COVID-19 Municipal Market Volatility and Liquidity Amid COVID-19 (March 25, 2020)

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
1	2.26	-0.25	0.18
2	2.27	-0.25	0.36
3	2.28	-0.25	0.40
4	2.28	-0.25	0.45
5	2.33	-0.23	0.48
6	2.40	-0.20	0.60
7	2.44	-0.20	0.72
8	2.49	-0.20	0.76
9	2.53	-0.20	0.79
10	2.59	-0.20	0.83

Source: Bloomberg, as of March 24, 2020

Below is a snapshot of our Investment Company Strategy (ICS) as of yesterday’s close:

	Discounts	Dividend Yield
Municipal ICS	14.89%	5.28%

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.

Kenneth Potts
Senior Vice President, Portfolio Manager

Dexter Torres, CFA
Senior Vice President, Portfolio Manager, Head of Trading