June 2019 Muni Market Monthly Report –“Another Look at the MainLine West Advantage”
As expected, muni prices continue their grind higher in 2019. However, we feel their outperformance may temper at some point. The muni market has enjoyed a sustained rally and, once again, yields declined (prices increased) modestly in June. While we are not forecasting a significant sell-off at this time, we fell munis may step back and gather a second wind.
MainLine takes great pride in providing its customers the most efficient way to purchase bonds. At MainLine West, we elevate our clients to the level of institutional clients by buying our bonds at the initial offering price without a markup. This saves our investors money by paying the best price for their bonds and adding more income during their holding period. We took a quick look at some deals priced in late April and early May and analyzed the mark-ups that occurred in the first couple of weeks of trading following the initial offering. Once again, the MainLine Advantage was quantified, and it is meaningful.
Muni Market Review
Muni market yields continue to decrease, but the long rally may finally be slowing down. Issuance has slowed recently, but appears it could pick up in the third quarter. The ability of muni yields to rally with taxables has decreased, but inflows to funds remain stable. Highlights of the muni market performance in June are as follows:
- Muni yields were down 13 to 1 bps, with the curve flattening and short-term (2 to 5 year) munis looking rich.
- Taxable yields were down 13 to 8 bps, also with the curve slightly flattening.
- Year-to-date, muni issuance has slowed recently and is now as follows:
- 2019 is up 1.4% versus 2018.
- 2019 is down 27.5% versus the last 5 years’ average.
MainLine feels the main portion of the muni price gain action is over for the time being, and are not expecting any sell offs any time soon. Munis have come so far for so long; we feel it is time for the dog days of summer, with lethargic market activity over the next 30 days.