A LOOK AHEAD – WEEK OF MAY 13, 2019
Trade war fears with China pushed some investors to sell equities and move into treasuries this week. Despite the flight to quality trade, municipals continued to perform well with 10-year muni/treasury ratios now at 71.4% and 30-year ratio at 84.4%. Next week’s new issue calendar is projected to be around $6.2bn total with around $4bn coming negotiated.
Lipper reported combined weekly and monthly inflows of $1.4bn for the period ending May 1st, marking the 17th consecutive week of inflows. YTD flows into all muni ($30.9bn), high-yield ($6.5bn), Intermediate ($12.2bn), Longterm ($17.1bn) and California ($2.4bn) muni funds continued with new records for the YTD period. Year-to-date 2019 inflows into municipal bond funds have been running at a record pace for 12 consecutive weeks
High Yield Municipal $6.5bn
Intermediate Municipal $12.2bn
Long Term Municipal $17.1bn
Last week we mentioned that the Illinois Senate voted in favor of a constitutional amendment that would end the requirement that all taxpayers pay the same tax rate regardless of their income. The bill now moves to the House of Representatives where if passed would provide an influx of revenue to Illinois that could help deal with the massive pension-fund shortfall and budget deficits that have plagued the state for years. This week another positive development was released out of Illinois. April 2019 tax collections were up 33% YoY, ~$1.5billion above expectations and Governor Pritzker dropped his plan to reduce pension payments. The tax windfall, together with other revenue collected throughout 2019, will be enough to cover most of the state’s projected $1.6billion deficit for the current budget year.
The positive news pushed Illinois GO bonds to tighten 20 to 25bps on the week. Some of the tightest levels seen in over two years.
(Continued) | DOWNLOADInsights of a Municipal Bond Trader_5.13.19