- MUNIs wrapped up their first five-day rally of 2022 yesterday, a welcomed sight for many. Investors have been "eyeing" these current rates while putting funds to work on the weakness of MUNIs. Yields on benchmark US MUNIs fell as much as ~8bps yesterday, while the 10-year Treasury retreated to 2.758% after reaching ~3.00% last week.
- As discussed, many cities are on track for large surpluses for this fiscal year. NYC, for example, is expecting a $3.1B surplus. Many cities are in a similar situation which is great for our markets. Overall fundamentals are strong and will remain strong based on the "wash of cash" out there for municipalities.
- Powell said on 5/17 that he needed to see "clear and convincing" signs inflation is coming down before he considers a downshift from a 50bps move. This year's 20% drop in stock values will contribute to dampening inflation numbers.
- Democrats are seeking to invest $130B in the nations crumbling school systems partly by reviving a type of debt financing killed by tax reform during the Trump administration. The bill will push to pass school infrastructure funding through a gridlocked Congress after a similar measure folded when Biden’s Build Back Better Program failed. These issues will be popular with investors as they offer good credits, which should have attractive spreads. Only half of US school districts need this overhaul. Many expect this bill to pass during the midterms.
- Pessimism surrounding the equity markets is centered around corporate profits as consumers ease up on spending. In addition, the FOMC's hawkish rhetoric suggests they will be elusive. The big question will be, is the pullback in demand severe enough to tip the economy into a recession? Some believe the risks are higher in 2023; however, the fundamentals are solid, so demand will keep growth positive for the next 12 months.
- Municipalities plan to sell $9.36b of bonds and notes next month. In the next 30 days, redemptions and maturities will total $27.8b, compared with $22.8b a week ago. According to Bloomberg News, institutional investors offered $1.47b for sale through bid-wanted lists in the last session, up 25% from $1.17b the previous day. According to the Municipal Securities Rulemaking Board, trading in the municipal market totaled $17.3b in the last session, up 6.7% from $16.2b a week earlier.
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