- According to Bloomberg, state, and local governments plan to sell $14.6B in new-issue debt over the next 30 days. This week's largest deals are $1.3B NY Tran for JFK Airport, $1B MTA Triborough Bridge & Tunnel, $600M NY Power, and $457 VA Pub Bldg. With the recent increase in yields, Muni investors' demand should be brisk.
- Municipal-bond exchange-traded funds pulled in $1.1 billion last week, the most significant weekly inflows on record. The influx comes even as mutual funds continue to see outflows amid a market selloff. While many retail investors reduce their mutual fund positions, relative value investors put money to work. We believe that part of that money is finding its way into Muni ETFs.There is opportunity out there for our markets, and while it is challenging to see it right now with the outflow, there are people putting money in and taking advantage of these levels.
- Morgan Stanley indicated that MUNIs had a “constructive outlook” based on their evaluations. Investors are naturally "uncomfortable" about the recent price declines; however, based on these "fresh levels," we could see outperformance in this asset class for the balance of this year.
- The 5-year and 30-year Treasury inverted again this week ahead of the jobs data, stoking fears that a recession is coming.
- Like everyone, I have been watching the Ukraine/Russia war developments. With Russia indicating a "talk" between the two countries, many, including me, are skeptical of how these will turn out. I suspect this war will go on for weeks. As mentioned in a previous note, there are three actions: de-escalation, conflict (where we are now), and escalation. If we move to "escalation," I expect the markets to drop, and you will see a flight to safety.
- CITI indicated the odds of a recession are "significant" over the next 18 months. All signs are pointing to this with the inversion. If this happens, I would expect a flight to quality and a "risk-off" mentality.
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