Tax Deferrals, Market Needs Help With Liquidity, Federal Government Support
03/20/2020
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To date, there have been a total of 16,315 coronavirus cases reported in the U.S., 220 deaths, and 125 recoveries;
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Tax deferrals and a dislocated market with limited access could create a cashflow crunch for municipal issuers;
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Friday, the Federal Reserve expanded its Money Market Liquidity Support program to state and local government short-term debt;
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Also Friday, the Municipal Bonds Emergency Relief Act was introduced in the Senate. It is an emergency measure that could allow the Federal Reserve to purchase state and local government debt. We need more specifics on this legislation to share more analysis;
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The municipal bond market has lost a principal point of navigation because of the lack of primary market activity, and secondary trading, while substantial, is occurring at wider and wider spreads. We saw less than $1 billion of municipal issues were sold this week out of a $5 billion calendar. Next week’s calendar has about $2 billion, and over $10 billion of issuance remain on day-to-day status; and
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AAA MMD rose 40-50 basis points across the curve at the close of today, Friday.
