- Muni's continue to increase in yield, and we see opportunities here; this is the cheapest level for tax-free investments this year.
- The primary market has been quiet this week after pricing $7.5B last week, driving the month-to-date tally to $17.5B, up 343% from May 2022. The year-to-date volume is $75B, up 30% year-over-year. New issues being quiet this week and next will help the market stabilize, especially with redemptions coming next month. According to Nuveen, more than $105B in municipal reinvestment funds will become available over the next three months.
- Colleges in distress continue to increase due in part to lower attendance. This sector is not seeing the post-COVID growth that other areas are currently experiencing. Additionally, San Benito Health Care District CA filed for bankruptcy this week; this is another sign of California’s financial position and the current cost pressures facing hospital facilities. We are selective buyers for hospitals and only buy insured.
- Seven states benefiting from the Colorado River's water agreed on water use cutbacks this week. They decided to cut at least 3 million acre-feet of water use from the Colorado River by the end of 2026. Of that total, 1.5M acre-feet of these cuts will remain until the end of 2024. Most of the cuts are coming from Arizona and are said to be voluntary. The Colorado River is divided into a Lower and Upper Basin, including AZ, CA, CO, NV, NM, UT, and WY. This area has had drought conditions for the last 23 years. The water reservoirs dropped so low that the hydropower plants at Hoover Dam and Glen Canyon were in danger of damage and closure if the levels continued to decrease. A shutdown like this would impact the electric power supply across eight states.
- Last week Muni rates were trending in the same direction as Treasuries. We will continue to see this type of movement for the rest of May or until we see a deal on the debt ceiling. It is unprecedented that the Muni market follows Treasuries "live" so quickly; typically, we see a lag between the two. We must get through the debt ceiling issue to have a more straightforward path for the FED to address the economy.
At The DRL Group, we specialize in helping high-net-worth investors maximize their tax-free returns by proactively maintaining their custom bond portfolios through all market conditions.
We would love the opportunity to visit with you further. Please click here to schedule a call with one of our specialists or contact us at 281-398-8600.
605-B Park Grove
Katy, TX 77450
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