- Last week, the MUNI market turned on a dime; outflows slowed to $1B in the week ended 5/25, the smallest withdrawal since March. The MUNI market staged the biggest rally in two years fueling optimism that pricing may be close to a bottom. The selling pressures of the last five months have disappeared. Buyers have also been drawn to Muni's by cheaper evaluations ahead of a calendar period when the asset class tends to benefit from investors looking to reinvest principal and interest payments.
- As mentioned last week, visible supply going into the summer will remain light, as it began the week at $8.8B, well below the average of $11.6B. This point should help our markets as we move through the week and month.
- According to the prior report, the Fed beige book will likely conclude that economic activity is expanding moderately. The last Beige Book figures pointed to accelerating consumer demand, solid manufacturing activity, and strong demand for housing. This fact suggests that Fed Funds Rates will be moving up over the near term. Inflationary pressures have shown tentative signs of abating; however, this should not change the course of the 50bps move this month. With our markets seeming like they are on the rebound, it will be interesting to see how the month of June finishes.
- Chatter on a US recession increased volume last week as new home sales plunged. The FED indicated that it needed "clear and convincing" evidence of a decline in inflation before considering any policy changes. I do not think we will see any changes until this year's winter.
- Municipalities plan to sell $9.36b of bonds and notes this 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 Invesco, municipal bond prices have sunken so low that they are starting to lure crossover buyers who don’t typically purchase this debt. Firms like banks or insurers are looking to take advantage of the market's low default rates and strong fundamentals, says Stephanie Larosiliere, Senior Muni Strategist at Invesco. "Since this started, it has all felt very mind-boggling because Muni fundamentals have never been better,” she said on Bloomberg Television. “From a historical perspective, Muni's have just gotten extremely cheap.”
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