In their June 14, 2019 Municipal Weekly report, BAML’s Municipal Research team led by Phillip Fisher offered the following takeaways:

• Despite the recent decline in munis, BAML remained bullish on munis and thinks now is a good entry point for relative value buyers, particular on the long-end of the municipal curve
• Based on an analysis of recent Moody’s Investor Service upgrade vs downgrade ratios, municipal credit continues to enter a strengthening phase. In the case of State credits, states continue to pour budget surpluses into rainy day funds
• On a sector-by-sector basis, BAML recommended being “overweight” in tech-heavy cities and 8-20yr part of the curve; and “underweight” in healthcare, small private colleges and California credit
• Although BBB and A-rated indices continue to outperform, investors should “exercise discipline given the slowing economy”
• Post the adoption of rules on May 30, 2019 to include most investment grade municipal bonds in the “Level 2B” category for purposes of banks’ liquidity coverage ratio (LCR), BAML anticipates a mildly positive impact on credit and resultant demand, particular for taxable bonds

To obtain a copy of the report, contact your Bank of America Securities broker.

To contact the writer of this article, email Karen Bigelow at KBigelow@buymuni.com.