Tax Exempt Bonds Tag Archives

Economic and Fixed Income Insights – March 28, 2018

Presented by Stifel, Nicolaus & Company, Incorporated

Economic and Fixed Income Insights

U.S. pending home sales rose in February for the first time in three months, highlighting uneven progress in the housing sector. According to Bloomberg, the pending home sales index increased to a reading of 107.5, up 3.1% from the prior month. In other news, Q4 GDP expanded at a 2.9% annual rate in the final three months of 2017, up from the previously reported 2.5%. The biggest gain in consumer spending in three years partially offset the drag from a surge in imports. The upward revision to the fourth-quarter growth estimate also reflected less inventory reduction than previously reported.  Bonds have rallied as the tech rout has spurred demand for haven assets.  For the week, the 10-year UST was 12 basis points lower to yield 2.78%, while the 30-year UST finished 10 basis points lower to yield 3.03%.  Tax-exempt yields fell in tandem with treasuries.  Both the 10-year and 30-year MMD were 5 basis points lower for the week yielding 2.46% and 2.99% respectively.

Interest Rate Observations

Benchmark Current Previous

Week

(+/-) Change Previous

Year

(+/-) Change
10-Year UST 2.78% 2.90% (12) 2.38% 40
30-Year UST 3.03% 3.13% (10) 2.99% 4
10-Year MMD 2.46% 2.51% (5) 2.23% 23
30-Year MMD 2.99% 3.04% (5) 3.01% (2)
Federal Funds Rate 1.75% 1.50% 25 1.00% 75
1-month LIBOR 1.88% 1.85% 3 0.98% 89
SIFMA 1.36% 1.22% 14 0.91% 45
10-year LIBOR Swap 2.79% 2.93% (14) 2.36% 43

Source: Thomson Reuters, Bloomberg. The table above reflects market conditions as of March 27, 2018.

Important Disclosures

This material was prepared by Stifel, Nicolaus & Company, Incorporated (“Stifel”). This material is for informational purposes only and is not an offer or solicitation to purchase or sell any security or instrument or to participate in any trading strategy discussed herein. The information contained is taken from sources believed to be reliable, but is not guaranteed by Stifel as to accuracy or completeness. Past performance is not necessarily a guide to future performance. Stifel does not provide accounting; tax or legal advice and clients are advised to consult with their accounting, tax or legal advisors prior to making any investment decision.

 

Stifel, Nicolaus & Company, Incorporated is a broker-dealer registered with the United States Securities and Exchange Commission and is a member FINRA, NYSE & SIPC. © 2018

Economic and Fixed Income Insights as of March 14, 2018

Presented by Stifel, Nicolaus & Company, Incorporated

Economic and Fixed Income Insights

Inflation cooled slightly last month as a decline in gasoline prices kept a lid on price pressures. The consumer-price index, which measures what Americans pay for most goods, increased 0.2% in February after rising a seasonally adjusted 0.5% in January, according to the Labor Department. In other economic news, the Commerce Department reported that retail sales declined for a third straight month as households curbed purchases of cars and other consumer items.  In the bond market, yields have experienced some volatility with divergence in the taxable and tax-exempt trends.  Treasuries trended lower for the week with the 10-year UST and 30-year UST both 5 basis points lower to 2.84% and 3.10% respectively.  In contrast, tax-exempt yields were slightly higher along the curve.  The 10-year MMD finished 4 basis points higher to yield 2.51%, and the 30-year MMD ticked up to 3.07%.

Interest Rate Observations

Benchmark Current Previous

Week

(+/-) Change Previous

Year

(+/-) Change
10-Year UST 2.84% 2.89% (5) 2.49% 35
30-Year UST 3.10% 3.15% (5) 3.11% (1)
10-Year MMD 2.51% 2.47% 4 2.45% 6
30-Year MMD 3.07% 3.05% 2 3.21% (14)
Federal Funds Rate 1.50% 1.50% 0 1.00% 50
1-month LIBOR 1.78% 1.71% 7 0.94% 83
SIFMA 1.13% 1.09% 4 0.71% 42
10-year LIBOR Swap 2.89% 2.90% (1) 2.47% 43

Source: Thomson Reuters, Bloomberg. The table above reflects market conditions as of March 13, 2018.

 

 

Important Disclosures

This material was prepared by Stifel, Nicolaus & Company, Incorporated (“Stifel”). This material is for informational purposes only and is not an offer or solicitation to purchase or sell any security or instrument or to participate in any trading strategy discussed herein. The information contained is taken from sources believed to be reliable, but is not guaranteed by Stifel as to accuracy or completeness. Past performance is not necessarily a guide to future performance. Stifel does not provide accounting; tax or legal advice and clients are advised to consult with their accounting, tax or legal advisors prior to making any investment decision.

 

Stifel, Nicolaus & Company, Incorporated is a broker-dealer registered with the United States Securities and Exchange Commission and is a member FINRA, NYSE & SIPC. © 2018

Leaked White House Infrastructure Document Proposes Changes to Private Activity Bonds

Earlier this week, several news agencies reported on a leaked infrastructure plan from the White House. One of President Trump’s campaign promises was to create a program to invest $1 trillion in infrastructure over ten years. Housing advocates may be disappointed to learn that affordable housing is not specifically mentioned in the leaked document. However, the document does propose changes to Private Activity Bonds (PABs), which could prove meaningful in the world of tax exempt bond financed affordable housing.

One proposed amendment is to remove state volume caps which would prove fruitful for the several states which hit their cap every year. Another amendment would eliminate the Advance Refunding prohibition on PABs. This allows not only for the issuance of new bonds to buy back outstanding bonds (thereby “locking in” lower interest rates), but further allows the new bonds to be outstanding for up to 90 days – essentially allowing two sets of tax exempt bond issues to be outstanding at the same time for one project. If this sounds familiar, this was implemented for Gulf States following Hurricane Katrina through the Gulf Opportunity Zone Act.

The White House has refused to comment on the leaked draft document, saying an official plan will be released in the near future. Whether these changes and others are included in the final plan is unclear. It is also impossible to say at this moment whether Congress will have an appetite for passing legislation similar to the President’s proposal.

House Tax Reform Bill Eliminates HTC, NMTC; Eliminates Private Activity Bonds

The House Ways and Means Committee has released the full text of its Tax Cuts and Jobs Act. The Committee plans to begin markup on the proposed legislation on November 6, with plans for a House floor vote sometime in mid-November. Several changes within the code would drastically change the landscape of affordable housing and community development.

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