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Municipal Bonds: Local Impact
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Muni Duration & Sharpe Ratio Analysis
According to our regression analysis, over the past 10 years (as of 12/31/2020), the correlation between tax-exempt municipals and taxable treasuries was high at roughly 88%, but municipals displayed lower volatility. Our regression analysis showed that for every 100 basis points (1.00%) increase in the 10-year treasury yield, the mean increase in the 10-year municipal yield was 0.82%. Furthermore, municipal yields are less correlated relative to corporates which…
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End of Easy and its Implications for the Municipal Bond Market
As the Fed publicly discusses it is nearing the end of its emergency approach to the pandemic and begins scaling back its pace of securities purchases, we thought it would be a good time to review the current status of the municipal market and potential outcomes for the 4th quarter.
Municipal yields – and bond yields in general – have stagnated since the early spring even though economic growth is robust and inflation readings are high. The market has largely looked through these metrics, as many believe this dynamic will be short-lived. What underpins this stance…
Municipal Bond Past, Present, & Future | 2020’s Stress and What Lies Ahead
The past year and half presented many challenges, but also a multitude of silver-linings and learning experiences. Within the municipal bond market, the experience verified the sector’s overall creditworthy reputation and balance sheet sturdiness….Given the nature of the crisis, federal stimulus actions have been unprecedented. The Federal Reserve’s balance sheet now amounts to over $8 trillion, and we are expected to run a federal budget deficit of over $3 trillion for the second year in a row. This intervention from D.C. has generally impacted the municipal market in two ways:…