Market News Commentary - From The Desk of David Loesch 12.15.2019Submitted by Tax Free Municipal Bonds/Fixed Income Specialists/DRL Group on December 5th, 2019
- State and local governments are planning on selling 20B in bonds this week alone; this will be the most in 2 years. With the low rates, the tally is only 4b shy of the weekly record hit in 2017 December.
- Barclays is forecasting for a positive net supply for 2020, however they are also indicating that this will not be a problem for retail to “soak up” and funds to purchase with the amount of cash on the books.
- Moody’s expects state revenues to climb in fiscal 2020 at a slower pace as the economic expansion cools. I do not think we will see many downgrades as a result as I believe the prolonged economic expansion will support continued revenue growth helping the states meet rising costs for priority services.
- Northern Trust Asset Management indicated yesterday that the surging pace of new issue sales seems to be turning the market into a “buyers’ market" with the oversupply. The bounty of new bonds comes as states and local governments rush to take advantage of the lower rates to refinance higher costing debt. A big part of this surge of new issues consists of taxable bond sales, which governments have been issuing without having to contend with the regulations imposed with traditional tax-exempt paper.
- IL's pension debt grew for the 3rd straight year after insufficient contributions from the state were lower than expected. S&P has indicated that they will watch this issue closely, as IL is one of the weakest states. I do believe that Chicago and the state of IL, will continue to “work out the issues” while rewarding the bondholders with nice gains.
- News on China today indicated that there is “little progress” in the trade talks getting resolved. I continue to believe that nothing will get resolved until we have clarity of the 2020 elections. With the Democratic Party putting their best foot forward to have someone take the nominee, China will wait this out to see who our next President will be.
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