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Friday,  September 25, 2020
Scott Carrithers
Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty
Kevin Doyle • Lonnie Harris •  Mark Tranckino 
• Robert Schuyler • Tom Toburen
Josh Kiefer • 
Nicole Burczyk • Natalie Regan • Aaron Stoffer • David Farris
US Treasury Market
Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
09/18/20 0.09 0.10 0.12 0.13 0.14 0.16 0.29 0.48 0.70 1.24 1.45
09/21/20 0.09 0.10 0.11 0.12 0.14 0.16 0.27 0.46 0.68 1.22 1.43
09/22/20 0.08 0.10 0.11 0.12 0.13 0.15 0.27 0.46 0.68 1.21 1.42
09/23/20 0.08 0.11 0.11 0.13 0.14 0.15 0.28 0.46 0.68 1.21 1.42
09/24/20 0.08 0.10 0.11 0.12 0.14 0.16 0.27 0.46 0.67 1.19 1.40
                                                                                                                                        Source: U.S. Department of the Treasury, as of 09/24/2020
Municipal Credit Overview

In June of this year, Moody’s Analytics called for $500 billion in aid for states and cities “to avoid major damage to the economy.”  On Monday of this week, the projected shortfall was lowered to $450 billion through fiscal 2022. The report stated that “an improved economic outlook and updated federal estimates reveal a smaller need than many had originally estimated.”

While this is clearly welcome news, concerns for the fiscal stability of issuers in all segments of the municipal market are still running high.   Interestingly, the two biggest rating agencies, Moody’s and S&P, have been slow to issue downgrades.  Both report that they have downgraded about 1% of the municipal borrowers they rate since the beginning of the pandemic.   Some reasons for the slow pace of downgrades are 1) states and local governments were stronger going into this downturn than previous recessions and municipalities have more tools to rely on in periods of fiscal stress, 2) federal stimulus measures that have pumped money in to local economies have allayed extreme sales tax revenue declines, 3) low mortgage rates have continued to promote housing sales resulting in stable property tax collections, and 4) the rating agencies in general do not move ratings up and down based on swings in the economic cycle – there must be a “severe” change to credit quality.

It is important to note that the number of “outlooks” lowered in recent months have significantly increased.  These outlooks are designed to alert investors that a downgrade (or upgrade) is likely if the situation worsens (improves).  Moody’s reports that it has lowered its outlook to negative on all sectors except for housing finance agencies and public electric and water utilities. 

Sticking to the strategy that we have always suggested, avoiding those sectors most vulnerable such as airports, healthcare, entertainment, and certain sales tax revenues, is even more crucial today.   But an additional step we suggest taking now is to stay on top of any bonds placed on negative watch in your portfolio. 

Rating changes are required to be reported to the MSRB’s EMMA (Electronic Municipal Market Access) data-port ( and you can register your CUSIPs to receive notification of annual financial filings, ratings changes and other material events.  Changes in “outlooks”, however, are not classified as a material event so those will not necessarily reported.  S&P ratings outlooks are displayed on Bloomberg so we can easily run a report to identify any S&P rated securities in your portfolio that may be on negative watch.  Please let us know if we can guide you in getting registered with EMMA or if we can provide a list of your holdings and their S&P outlooks.   

This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.

•Not FDIC Insured •No Bank Guarantee •May Lose Value