Municipal Bond News

•    Overall street chatter is “how high will yields go?”. With the employment numbers on 10/03/2018 pushing the yield up, you will have ADP numbers again on 10/04/2018 that might move our markets even more.  With increased yields comes increased market (equity) pressures.

•    NY and NJ deals will spur supply over the next 3 weeks, stay and local governments will be brining 9B to market this week alone.  Higher yields should bring investors to the table this month, the volume of longer dated supply has dropped to 12% mostly due-to the elimination of Tax-exempt advanced refunding from the federal tax law changes at the end of 2017.

•    Banks continue to reduce MUNI holdings as other securities have a better appeal.  Many banks (JP Morgan, State Street, Wells, Citi, and BOA) reduced their holdings of MUNI’s by 16B for the first half of 2018.  The bulk of this decline came in the 1st Q of this year.  With this reduction, we have not seen any major decrease in pricing

•    State and Local governments are set to sell 11.8B of bonds this week; this will be the most since the rush to market in 12/17.  The largest bond will be on the Denver airport at 2.3B for improvements.

•    Moody’s indicated that Iowa, Kansas, Nebraska and North Dakota are the most vulnerable to the US-China trade dispute because of heavy reliance on agriculture and farm product exports. 

•    Yonkers NY was revised to negative by S&P due to budgetary reserves. 

•    PREPA has reached a prelim agreement with bondholders; there will be two classes of bonds, one valued at 67.50 and the other will be tied to the turnaround of the island.  I believe this is a much better plan than the one discussed initially, and the bonds, as well as the insurance companies, should rally on this news.

•    Investors added 1.68B to MUNI bond funds last week; this is up from 980MM the week prior, which is signaling that many are looking for safer investments away from the equity markets.

• Many governors in the US are recommending a 1.4B increase in higher education spending for fiscal 2019; this is 1B more than last year.  With this many public universities have indicated that they will continue to raise tuition, and there are many signs that state aid will not provide enough money for those who wish to attend college. 
• Benchmark state 10-year yields a

•    NJ is issuing a 600MM new money deal to help fiancée construction of a replacement bride of the gateway program and help end railway congestion into NYC.  The bonds will be paid with fees from the bridge as well as the overall transportation authority of the state; this will create some liquidity in the system.