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Weekly Insights of a Municipal Bond Trader

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A LOOK AHEAD – WEEK OF MAY 6TH, 2019

COMMENTARY

Municipal bonds continue to perform well and inflows into municipal bond funds continued to be robust this week adding just north of $1bn for the week. The municipal market continues to benefit from strong investor sentiment looking forward to the summer months. It was reported this past week that state and local governments are set to pay off $117 billion of debt from June through August adding more cash potentially to be redeployed into the market. In addition, if fund flows continue to remain positive and there are no broad market disruptions, municipals may continue their strong performance.

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RATIOS

Municipal/treasuries long end ratios have now fallen to six-year low and 10-year ratios are now at a record low.

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FUND FLOWS

Lipper weekly municipal bond fund flows ending May 1st were again positive with $1.19bln in inflows. Long term funds brought in $413mn, high yield funds added $295mn, intermediate funds gained $274mn, and short-term funds added $210mm. TEMMS recorded $1.5bn in inflows probably due the fact that the weekly SIFMA rate hit a 2.30% yield last week on its weekly reset.

SPOTLIGHT

Illinois – The Illinois Senate voted Wednesday 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 budge deficits that have plagued the state for years.

Data Sources: MMD from TM3 and Treasury data from Bloomberg; Lipper data from JP Morgan

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Insights of a Municipal Bond Trader_5.6.19
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