The supply blitz remains, and the muni market continues to meet it with cash to invest. Yields were virtually unchanged for the month of August, and the muni curve remains a mixed bag of value. More specifically:
- Municipal yields increased from 4 to 0 bps, with the curve flattening a little.
- US taxable rates were mixed, causing the yield curve to flatten quite a bit.
- 20 to 30 year rates declined from 1 to 3 bps.
- 5 and 7 year rates increased 17 to 9 bps.
- Issuance remains on the uptrend.
- 2016 August issuance was up 40%; new money was 48% higher, and refunding was 34% higher.
- 30 day supply is still showing high issuance versus historical levels.
- Muni relative value versus taxables remain mixed.
- Short-term munis from 10 years and shorter are rich.
- Long-term munis are cheap, the longer the cheaper.
We are expecting value to return to the muni market over the next 30 to 60 days. The combination of upcoming weak seasonal technicals and the forecasted continued acceleration in issuance could provide some investment opportunities in 15 to 30 year munis.
This material has been prepared for informational purposes only and is not an offer to buy or sell, or a solicitation to buy or sell. The information herein was obtained from sources which Mainline West Municipal Securities LLC, a member of FINRA and SIPC, and its suppliers believe reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any securities. Any prior investment results presented herein are provided for illustrative purposes only and have not been verified by a third party. Furthermore, any hypothetical or simulated performance results contained herein have inherent limitation and do not represent an actual performance record. Actual factual performance will likely vary and may vary sharply from such hypothetical or simulated performance results. An investor should consider the investment objectives, risks, and charges and expenses associated with municipal bond securities before investing. More information about municipal bond securities is available in the issuer’s official statement or can be found at http://emma.msrb.org.