- Taper doubling is expected to go to $30B per month starting in January and winding down in March. The FED will clarify how it prioritizes dual mandates related to the taper and the interest rate rise. I suspect the Dot Plot will reveal three hikes in 2022.
- Retail investors' concerns about tax increases in 2022 will continue to support the demand for MUNIs in 2022. I expect the Biden Administration will increase taxes in 2022 and make them retroactive to 1/1/22. Paying for these spending plans will be a top priority, MUNIs will benefit well.
- Senator Chuck Schumer insists the Senate will pass the $2T Tax and Spending Bill this year; however, many think this is impossible due to lack of time with the upcoming holidays. There are several critical areas in the package still under negotiation. I am surprised we have not heard anything about a tax increase in FED taxes for individuals yet.
- The CPI rose 6.80% from November 2020, the fastest on record in nearly 40 years. If one were to look at the T markets, you would not think this is happening; with the T bills holding firm, it is interesting to see how inflation is not impacting these markets. I suspect this is because rates "cannot" go higher due to borrowing in the street.
- Vanguard indicated on Friday that they expect new issuance to slow to $400B in 2022, an 11% decrease compared to 2021. This "read" is due to what we have discussed all along; municipalities are “flush” with cash and will not need to issue paper. The BOA 2022 forecast for issuance is $400B to $550B. I suspect it will be around$ 450B.
- It is the last week to get anything done in our markets from a new-issuance supply standpoint. Visible supply begins the week well below the average of $11.8B, coming in just over $8B. I suspect next week will be even lower.
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