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Weekly Insights of a Municipal Bond Trader

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A LOOK AHEAD – WEEK OF JUNE 10TH, 2019

Municipals performed slightly better than treasuries last week from a ratio perspective and the 5-30yr curve steepened by 5 basis points. The calendar is finally building this week with expected new issuance coming in around $10bln in both competitive and negotiated markets. We are in the beginning stages of the “summer technical” period where monthly redemptions and coupon payments often outpace the amount of new issuance coming to the market. This historically has been a positive for municipal performance. The only challenge we see to the strong technical outlook is the absolute low level of rates currently. Many funds are sitting on cash waiting for a back up in rates to deploy at better entry levels. We will be keeping a close eye on the new issued calendar this week to see how the market digest the larger calendar.

Treasury-Ratios-June-7

FUND FLOWS

Lipper reported combined weekly and monthly inflows of $1.3bn for the period ending June 5th, marking the 22nd consecutive week of inflows. YTD flows into high-yield ($8.5bn), Intermediate ($14.7bn), Long-term ($22.6bn) and California ($3.2bn) muni funds continued with new records for the period.

SPOTLIGHT

New Issues this week:

Airports. Two of the largest issues this week will be airport related. There will be a $851mm A2/A/A Industrial Development Authority of Kansas City Missouri, for Kansas City International Airport deal with serial maturities 2026-2039 and terms in 2044, 2049, and 2055, and $433mm Department of Airports for the City of Los Angeles Aa3/AA-/AA- for LA International Airport both being issued with Non-AMT and AMT series.

We will also be focusing on Michigan Finance Authority Hospital Revenue bond for McLaren Health Care $575mm A1/NR/AA- which should set the tone for High Yield this week.

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Insights of a Municipal Bond Trader_6.10.19-REV
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