- States and local municipalities are in great shape related to cash flow and overall budgets. Yesterday, NJ proposed a record $48.9B fiscal budget for 2023 buoyed by spending on pensions, education, and tax rebates. NJ currently has an unfunded pension liability of at least $74.9B, one of the highest in the country. They will use FED money to build infrastructure within the state and bond issuance to begin shoring up their pension obligations.
- In line with the above, the biggest winner state-wise from the nation's historic economic rebound from COVID is Idaho. Idaho has seen sales tax collections increase by almost 40% compared to pre-pandemic levels. The state now has a $1.9B budget surplus and brought in more than $5B in revenue. Idaho is small; however, they have managed their budgets the best out of 50 states.
- There is plenty of cash on the sidelines and moving into MUNIs considering they are the cheapest since 2020 relative to T bills, which are outperforming due to high demand from the tensions in Ukraine. With both markets being down in 2022 ahead of an expected FED hike, CITI indicated Monday that the MUNI market is "past the point of peak pain" and recommends buying at these levels. CITI also noted the FED backed off its hawkish stance given the Ukraine conflict, the sort of crisis that tends to bolster MUNI performance. I expect a .25 bps move next week; once done, I think we will start to see some stability in our markets.
- US hiring boomed in February while overall wage growth slowed, showing a robust market that will likely keep the FED on track to raise interest rates this month. Overall, numbers were good across all sectors while unemployment decreased to 3.80%. This point will further solidify the rate hike this month.
- Investors seeking paper that makes the world a better place, such as green bonds, are demanding proof that the sustainability goals are being met. Governments are reluctant to spend more money tracking and reporting whether their projects are meeting environmental, social, or governance goals. Only half of Muni ESG issuance is subject to outside verification. The MSRB is looking to formulate industry standards related to ESG disclosures.
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