- The State of Texas' top oil and gas regulator approved a $3.4B bond sale to bail out utilities stung by substantial financial losses after the 2/2021 freeze. A newly established entity created by the Texas Public Finance Authority will sell the bonds within the next six months. This issue will spread out the repayment of the bonds by customers of 8 utilities involved for over 30 years. The bonds will cost customers $1.25 a month on top of their existing utility bills instead of hundreds of dollars at one time. This deal will be an excellent issue for our state as it will assist in building up the infrastructure of our power grid. I suspect the state will also use government funds and this bond deal to complete the projects.
- Many cities have indicated that Federal funding has been critical to continuing with essential services such as mass transit during the pandemic. The City of Chicago announced yesterday they would be receiving a $912.1MM grant under the American Rescue Plan Act to assist with their city's mass transit authority. The funds will support the transit agency and its 10,600 workers as they continue to provide rides to the population of Chicago. I suspect we will see other cities (as we know NY has already received funding) announce they have/will receive funding from our government.
- Issues underwritten for project "builds" are starting to run into problems with labor. Challenges are already piling up for Amtrak in handling personnel needs, communications with employees, and providing safe working conditions for the workers on the tracks. The issue is a gateway for Amtrak's Northeast Corridor, which stretches from Washington to Boston and is the most congested route in the US. Finding skilled labor for construction projects continues to be a challenge; many underwriters are starting to put this type of language in the Official Statements when underwriting these new issues.
- The FED government is giving transit systems a temporary reprieve, having provided $69.5B in assistance so far. There is a ton of public transportation around our country. Many traders anticipate an eventual "government bailout" of our transit systems to assist cities and keep their internal systems from going bankrupt. As of now, most public transportation is already subsidized. MTA, the largest in North America, has received the most money. MTA's ridership is down by about half.
- Traders are buying into hawkish posturing. Four months ago, the FED's consensus was for two 25bps hikes through December 2022. The S&P and NASDAQ have adjusted for this anticipated move. Now, traders are looking for five. The DRL Group sees at least four hikes for 2022 starting in March. Typically when the "actual" rate hike happens, you see a market rally based on the "news is out" mentality. MUNIs and T bills are bow priced in line with these moves.
- Value states such as IL, NY, NJ, and perhaps CA reported "record" tax inflows from property taxes, sales, and income tax. IL state tax rose 37% in January alone. We have discussed how this will impact the muni markets, which will be very favorable. Over time I suspect these tax increases to taper off. They are not sustainable at the levels they are currently tracking. This will not hurt our markets, but because of these increased taxes, you will find more buyers "open to the idea" of placing capital in safe assets such as MUNIs.
- Redemptions in March are average compared to previous months; there will be about $15.5B of bonds redeemed or paid interest for the first week of March - which should help our markets from a supply/demand standpoint.
605-B Park Grove
Katy, TX 77450
This report has no regard to the specific investment objectives, financial situation, or particular 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 to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Opinions expressed herein are subject to change without notice. The division, group, subsidiary, or affiliate of NewEdge Securities, Inc., 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 certain categories of investors. NewEdge Securities, Inc. 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 and 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 non-rated bonds (NR) should be considered for investment by knowledgeable and sophisticated investors. Additional information will be made available upon request.
Securities are offered through NewEdge Securities, Inc., a registered Broker-Dealer, Member FINRA/SIPC.
The DRL Group is not a registered entity or a subsidiary or control affiliate of NewEdge Securities, Inc.
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: E-mail sent through the Internet is not secure. Do not use e-mail to send us confidential information such as credit card numbers, change of address, PIN numbers, passwords, or other important information. Do not e-mail orders to buy or sell securities, transfer funds, or send time-sensitive instructions. We will not accept such orders or instructions. This e-mail is not an official trade confirmation for transactions executed for your account. Your e-mail message is not private in that it is subject to review by the firm, its officers, agents, and employees. Unless expressly stated in this e-mail, nothing in this message should be construed as a digital or electronic signature.