After a successful month of underwriting, investors have shown a strong appetite for municipal bond issues.
This week, with the Thanksgiving holiday, the calendar was light. Looking ahead to December, there should only be two heavy weeks of trading with the Christmas holiday approaching before the month winds down.
As a testament to the robust demand for bonds, and in this case higher-yielding bonds, this week, The Houston Airport System (rated Ba3/NR) successfully borrowed $1.1 billion for a special facilities revenue bond backed by United Airlines. The issue, carrying a 5.5% coupon and maturing in 2036, was priced at 4.60%. Upon its release in the secondary market, bonds traded up ten basis points to 4.50%. This aggressive interest and strong trading performance for higher-yielding bonds like this should be a source of optimism for investors.
Overall, municipal bonds have proven to be a secure and attractive tax-free investment option. They continue to have strong credit quality, maintain solid demand in the marketplace, and, most importantly, offer favorable values compared to taxable equivalents.
The municipal bond market is on track for its seventh consecutive November gains, supported by muted issuance amid election-related caution and strong investor demand. With long-term Muni issuance down 6% year-over-year to $23.4 billion as of Nov. 22, demand has significantly exceeded supply by $12 billion, boosting prices. Historically, November has been a strong month for Muni returns, averaging 1.1% over the past decade, and December has shown even better performance. Meanwhile, long-dated Muni bonds are at their most expensive relative to Treasuries in three years,
New York Mayor Eric Adams and the City Council are close to finalizing a rezoning deal to tackle the city’s severe housing shortage. The deal could potentially add 80,000 new units, primarily market-rate. The City of Yes for Housing Opportunity plan includes $5 billion in funding for affordable housing and infrastructure, with $1 billion pledged by Governor Kathy Hochul. The City Council will vote on the final proposal in early December.
State and local governments have borrowed a record-breaking $460 billion this year, surpassing the previous $457 billion set in 2021, and there’s still time for more issuance before year-end. This borrowing surge is driven by rising project costs due to inflation, dwindling federal aid, and a backlog of delayed pandemic-era projects. With stabilized interest rates after years of hikes, many governments were more comfortable issuing debt for new projects and refinancing existing ones.
Happy Thanksgiving!
Warmest wishes to you and your loved ones for a relaxing Thanksgiving filled with good food and cherished moments.
We are thankful for your trust and for allowing us the opportunity to work with you towards your financial goals.
Warm regards,
The DRL Group
At The DRL Group, we specialize in helping high-net-worth investors maximize tax-free returns by proactively maintaining their custom bond portfolios through all market conditions.
David Loesch
[email protected]
www.drlgroup.net
605-B Park Grove
Katy, TX 77450
866.664.4040 (toll-free)
281.398.8600 (direct)
Securities are offered through New Edge Securities, Inc., a registered Broker-Dealer, FINRA and SIPC member. The DRL Group is not a subsidiary or control affiliate of New Edge Securities, Inc.New Edge Securities, Inc. has no affiliation with Bond Desk Trading LLC, Bond Trader Pro, Tradeweb Direct, Bondpoint, TMC, Market Axess or any other ECN.
Do not buy discount bonds based on the Yield-to-Call (YTC). YTC does not indicate total return; this yield is valid only if the security is called. Bonds may be callable on multiple dates or any date following the first call date, so yield to call is based on the earliest stated call date. Discounted bonds may be subject to capital gains tax. Bonds may be subject to OID (Original Issue Discount). Bonds could also be subject to the DeMinimis Rule; please consult your tax advisor for further clarification. Insured bonds are issued for timely payment of principal and interest only, do not cover potential market loss, and are subject to the insurance company’s claims-paying ability. Municipal income may be subject to state, local, and Alternative Minimum Tax (AMT) taxation. Corporate and Municipal securities are subject to gains/losses based on the level of interest rates, market conditions, and credit quality of the issuer.
Prices and availability may change at any time without notice. The securities described herein may not be eligible for sale in all jurisdictions or to specific categories of investors.
This summary is for informational purposes only and is not an offer or solicitation for the purchase, sale, recommendation, or endorsement of any security or issuer. New Edge Securities, Inc. and DRL Group do not represent this information’s accuracy, completeness, or timeliness.
This report does not regard any recipient’s specific investment objectives, financial situation, or needs and is based on information obtained from sources believed to be reliable. No independent verification has been made, nor is its accuracy or completeness guaranteed. Opinions expressed herein are subject to change without notice. The division, group, subsidiary, or affiliate of NewEdge Securities, Inc., is under no obligation to update or keep the information current. NewEdge Securities, Inc. accepts no liability for any loss or damage of any kind arising out of the use of this report. Contact your tax advisor regarding the suitability of tax-exempt investments in your portfolio.
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