- On many occasions, the FED has indicated that rates will not move for the next several years and unanimously approved to keep the FED Funds rates at 0.00 to .25%, where it has been since March. We remain buyers of High-Grade paper, while also starting to put money <3 years around a .5-.60% YTW tax exempt. Our focus, however, remains on the longer end of the curve with a five-year call.
- The CT state budget gap is shrinking. They now estimate the deficit to be $640.2MM, down from $800MM last month. Bond sales and corporate revenue continue to climb for this state and positively impact their debt. I suspect we will see this in many states as the economy gets "going again" and people get back to work in 2021. I expect few downgrades and some upgrades as states and municipalities continue to improve their overall finances.
- For the 1st Q of 2021, there is $66B worth of bonds maturing, with another $10B slated to be called in prior to maturity. These redemptions will produce an enormous influx of cash into the market, leaving fewer bonds to buy. I expect pricing to hold firm or move up as we move through the 1st Q due to supply/demand. Pricing should move up as we get through the 1st Q 2021.
- As expected, Congress passed a bill for a government funding stimulus package. This package is not directed towards municipalities and states; however, it will continue to give investors the confidence they need to enter the markets and buy securities. The bill is geared towards small businesses and includes money for schools, airlines, and vaccine distribution. Many say the aid will be enough to avert a double-dip recession next year; however, the FED continues to caution against slow growth and high unemployment.
- MTA indicated that it would receive $4B in aid from the economic stimulus agreement struck in Congress, allowing the system to keep thousands of jobs and slow cuts to the bus, subway, and commuter train services. The latest package will help balance the MTA’s budget through 2021 by making up for its steep revenue declines. MTA insured paper should continue to be a good buy and provide good yields for those seeking higher yields while staying safe.
- The Securities Industry and Financial Markets Association issued information to assist market participants with planning for the potential of a negative interest rate policy in the US. SIFMA is not forecasting a US negative rate policy in the near term, however many members of SIFMA have expressed concerns of a negative rate environment over the next two years. This report is the first type of language I have seen by a regulatory agency that addresses this concern.
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