ramirez municipal strategy · 2021. 3. 1. · ramirez municipal strategy page 1march 1, 2021...

Municipal Market Update

***INSTITUTIONAL USE ONLY***

Ramirez Municipal Strategy

March 1, 2021

Markets last week took direction from Treasuries, which sold off sharply on inflation fears as economic data surprised to the upside, fiscal stim-ulus appears assured, and there was no significant negative catalyst on the Covid front. Yields rose across the curve led by the 5yr which rose +15.6 bps to 0.73%. The 10yr yield rose +6.9 bps on the week to end at 1.40% -- after breaching 1.50% resistance and trading as high as 1.61% on Thursday, the highest yield in about a year. Auctions were also very poorly received, particularly the 7yr. The Treasury index lost -0.30% on the week and is down -2.75% YTD.

Equities were pummeled on rising rates, particularly on Thursday as the 10yr breached 1.5%. DJIA -1.78% wk to 30,932 (+1.06%YTD); S&P -2.45% wk to 3,811 (+1.47% YTD); NASD -4.92% wk to 13,192 (+2.36% YTD).

Fed Chair Powell testified on Wed before Congressional committees and calmed markets temporarily, saying that rising rates would not alter monetary policy. The sell-off in both rates and equity markets resumed Thursday-Friday as investors expect inflation to overshoot Fed targets and result in Fed monetary policy turning hawkish sooner and more aggressively. Investors also negatively reacted to BOE chief economist Andy Haldane warning that inflation is a “sleeping tiger” and that it has been “stirred from its slumber.”

US Covid-19 deaths surpassed 500k, a grim milestone. The FDA approved J&J’s one-dose vaccine, adding a third vaccine to the US arsenal.

Economic data was favorable and generally beat expectations. Weekly jobless claims declined to 730k from 861k in the prior week; Jan dura-ble goods was up +3.4% m/m (exp +1.1% m/m); new home sales was 923k (856k exp); Univ of MI sentiment was 76.8 (76.5 exp); and Jan personal income, bolstered by the Dec stimulus, rose +10% m/m (+9.5% exp). 4Q GDP was +4.1% q/q, slightly missing expectations of 4.2% q/q.

Munis sold off violently in sympathy with Treasuries and woefully underperformed despite a manageable issuance of $10.3 bil., of which $7.34 bil., or only 72% of which was tax-exempt. The S&P Main Muni Index lost -1.05% on the week and turned negative for the year (-0.80% YTD) as MMD was cut between +6 bps (1yr) and 28 bps (30yr), steeping 2s30s by +21 bps to 161 bps, the steepest since Nov, 2017. Retail investors are of course taking notice of negative total returns as aggregate fund flows on the week decelerated sharply to essentially zero ($38 mil.) after posting several multi-billion dollar weeks of inflows (+$15.125 bil. YTD).

Last week’s $10.3 bil. new issue calendar was led by issues from Univ of California, San Diego Co Regl, and Indianapolis Bond Bank. With the exclusion of the shorter maturities of Univ of California (repricing lowered spreads 2022-26 by 5-10bps), spreads were raised in many of the negotiated deals by anywhere from +2 to +19 bps. Secondary market activity, indicated by bid-wanted and trading flows, was also active at about +10% above average.

Tax-exempts underperformed Treasuries across the curve by an average of +19.8 ratios, including about +16 ratios in both 5yrs and 10yrs and +12.4 ratios in 30yrs. Despite the weekly underperformance, tax-exempts remain only fairly valued on a M/T ratio basis as well as spread and absolute rate perspective. We think valuations will likely become more compelling over the next few months as the Treasury sell-off (likely) deepens slightly and Munis catch up with reality.

Gross supply for this week is $8.5 bil., although only $5.1 bil., or 59.9% is tax-exempt. Top issuances this week are led by New York City, BART, and Baltimore. The 30-day visible net supply is -$6.2 bil., reflecting +$11.2 bil. of announced supply against -$17.5 bil. of maturities/ calls. New issue supply in Feb was in-line with our forecast at about $32 bil., (22% m/m), of which 68.7% or $22 bil. was tax-exempt. We ex-pect March new issue volume to be about $33 bil (4% m/m) and for net supply to be -$1 bil.

This Week: Big week for potential catalysts...Fiscal stimulus vote in Senate this week. Fed speakers every day this week. Brainard today and Tues, Bostic on Wed, Powell Thurs, Bostic on Friday. Economic data headlined by the Feb nonfarm payroll report on Friday, expected at +180k jobs vs +49k jobs in Jan and a slightly uptick in the UE rate to 6.4% from 6.3%. ADP jobs report on Wed also expects +180k jobs in Feb. Weekly unemployment claims are expected to increase slightly to +755k. Other data includes ISM Manuf PMI for Feb (58.6 exp), ISM Services PMI (58.9 exp), construction spending, Fed beige book.

PETER BLOCK Managing Director

[email protected]

(212) 248-3885

MICHAEL SLONIM Analyst

[email protected]

(212) 248-3876

JOHN YOUNG

Managing Director

[email protected]

(212) 248-3870

PATRICIA MCGRORRY Managing Director

[email protected]

(212) 248-3870

ALAN GRECO Managing Director

[email protected]

(212) 248-3892

Economic Calendar

Monday (3/1) Tuesday (3/2) Wednesday (3/3) Thursday (3/4) Friday (3/5)

ISM Manufacturing Fed’s Brainard Discusses

Economic Outlook

MBA Mortgage Applications Initial Jobless Claims Change in Nonfarm Payrolls

Markit US Manufacturing PMI Fed’s Daly Speaks to Eco-

nomic Club of New York

ADP Employment Change Factory Orders Unemployment Rate

Construction Spending MoM U.S. To Sell USD30 Bln 42-

Day CMB

ISM Services Index Durable Goods Orders Trade Balance

ISM Prices Paid Markit US Composite PMI Durables Ex Transportation Change in Manufact. Payrolls

Fed’s Brainard Discuses

Financial Stability

Markit US Services PMI Continuing Claims Fed’s Bostic Discusses Mac-

roeconomic Policy Source: Bloomberg

Previous Week Deal Pricings (Week of 2/26/2021)



March 1, 2021

Source: Bloomberg

Municipal Market Update



March 1, 2021

Source: Thomson Reuters (TM3) Source: Bloomberg

Muni Primary Market

Municipal Market Update Ramirez Municipal Strategy

30-Day Visible Supply ($ in millions)

Current 2021 High 2021 Low

Total $ Date $ Date

Total $10,231 $11,851 (2/22) $5,068 (1/4)

Comp. 4,040 5,298 (2/5) 1,617 (1/4)

Neg. 6,191 8,641 (2/19) 2,079 (2/10)

Source: Bond Buyer

Source: Bloomberg

Weekly Supply

($ in millions)

Week of

3/1/21

Total 8,481

Neg. 6,406

Comp. 2,075

Total Taxable 3,405

Taxable % of

Supply

40.1%

Source: Bloomberg, Ramirez

Gross Supply

($ in millions)

As of

2/26/21

Last Week 10,341

12wk Moving Avg. 7,268

YTD 60,347

Total Issuance YoY 17%

Taxable Last Week 2,917

Taxable YTD 18,882

Taxable % of YTD

Supply

31.3%

Source: Bloomberg

March 1, 2021

New Issue Calendar (Partial)

Issuer State Amount ($mil.) Sale Type Tax Status Ramirez Role

New York City GO NY 1,249 Neg TE Co-Sr

BART CA 727 Neg TE/Txbl

Baltimore MD 658 Comp TE/Txbl

Univ. of Chicago *corporate CUSIP* IL 610 Neg Txbl

Ohio GO OH 564 Neg TE

Florida DOT FL 344 Comp TE

Rhode Island Hlth & Edu RI 13 Neg TE/Txbl Co-Mgr

Burlington Airport VT 5 Neg Txbl Senior



March 1, 2021

Muni Secondary Market

Source: Bloomberg Source: Bloomberg

US Lipper Fund Flows

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

Tax-Exempt Inflow: 0.038 Inflow: 15.125

Money Market Inflow: 13.19 Inflow: 32.064

Taxable Inflow: 4.067 Inflow: 59.901

Equities Inflow: 17.112 Inflow: 46.71

Source: Lipper Fund Flows Source: Lipper Fund Flows


March 1, 2021

Source: Bloomberg

Taxable Munis Look Rich

Relative Value


March 1, 2021


2021 Muni Supply Forecast


2021 Muni Cashflow Forecast


March 1, 2021


©2019 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

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

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

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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

March 1, 2021

ramirez municipal strategy · 2021. 3. 1. · ramirez municipal strategy page 1march 1, 2021...

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