feat only achieved three times in the past. Overall, total supply has been very high, and much higher than expected, RBC indicates that they expect to see elevated new issue volume for the remainder of this year. Yields, in my opinion, will stay steady through the end of the year.
- Viable supply stands at 21.4B a new high for the year. This increased supply continues to move up, so there will be plenty of product to choose from for the last Q of this year. This figure is well above the 2019 average of 10.7B. The biggest sale is expected to be the NY State Thruway Authority for 950MM.
This content is based on the opinions of David Loesch based on his review of articles from Bloomberg.com or CNBC.com.
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