Municipal Market Volatility and Liquidity Amid
COVID-19 (March 25, 2020)
- Municipals rallied on Tuesday as Fed measures and stimulus hopes, combined with cross-over buyers showing a willingness to engage at higher gross yields, led to better buying across the curve.
- The short-end, which had been dramatically impacted over the last week and a half due to liquidations in order to meet cash needs, was well supported today and led the charge to lower yields.
- Pre-refunded levels are settling in and around the 2.30% range which is 10-20 lower than where they were trading yesterday. We saw more than a handful being executed in the 2.25 range.
- VRDN rates which peaked around 9% in some cases last week, have retreated
- Fund flows last week (3/16 – 3/20), as reported by EPFR, saw $10 billion in outflows.
- In the backdrop, all three major US stock indices were higher as Wall Street bet on Washington’s proposed $2 trillion virus stimulus package coming to fruition. The risk-on attitude weighed on Treasuries throughout the day, but the Fed’s buying activity helped to limit the overall damage.
|Maturity||Muni GM AAA||Treasury|
|Today’s Closing||Day Change|
Source: Bloomberg, as of March 24, 2020
Below is a snapshot of our Investment Company Strategy (ICS) as of yesterday’s close:
Source: Fiera Capital as of 3/24/20. Past performance is no guarantee of future results. The current allocation is a pro forma calculation that is based on the current holdings and weightings of the strategy and does not represent performance for the composite or a client’s account.
Senior Vice President, Portfolio Manager
Dexter Torres, CFA
Senior Vice President, Portfolio Manager, Head of Trading