![]() ![]() A bond spread is often expressed as a difference in percentage points or basis points (which equal one-one hundredth of a percentage point). Spread is the percentage difference in current yields of various classes of fixed-income securities versus Treasury bonds or another benchmark bond measure. Data as of Apchart derived from the Bloomberg Barclays High Yield Index, excluding Puerto Rico-related bonds. High Yield Muni-Bond Spreads (ex-Puerto Rico) Recently Reached the Widest Level in Five Yearsĭata for the period June 1, 2015–April 30, 2020 The large liquidity costs have lowered prices so much–the average dollar price of the Bloomberg Barclays HY Municipal index was $64.25 (including zero coupon bonds) as of May 8–that they likely already more than reflect the potential downside impact from the weaker outlook for credit fundamentals.įigure 1. In our view, this rapid change has been the direct result of both the large outflows from municipal bond funds, especially high yield funds, and the costs for the liquidity which has been necessary to sell lower quality bonds in order for muni bond funds to have enough cash to cover investor withdrawals. Since the end of February, the extra yield demanded by investors in high yield municipals versus their investment-grade counterparts has risen from 200 basis points (bps) to 346 bps (see Figure 1). The fear of increased defaults and ratings downgrades may already be reflected in prices. Although there could be additional volatility before the outlook changes, we think there are a number of reasons why this large performance differential could suggest some compelling future opportunities in the sector.ġ. While some investors are clearly concerned about the outlook for lower-quality investments, we would argue that the difference in performance has created a lot of potential value in the high yield muni sector. Over the same period, the ‘BBB’-rated segment of the index returned -7.64%, and the Bloomberg Barclays High Yield Municipal Bond Index posted a total return of -9.06%. Through May 7, the year-to-date total return of the broad investment-grade Bloomberg Barclays Municipal Bond Index was basically flat (-0.99%). ![]() He holds master’s degrees from Columbia University in architecture and urban planning, a bachelor’s degree from Columbia College, and studied accounting and finance at the NYU Stern School of Business.Since the start of the Covid-19 pandemic, in the municipal bond market, high-grade bonds have continually outperformed high yield and lower-quality investment grade issues. Al was formerly an architect/urban planner and was a senior professional and manager on diverse projects in the Middle East, Africa, and Europe. During his preceding eight years at Moody’s, he worked on a variety of teams within the US Public Finance Group and managed the southeast regional ratings group. He participates on numerous task forces including bankruptcy, pensions, OPEBs, municipal utilities and surveillance.īefore rejoining Moody’s in 2011 after a two decade hiatus, Al was a credit officer at AIG Financial Products Corporation, with a broad portfolio of credits including municipals, banks, corporates, and sovereigns, along with energy and project finance. ![]() Al chairs the Public Finance Forum and is a member of the Infrastructure Finance Franchise Committee, both of which are responsible for the review and improvement of rating analytics. His chief responsibility is improving the rigor, quality, and consistency of analytic standards and procedures underlying ratings in US public finance and for sub sovereign governments. Alfred Medioli Senior Vice President and Group Credit Officer Moody's Investors ServiceĪl is Senior Vice President and Group Credit Officer for Public Sector Ratings in the Ratings and Process Oversight Group within Credit Strategy and Standards.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |