December 17, 2019 – After many years of analysts forecasting higher interest rates, Wall Street firms are taking a contrarian position and forecasting LOWER interest rates on the back of a slowing global economy, dovish Federal Reserve and election uncertainties in 2020.<\/p>\n\n\n\n
At the Citibank Municipal Conference in New York last week, analysts shocked some institutional investors by reiterating the call for AAA MMD to decline to 1% in 2020, from current levels of 1.42%.<\/p>\n\n\n\n
Citi said:<\/p>\n\n\n\n
In 2020, we expect that MMD yields will largely follow Treasury rates lower unless there is a mutual fund outflow cycle catalyzed by an outflow cycle in the broader fixed income markets.<\/em> Given Citi’s projection for lower tax-exempt rates, savvy public finance bankers are contemplating the backlash that might ensue as issuers have been persuaded by their bankers to “advance-refunded” bonds in preparation for higher rates. <\/p>\n\n\n\n If 10-year MMD does decline to 1%, issuers may experience buyers’ regret as their refunding savings — had they waited and not issued refunding taxable bonds — might be 25-30% higher than what was achieved in 2019, according to an experienced quantitative banker who runs refunding numbers for New York State and the MTA.<\/p>\n\n\n\n Contact Karen Bigelow at KBigelow@buymuni.com.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" December 17, 2019 – After many years of analysts forecasting higher interest rates, Wall Street firms are taking a contrarian…<\/p>\n","protected":false},"author":8,"featured_media":680,"comment_status":"open","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[38,8,12,102],"tags":[],"class_list":["post-678","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-federal-reserve","category-investing","category-issuers","category-underwriting","wpcat-38-id","wpcat-8-id","wpcat-12-id","wpcat-102-id"],"jetpack_featured_media_url":"https:\/\/buymuni.com\/wp-content\/uploads\/2019\/12\/shallow-focus-photography-of-red-apple-on-gray-pavement-206959.jpg","jetpack_sharing_enabled":true,"jetpack_likes_enabled":false,"_links":{"self":[{"href":"https:\/\/buymuni.com\/index.php?rest_route=\/wp\/v2\/posts\/678","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buymuni.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buymuni.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buymuni.com\/index.php?rest_route=\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/buymuni.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=678"}],"version-history":[{"count":3,"href":"https:\/\/buymuni.com\/index.php?rest_route=\/wp\/v2\/posts\/678\/revisions"}],"predecessor-version":[{"id":683,"href":"https:\/\/buymuni.com\/index.php?rest_route=\/wp\/v2\/posts\/678\/revisions\/683"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buymuni.com\/index.php?rest_route=\/wp\/v2\/media\/680"}],"wp:attachment":[{"href":"https:\/\/buymuni.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=678"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buymuni.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=678"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buymuni.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=678"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
Despite the expected challenges to municipal credit in 2020, macro factors, again, will remain the main influences on municipal performance, because our market remains a high-grade market. Also, the reduced role of the individual investor buying directly has taken a significant portion of the independent directionality out of the market. If intermediate and long-term rates move high enough, individual investors may redevelop their influence, but this is unlikely to occur in 2020 or even for the next few years.<\/em><\/p>\n\n\n\n
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