Although the number of acres burned, and structures damaged from CA wildfires has decreased from 2020 when 4.3 mlln acres burned and resulted in approximately 20 billion dollars of damage. The more recent fires are closer to populated areas and have resulted in much more significant monetary losses, estimates are over 200 blln dollars. As […]
Inflation data this week will likely support the Fed’s view that rates need to go higher for longer. We see Fed Funds hitting 5.25% by March next year (currently 4%). The market has similar views. One year T Bills are trading at 4.80, which is close to a fair projection of the average Fed Funds […]
In ‘normal’ times, Municipal bonds provide our clients with a much better after tax return than US Treasury Bills. These are not normal times, so lets dig into the details. Let’s assume that most of our clients are in the highest marginal Federal tax bracket of 37% and many pay the 3.8% NIIT. For our […]
The Fed raised rates by 75 basis points last week and admitted they were behind the inflation curve. As importantly, Powell implied that inflation is the worst of all evils, even worse than a slower economy and higher unemployment rate. This is a subtle but important distinction. Prices on consumer ‘necessities’, utilities, gasoline, food, and […]
As we have discussed before, Municipal Bond yields are mostly a function of retail buying or selling. When retail sells, municipal bond yields usually rise and when they buy, yields usually drop. Municipal Bid Wanted activity is a direct and timely indicator of retail activity; retail has stopped selling aggressively and thus yields have stabilized. […]
Last week we discussed the difference between the distribution yields reported by municipal bond mutual funds and the actual yields of the bonds in their portfolios. This week we will look at municipal closed end funds. When we look at the investment grade municipal bond market one important characteristic jumps out, over 70% of the […]
Many municipal bond funds report ‘Distribution Yields’ which are MUCH higher than the ACTUAL yields of the Muni bonds held in their portfolios. When we look at the investment grade municipal bond market one important characteristic jumps out, over 70% of the outstanding bonds have fixed rate coupons higher than 4%. These fixed rate coupons […]
Municipalities continue to take advantage of low interest rates and issue large amounts of municipal debt. During the first half of 2021, municipalities borrowed approximately 225 billion dollars. New issue supply is NOT the problem. Over 200 billion worth of municipal bonds matured during the first half of 2021. Maturing proceeds are usually reinvested back […]