Municipal Market Volatility and Liquidity Amid
COVID-19 (March 25, 2020)
- Municipals rallied on Tuesday as Fed measures and stimulus hopes, combined with cross-over buyers showing a willingness to engage at higher gross yields, led to better buying across the curve.
- The short-end, which had been dramatically impacted over the last week and a half due to liquidations in order to meet cash needs, was well supported today and led the charge to lower yields.
- Pre-refunded levels are settling in and around the 2.30% range which is 10-20 lower than where they were trading yesterday. We saw more than a handful being executed in the 2.25 range.
- VRDN rates which peaked around 9% in some cases last week, have retreated
- Fund flows last week (3/16 – 3/20), as reported by EPFR, saw $10 billion in outflows.
- In the backdrop, all three major US stock indices were higher as Wall Street bet on Washington’s proposed $2 trillion virus stimulus package coming to fruition. The risk-on attitude weighed on Treasuries throughout the day, but the Fed’s buying activity helped to limit the overall damage.
|Maturity||Muni GM AAA||Treasury|
|Today’s Closing||Day Change|
Source: Bloomberg, as of March 24, 2020
Below is a snapshot of our Investment Company Strategy (ICS) as of yesterday’s close:
Source: Fiera Capital as of 3/24/20. Past performance is no guarantee of future results. The current allocation is a pro forma calculation that is based on the current holdings and weightings of the strategy and does not represent performance for the composite or a client’s account.
Senior Vice President, Portfolio Manager
Dexter Torres, CFA
Senior Vice President, Portfolio Manager, Head of Trading
Fiera Capital Corporation is a global asset management firm with affiliates in various jurisdictions (collectively, “Fiera Capital”). The information and opinions expressed herein relate to Fiera Capital’s investment advisory services and investment funds and are provided for informational purposes only. It is subject to change and should not be relied upon as the basis of any investment or disposition decisions. While not exhaustive in nature, these Important Disclosures provide important information about Fiera Capital and its services and are intended to be read and understood in association with all materials available on Fiera Capital’s websites.
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Important risk factors
Emerging Markets risks – an investment in emerging markets may be subject to greater risk due to investing in emerging market countries, which may introduce greater volatility and political, economic, and currency risks, as well as differences in accounting methods.
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