municipal market weekly - ramirezco.com · ramirez municipal strategy april 2, 2018 page 2 2018...

Munis largely underperformed Treasuries during March and 1Q18 as the overhang of secondary market supply from Dec. 2017 weighed on total returns. Fed messaging regarding rate hikes has heretofore caused Muni investors to focus reinvestment on shorter durations, helping to push Munis inside 5yrs during 1Q to outperform vs similar duration Treasuries, which were affected to a greater degree (as usual) by Fed policy. Treasury performance overall in 1Q18 was in fact weak overall on good economic results, but surged in March due to risk-off sentiment driven by the recent China trade war concerns and equity market losses caused most recently by the Tech sell-off. Short-term rates rocketed higher during 1Q18 as the Fed continues to signal two additional rate increases in 2018, with 1M LIBOR up +32 bps in 1Q and +20 bps in March to a 10yr-high of 1.88%. Muni SIFMA also reset dramatically higher last Wed Mar 28 to 1.58%, or +22 bps on the week and 84% of 1M LIBOR in sympathy with LIBOR increases, but also as dealer VRDO inventory rose +19% in March ($4.2 bil.). Moving out on the curve, 1Q18 saw Munis in 5yrs increase +36bps to 2.04%, the 10yr spot increase +44 bps to 2.42%, and the 30yr spot increase +41 bps to 2.95%. MMD 5s30s steepened 5 bps to +91 bps vs Treasury 5s30s, which flattened 15 bps to a 10yr low of 41 bps, including a +36 bps increase in the 5yr note to 2.58%, and a +21 bps increase in the 30yr bond to 2.99%. The divergent rate paths resulted in Muni underperformance of only 3 ratios in the 5yr spot but 7 ratios in both the 10yr and 30yr MMD spots. Fortunately for investors waiting for better relative value, Muni underperformance in Q1 has created a statistically “fair value” reading across the Muni curve for the first time all year, with the 5, 10, and 30 yr spots ending last week at 79%, 88%, and 99%, respectively. Muni dealer balance sheets and bid-wanted activity, both of which are running about 50% above average, continue to weigh on Muni performance that other-wise would have been worse, if not for the strong mutual fund inflows ($3.79 bil.) and anemic new issue supply (-27% YoY, $62.9 bil.). New issue supply in March was in fact up +14% vs Feb, but is down -5% vs March, 2017 and was the lowest since 2011, largely the result of loss of tax-exempt refunding activity. The S&P Main Muni index returned -92bps in Q1, including +42 bps in March, -39 bps in Feb, and -95 bps in Jan. The only Muni sectors to post positive re-turns during 1Q were short-term and high-yield at 24 bps and 58 bps, respectively. High-yield was driven, as usual, by strong 1Q returns in the MSA tobacco sector at +172bps. Comparatively, the S&P Treasury index returned -118 bps overall in Q1, including +94 bps in March, -75 bps in Feb and -136 bps in Jan. Corporate spreads widened dramatically in Q1 causing the index to lose -232 bps on the quarter, although prices firmed somewhat in March with the Corp index up +25 bps.

The rates market last week was heavily impacted by the potential trade war with China, Fed speakers, the volatile equity market, monumental ($294 bil.) Treasury auctions, and muted economic data, including both personal income and PCE deflator meeting consensus estimates. Munis underperformed on the week, as they had during 1Q18, impacted by heavy BWIC activity with Monday and Tuesday offerings exceeding $1 bil. daily and, as mentioned, heavy deal-er inventories. Munis 10yrs and out were better by -5 bps, mostly in sympathy with the Treasury market with the 10yr spot ending at 2.42% vs Treasuries at 2.75% (88% ratio). Treasuries in 5yrs and out rallied on the week, with the 5 year note better by -5 bps, the 10yr note better by -9 bps, and the 30yr bond better by -10 bps. Last week the Muni market was dazed and confused by The State of Connecticut coming to the financial rescue of its capitol city, Hartford, through a bail-out structure unprecedented in modern times. Under the terms of the bail-out, the State will pledge to service the City’s GO debt and install an oversight mechanism on the City’s budgeting and capital management. The State stepped into rescue Hartford from a potentially messy Chapter 9 bankruptcy proceeding, thereby sparing the City further untenable costs and uncertainty. The market also reacted strongly to better news out of Puerto Rico, with bench-mark 8s ’35 trading up to a high of ~$44 on the news that economic projections indicate budget surpluses given anticipated receipt of $70+ bil. of insurance and federal aid in the wake of Hurricane Maria.

The recent backup in ratios to fair value combined with recent equity market volatility indicates some potential for Muni outperformance probably on a better retail bid and continued good fund flows in the near term. Persistent outperformance in 2Q18 depends largely on the path of Muni relative value. We have said it before and will (reluctantly) say it again: Munis still need to get cheaper before getting stronger– irrespective of whether underperformance is created by new issue supply overwhelming demand or Treasuries outperforming Munis. We see the former as less likely than the latter as we forecast new issue supply for Munis to remain at or around ~-25% YoY. We think it’s therefore more likely that Munis initially underperform in a risk-off environment, in which case, a bear flattening of the Muni curve has room to occur with the front-end of the Muni curve cheapening to a greater degree relative to the long-end. A stronger Treasury market — particularly 10yrs and out — would enhance Muni relative value and entice crossover buyers to re-enter the market and help clear the secondary oversupply. This is particularly the case if ratios remain at or above 3yr averages (see below) for a period of time. For these reasons, we continue to prefer a defensive, shorter duration ladder posture – 5yrs-7 yrs eff duration using longer duration 5%+ coupons with shorter calls (5-8 yr calls) for optimization of carry, rolldown, and reinvestment opportunities (Pg 2). It is also notable that bonds with 2023-2028 calls have become cheaper over the past few weeks as rates in that sector have widened out.

Gross supply YTD is down -27% YoY ($62.9 bil.) which is relatively in-line vs our full-year estimate of gross supply of -27% YoY ($317 bil.). Issuance last week remained weak at $3.7 bil., including about $1 bil. of taxable issuance. The tax-exempt calendar this week is relatively larger at $8.3 bil., although nearly 40% of supply is the $3.2 bil. NJ Tobacco deal, which we expect will be widely subscribed due to replacement purchases by existing NJ tobacco holders, but also the tobacco sector’s outperformance vs the broader market over the past several years. The remainder of the negotiated calendar is led by $537 mil. San Diego Cnty Regional Trans Comm, $425 mil. NYC Water, $308 mil. Bexar Cnty Hosp Dist., and $250 Santa Monica CCD (Ramirez Co-Senior; see be-low). Over the next 30 days we see net muni market supply at –$5.36 bil., comprised of +$10.08 bil. new issues, -$8.71 bil. maturing, and -$6.73 bil. an-nounced calls. The states that stand to experience the largest change in outstanding debt include New Jersey (+$2.76 bil.), New York (-$2.20 bil.), California (-$1.08 bil.), Texas (+$903 mil.), and Connecticut (-$742 mil.).

This week’s key economic news will be the March non-farm payrolls report on Friday, Fed speakers every day of the week, including Powell on Friday, ADP employment report, PMI, ISM, factory orders, durable goods, initial and continuing claims, and Trump vs. Amazon.

April 2, 2018

Municipal Market Weekly Ramirez Municipal Strategy

Peter L. Block Managing Director | Credit Strategy

(212) 248-3885 [email protected]

***INSTITUTIONAL USE ONLY***

Spencer Feit Associate | Credit Strategy

(212) 248-3876

[email protected]

John Young Managing Director | Underwriting

(212) 248-3870

[email protected]

Alan Greco Managing Director | Sales & Trading

(212) 248-3892

[email protected]

Muni Performance & Relative Value MMD/UST Ratios

2018

3y Avg Value

WTD MTD QTD YTD

Mty 12/29/17 2/28/18 3/23/18 3/29/18 Ratios Perf Ratios Perf Ratios Perf Ratios Perf

1 81 67 76 74 93 Fair -2.1 Out 6.3 Under -8 Out -7.6 Out

2 82 68 72 72 84 Fair 0.6 Under 4.6 Under -10 Out -9.7 Out

5 76 75 78 79 82 Fair 1.5 Under 3.6 Under 3 Under 3.4 Under




April 2, 2018

2018 Strategy

Ladder strategy

Defensive posture (5yr eff

dur; 7yr WAM)

Intermediate-long bonds with

shorter calls (5-8yrs vs 10y);

cheaper vs longer calls, cap-

ture better spread and roll-

down, faster reinvestment

Best rolldown range is gener-

ally 8-15yrs.

Coupon: 5%+ (lower convexi-

ty vs 4%)

Credit: ‘AA’ GOs, ‘A’ rated or

better Revenue Bonds;

MMD Callable Curve (5% Cpn) - 12M FWD Total Return Projections*

Mty 1-30y 1-5y 6-10y 11-15y 16-20y 21-25y 26-30y

Eff Dur 0.0 2.5 6.1 8.2 9.3 10.0 10.6

Scen

ario

s

Unch 3.58% 2.51% 3.28% 3.63% 3.73% 3.67% 3.70%

1Y Fwd Rates 2.75% 1.94% 2.47% 2.67% 2.77% 2.83% 3.02%

Parallel +25 bps 1.09% 1.77% 1.47% 1.22% 1.10% 0.91% 0.84%

Parallel +50 bps -1.39% 1.03% -0.32% -1.16% -1.51% -1.83% -2.02%

Scenarios

Bear Case Base Case Bull Case

Strategy

Ladder

(Short) 70/30 Bar Ladder 30/70 Bar Ladder

Crv Shft (avg bps)* 50 25 25 9 9

Quality Revs >/= A+ Revs >/= A+ Revs >/= A+ Revs >/= A+ Revs >/= A+

TR % Proj. 0.06% 2.43% 1.69% 3.41% 3.50%

OAS (bps) -136 30 9 41 46

Eff Dur (yrs) 0.5 6.8 3.5 8.7 10.8

WAM 1.4 15.6 4.9 23.1 28.5

Cnvx 0.01 -0.81 0.31 -1.59 -1.63

9 *avg bps shift = implied by FWD rates


April 2, 2018

Source: Bloomberg

Credit spreads remain very tight...

SECTOR CREDIT SPREADS (10Y)

2Y STATISTICS

Sector Rating 3/30/18 Avg Min Max SD 3Y Z-Scr Value

GO AA 17 25 12 40 6 -1.32 Rich

A 39 55 25 86 13 -1.24 Rich

HOSP AA 25 39 24 60 6 -2.21 Rich

A 58 65 48 102 7 -1.10 Rich

HI ED AA 18 26 12 40 6 -1.20 Rich

A 40 54 33 94 10 -1.47 Rich

TRANS AA 18 27 12 47 7 -1.18 Rich

A 38 47 28 87 10 -0.85 Fair

POWER AA 13 17 5 32 6 -0.70 Fair

A 42 48 32 72 8 -0.79 Fair

WTR /

SWR AA 17 23 10 41 5 -1.25 Rich

A 43 61 27 104 16 -1.18 Rich

HY <BBB- 227 305 223 472 56 -1.40 Rich

Rates & Ratios YIELDS (%)

Lo Hi Mean SD Value

3/29/2018 3/23/2018 1/3/2017 3/30/2017 12M 12M 12M 12M 12M 3Y

AAA MMD /

UST

2 Yr 72% 72% 100% 81% 62% 89% 72% 5.91 Fair Fair

5 Yr 79% 78% 91% 81% 62% 85% 72% 4.68 Cheap Fair

10 Yr 88% 87% 94% 94% 79% 96% 86% 3.18 Fair Fair

30 Yr 99% 97% 99% 101% 90% 103% 97% 2.53 Fair Fair

UST

2 Yr 2.28 2.28 1.23 1.27 1.18 2.35 1.62 35.51 Cheap Cheap

5 Yr 2.58 2.63 1.97 1.91 1.61 2.70 2.05 30.89 Cheap Cheap

10 Yr 2.75 2.84 2.46 2.39 2.03 2.93 2.41 22.71 Cheap Cheap

30 Yr 2.99 3.09 3.07 3.03 2.65 3.21 2.89 12.41 Fair Fair

AAA MMD

2 Yr 1.65 1.64 1.23 1.02 0.85 1.65 1.17 28.05 Cheap Cheap

5 Yr 2.04 2.04 1.79 1.55 1.12 2.05 1.49 27.85 Cheap Cheap

10 Yr 2.42 2.47 2.32 2.25 1.81 2.52 2.07 19.83 Cheap Cheap

30 Yr 2.95 3.00 3.05 3.05 2.46 3.07 2.81 14.30 Fair Fair

*Rich/Cheap: +/- 1.0 Z-Score


April 2, 2018

Market Performance Indicators

WEEK ENDING: 3/30/18

TOTAL RETURN (%) YIELD (%)

Eff WTD YTD Lo Hi

Mea

n Vol Z-score

INDEX Dur WTD M-18 F-18 J-18 1Q18 4Q17 3Q17 2018 2017 2016 2015 3/30/18 Δ Δ 12M 12M 12M 12M 12M 3Y

TREASURY-TERM

TREASURY -

ALL 6.2 0.50 0.94 -0.75 -1.36 -1.18 0.05 0.38 -1.18 2.31 0.63 0.84 2.55 -0.04 0.31 1.73 2.66 2.07 0.28 1.69 2.31

SHORT 2.0 0.07 0.16 -0.09 -0.27 -0.20 -0.20 0.34 -0.20 0.87 1.25 0.67 2.50 0.00 0.42 1.42 2.55 1.82 0.35 1.96 2.77

SHORT-INT 3.8 0.23 0.37 -0.36 -0.87 -0.86 -0.36 0.58 -0.86 1.75 1.84 1.57 2.83 -0.04 0.41 1.91 2.94 2.26 0.30 1.90 2.85

INTRMD 5.3 0.33 0.49 -0.57 -1.13 -1.21 -0.11 0.86 -1.21 2.59 1.78 1.25 3.14 -0.04 0.33 2.47 3.24 2.72 0.21 1.93 2.35

LONG-INT 6.8 0.51 0.69 -0.93 -1.56 -1.80 0.30 0.98 -1.80 3.51 2.20 1.09 3.37 -0.06 0.35 2.73 3.50 3.01 0.20 1.80 1.86

LONG 15.1 1.66 1.65 -3.14 -2.05 -3.57 2.84 1.52 -3.57 10.47 5.77 -3.26 3.80 -0.11 0.24 3.45 3.94 3.66 0.12 1.10 0.14

MUNICIPAL-TERM

SHORT 1.9 0.04 -0.03 0.06 0.21 0.24 -0.59 0.46 0.24 1.16 0.39 0.88 1.84 0.01 0.13 1.03 1.84 1.35 0.25 1.91 2.69

SHORT-INT 3.3 0.05 0.01 -0.17 -0.17 -0.33 -0.61 0.62 -0.33 2.39 0.12 1.96 2.10 0.00 0.21 1.30 2.10 1.63 0.20 1.93 2.44

INTRMD 4.8 0.17 0.29 -0.41 -0.98 -1.09 0.11 1.07 -1.09 4.74 0.28 3.27 2.52 -0.01 0.33 1.84 2.56 2.14 0.20 1.94 1.66

LONG-INT 5.2 0.21 0.39 -0.48 -1.25 -1.35 0.39 1.18 -1.35 5.42 0.38 3.68 2.64 -0.02 0.37 1.99 2.69 2.28 0.19 1.89 1.46

LONG 6.6 0.46 0.71 -0.42 -1.84 -1.56 2.23 1.23 -1.56 8.19 0.97 4.52 3.30 -0.05 0.38 2.79 3.39 3.06 0.16 1.48 0.87

MUNICIPAL-QUALITY

MUNI-EXEMPT 5.0 0.21 0.42 -0.39 -0.95 -0.92 0.64 0.99 -0.92 4.95 0.90 3.32 2.66 -0.02 0.29 2.05 2.70 2.33 0.17 1.93 1.44 MUNI-

TAXABLE 8.1

0.61 1.27 -0.83 -1.23 -0.80 1.58 1.43 -0.80 6.81 4.16 1.30 3.93 -0.04 0.16 3.59 4.06 3.80 0.11 1.21 0.79

HIGH-GRADE 5.0 0.17 0.27 -0.43 -1.05 -1.21 -0.02 0.78 -1.21 4.22 -0.09 3.21 2.34 -0.01 0.33 1.54 2.38 1.88 0.24 1.89 2.04

'A' RATED 4.8 0.19 0.36 -0.40 -1.04 -1.07 0.77 1.17 -1.07 5.40 0.82 3.60 2.68 -0.01 0.31 2.08 2.72 2.34 0.17 1.99 1.50

'BBB' RATED 5.1 0.22 0.49 -0.49 -0.94 -0.94 1.45 2.38 -0.94 7.97 0.94 4.31 3.21 -0.02 0.29 2.79 3.41 3.07 0.16 0.93 0.59

HIGH YIELD 6.7 0.66 1.46 0.07 -0.94 0.58 1.83 1.50 0.58 9.69 3.52 1.81 5.26 -0.07 0.11 5.05 6.19 5.50 0.35 -0.67 0.76

MUNICIPAL-SECTOR

PRE-RE 2.4 0.05 -0.02 -0.05 0.17 0.10 -0.54 0.33 0.10 1.07 0.32 0.95 1.77 0.00 0.11 0.93 1.78 1.26 0.28 1.84 2.79

GO 5.1 0.21 0.38 -0.45 -1.12 -1.19 0.52 0.93 -1.19 4.56 0.08 2.99 2.52 -0.02 0.31 1.76 2.56 2.10 0.22 1.90 1.98

DED TAX 5.6 0.27 0.50 -0.34 -0.99 -0.84 0.36 1.03 -0.84 3.73 1.92 1.24 2.82 -0.02 0.32 2.21 3.00 2.59 0.21 1.06 0.59

WTR-SWR 5.1 0.20 0.41 -0.50 -1.15 -1.24 0.77 1.07 -1.24 5.31 0.53 3.92 2.59 -0.02 0.33 1.97 2.63 2.25 0.17 1.97 1.39

PUB PWR 4.5 0.17 0.30 -0.38 -0.92 -0.99 0.39 0.06 -0.99 3.20 1.18 4.57 2.52 -0.01 0.29 1.77 2.71 2.24 0.27 1.03 0.62

HEALTHCARE 5.3 0.28 0.67 -0.36 -1.29 -0.99 1.73 1.20 -0.99 7.00 1.24 4.65 3.20 -0.03 0.36 2.72 3.27 2.96 0.15 1.59 1.06

HIGHER ED 5.6 0.26 0.58 -0.49 -1.23 -1.14 1.01 1.24 -1.14 6.20 0.62 3.87 2.92 -0.03 0.32 2.38 2.97 2.63 0.16 1.81 1.38

TRANSPORT 5.1 0.20 0.36 -0.49 -1.14 -1.28 0.94 1.43 -1.28 6.25 0.93 3.76 2.76 -0.02 0.33 2.13 2.79 2.42 0.18 1.92 1.30

HOUSING 8.9 0.28 0.60 -0.32 -0.94 -0.66 1.18 0.96 -0.66 5.59 1.52 3.71 3.09 -0.02 0.29 2.66 3.14 2.93 0.11 1.43 0.29

TOBACCO 8.1 0.54 1.71 -0.20 0.21 1.72 1.84 0.41 1.72 17.82 6.17 13.48 4.33 -0.04 -0.27 4.33 5.26 4.79 0.23 -1.98 -1.67

IDB 4.3 0.19 0.41 -0.25 -0.50 -0.35 1.14 1.47 -0.35 6.41 1.53 3.66 3.36 -0.01 0.41 2.73 3.39 3.05 0.16 1.86 1.17

GLOBAL / CORP

GLOBAL 7.2 -0.09 1.06 -0.89 1.19 1.36 1.08 1.76 1.36 7.39 1.77 -3.15 1.83 -0.03 0.13 1.47 1.90 1.65 0.11 1.61 1.37

US CORP-IG 7.6 0.75 0.25 -1.62 -0.96 -2.32 1.17 1.34 -2.32 6.42 5.84 -0.68 3.76 -0.07 0.45 3.03 3.86 3.29 0.21 2.28 2.01

US CORP-HY 4.3 0.11 -0.60 -0.85 0.60 -0.86 0.47 1.98 -0.86 7.50 18.37 -4.47 6.19 -0.12 0.47 5.31 6.36 5.70 0.25 1.95 -0.37

Rich Fair Cheap

*Rich/Cheap: +/- 1 Z-scr

MUNI TAX-EXEMPT SPREADS

2Y STATISTICS

4/2/18 Avg Min Max SD Z-Scr Value

10Y

AA GO 17 25 12 40 6 -1.32 Rich

A GO 32 45 27 69 9 -1.41 Rich

BBB REV 74 98 74 118 9 -2.68 Rich

30Y

AA GO 32 35 22 51 5 -0.69 Fair

A GO 38 59 27 94 14 -1.52 Rich

BBB REV 97 110 85 144 12 -1.07 Rich

HY 227 305 223 472 56 -1.40 Rich

Underwriters will attempt to market

$8.32 bil. of municipals in the week

of 4/2, led in the negotiated space

by $3.22 bil Tobacco Settlement

Fin Corp, $537 mil. San Diego

Regl Transport Comm, and $425

mil. New York City Muni Wtr Fin

Auth. The competitive calendar is

highlighted by $172 mil. Howard

Co, $152 mil. Albany Co, and $150

mil. Florida St Brd of Edu.

Muni Primary Market


30-Day Visible Supply

($ in millions)

Current 2017 High 2017 Low

Total $ Date $ Date

Total 11,559.2 12,069.2 (3/7) 4,175.5 (1/2)

Comp. 3,263.0 5,636.0 (3/7) 903.1 (1/26)

Neg. 8,296.2 8,296.2 (4/2) 2618.6 (1/2)

Top Negotiated Issuances Coming to Market

Issuer State Amount ($ 000’s)

Tobacco Settlement Fin Corp NJ 3,216,940

San Diego Cnty Regl Transport Comm CA 537,480

New York City Muni Wtr Fin Auth NY 425,000

Bexar Co Hosp Dt TX 308,000

Santa Monica Cmnty Clg Dt CA 250,000

Top Competitive Issuances Coming to Market

Issuer State Amount ($ 000’s)

Howard Co MD 171,780

Albany Co NY 151,815

Florida St Brd of Edu FL 150,475

Rhode Island St RI 149,375

IL St Univ IL 143,500

Source: Bond Buyer

Source: Bloomberg Source: Bloomberg

Economic Calendar

Monday (4/2) Tuesday (4/3) Wednesday (4/4) Thursday (4/5) Friday (4/6)

Markit US Manufacturing PMI Fed Speakers: Kashkari, Brainard MBA Mortgage Applications Initial Jobless Claims Change in Nonfarm Payrolls

Construction Spending 4-Week Bill Auction ADP Employment Change Continuing Claims Change in Manufact. Payrolls

ISM Manufacturing Markit US Services PMI Trade Balance Unemployment Rate

ISM Prices Paid Markit US Composite PMI Bloomberg Consumer Comfort Fed Chairman Powell Speech

Fed Speaker: Kashkari ISM Non-Manf. Composite Fed Speaker: Bostic

$48 Bln 3-Month Bill Auction Factor Orders

$42 Bln 6-Month Bill Auction Durable Goods Orders

Cap Goods Orders

Fed Speakers: Bullard, Mester

Ramirez Negotiated Issuances Coming to Market

Issuer State Amount ($ 000’s) Senior Manager Ramirez Role

Travis Co Hsg Fin Corp MF TX 28,000 Ramirez Senior Manager

Tobacco Settlement Fin Corp NJ 3,216,940 Jefferies Co-Senior Manager

Santa Monic Cmnty Clg Dt CA 250,000 RBC Co-Senior Manager

New York City Muni Wtr Fin Auth NY 425,000 Siebert Co-Manager

Weekly Visible Supply

($ in millions)

Week of

4/2/18

Total 8,324.4

Comp. 1,522.9

Neg. 6,801.5

Source: Bloomberg, Ramirez

Gross Supply

($ in millions)

As of

3/30/18

Last Week 3,685.6

12wk Moving Avg 5,175.7

YTD 62,878.2

Source: Bloomberg

April 2, 2018

Source: Bloomberg

Muni Market Demand

April 2, 2018


Over the next 30 days we see net muni market supply at –$5.36 bil., comprised of $10.08 bil. new issues, $8.71 bil. matur-

ing, and $6.73 bil. announced calls. The states that stand to experience the largest change in outstanding debt include New

Jersey (+$2.76 bil.), New York (-$2.20 bil.), California (-$1.08 bil.), Texas (+$903 mil.), and Connecticut (-$742 mil.).

US Lipper Fund Flows

Sector Flow Change ($B) YTD ($B)

Tax-Exempt Inflow: 0.037 Inflow: 3.787

Money Market Inflow: 2.370 Outflow: -24.203

Taxable Inflow: 0.121 Inflow: 28.731

Equities Outflow: -14.379 Inflow: 24.861

Tax-exempt mutual funds recorded an inflow of $37

million for the week ending March 28, 88% below

the 12-week moving average of a $320 million.

Source: Bloomberg

Source: Bloomberg


Source: Bloomberg

Source: Lipper Fund Flows

Source: Lipper Fund Flows

Muni Market Supply


Muni Market Demand

April 2, 2018


$28,000,000

Travis County Housing Finance Corporation

Multifamily Housing Revenue Bonds

(McKinney Falls Apartments), Series 2018

Issue: Rated AA+ (e). Pricing Tuesday, March 27, 2018. Ramirez & Co. is Senior Manager of this transaction. There is a mandatory tender date of April 1,

2020 and a final maturity date of April 1, 2021

Credit Overview: On the closing date, Bond proceeds will be deposited into the Project Fund and Subordinate Loan proceeds will be deposited to the

Capitalized Interest Account of the Bond Fund. On the same date, upon deposit of the Lender Collateral Deposit to the Collateral Fund, such amounts, together with

amounts in the Capitalized Interest Account and the Project Fund, will be invested in US government obligations maturing on or before the Mandatory Tender Date.

Such investments, along with amounts on deposit in the Capitalized Interest Account, will be sufficient to pay principal and interest on the Bonds when due without

the need for reinvestment. Government obligations are direct obligations issued by the U.S., including treasuries or SLGS. The escrow will be verified by a verifica-

tion agent.

$250,000,000

Santa Monica Community College District

(Los Angeles County, California)

Issue: Rated Aa2/AA+. Pricing Wednesday, April 4, 2018. Ramirez & Co. is Co-Senior Manager of this transaction. Proceeds of the tax -exempt bonds will

be used to finance capital expenditures for Santa Monic Community College District (District) facilities, pay capitalized interest, and pay costs of issuance. Proceeds

of the taxable bonds will be used to refund certain outstanding debt, on a crossover basis.

Security: The tax-exempt bonds are general obligations of the District, secured by its pledge to levy an unlimited ad valorem property tax levied on all taxable

property within the District. The taxable bonds are secured by an escrow fund through the crossover refunding date of August 1, 2020.

Credit Overview: Santa Monic Community College District spans 28 square-miles along the Pacific Ocean in Los Angeles County, California. It serves 27,660

full-time equivalent students, representing a five-year increase of 9%. The District’s tax base totals $52.14 billion, representing a five-year increase of 25%. The tax

base is diverse, with the ten largest taxpayers accounting for 6.0% of assessed value. Wealth levels in Santa Monica are above average, with median per capita

and household incomes at 211% and 148% of their respective national medians. As of January 2018, Santa Monica had an unemployment rate of 4.6%, above the

national rate of 4.5%. In FY17 the District reported a general fund deficit of $0.6 million on general fund revenues of $204.3 million (-2.6% YoY). The ending general

fund balance was $29.6 million, or 14.5% of revenues. The District’s FY17 revenue sources included state sources (50%), local sources (48%), and federal sources

(2%). Overall net debt totals $1.19 billion, or, 2.27% of assessed value. The District participates in the state-managed CALSTRS and CALPERS pension plans and

has a net pension liability of $169.5 million. The District made 42% of its FY17 OPEB annual required contribution (ARC) and has a total OPEB liability of $51.2

million.


©2018 Samuel A. Ramirez & Co., Inc., member FINRA, MSRB, SIPC.

This material is proprietary to Samuel A. Ramirez & Co., Inc. or (“Ramirez”) and may not be disclosed to any third party or used for any other

purpose without the prior written consent of Ramirez.

Unless otherwise agreed in writing between you and Ramirez & Co, we are acting solely as a principal/underwriter in an arm’s length commercial

transaction in which Ramirez has financial and other interests that differ from yours. Ramirez is not acting as a municipal advisor, financial advisor

or fiduciary and the information provided should not be construed as “advice” within the meaning of Section 15B of the Securities Exchange Act of

1934.

The information in this document should not be considered research1 or its content be construed as a solicitation or recommendation. This mate-

rial has been prepared for informational purposes only without regard to any particular user's investment objectives, financial situation, or means,

and Ramirez is not soliciting any action based upon it. The Information contained is not an offer to buy or sell or a solicitation of an offer to buy or

sell any security or instrument or to participate in any trading strategy. Ramirez does not provide accounting, tax or legal advice; however, you

should be aware that any proposed indicative transaction could have accounting, tax, legal or other implications that should be discussed with

your advisors and or counsel. The Information should not be relied upon for the maintenance of your books and records or for any tax, account-

ing, legal or other purposes. Subject to applicable law, you may disclose any aspects of any potential transaction or structure described herein

that are necessary to support U.S. federal income tax benefits. The information in this document reflects prevailing conditions and our views as of

this date which, are subject to change. In preparing this material, we have relied upon and assumed, without independent verification, the accura-

cy and completeness of all the information available from internal and public sources or which was provided to us by or on behalf of Ramirez or

which was otherwise reviewed by Ramirez. Even when this material contains a kind of appraisal, it should be considered preliminary, suitable only

for the purpose described herein and not be disclosed or otherwise used without the prior written consent of Ramirez. Bonds are subject to inter-

est rate risk. When interest rates rise, bond prices fall; generally the longer a bond's maturity, the more sensitive it is to this risk. Bonds may also

be subject to call risk, which is the risk that the issuer will redeem the debt at its option, fully or partially, before the scheduled maturity date. The

market value of debt instruments may fluctuate, and proceeds from sales prior to maturity may be more or less than the amount originally invest-

ed or the maturity value due to changes in market conditions or changes in the credit quality of the issuer. Bonds are subject to the credit risk of

the issuer. This is the risk that the issuer might be unable to make interest and/or principal payments on a timely basis. Bonds are also subject to

reinvestment risk, which is the risk that principal and/or interest payments from a given investment may be reinvested at a lower interest rate.

_____________________________________________________________________________________

1 For purposes of the debt Rule FINRA 2242, a “debt security” excludes any equity security, municipal security and security-based swap (each as

define under the Exchange Act) and any US Treasury (as defined in FINRA Rule 6710 (p)).

Samuel A. Ramirez & Co., Inc.

61 Broadway, 29th Floor

New York, NY 10006

April 2, 2018

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