Our roundup and recap of the most relevant municipal bond market news:

The CT Mirror: CT’s Budget Reserve on the Brink of Hitting Unprecedented High

  • Connecticut will have more than $2.3 billion in reserve when the audit of the just-completed 2018-19 fiscal year is done in late September
  • By the end of the new budget cycle, Connecticut could have a reserve three times the size of the cushion it built in the early 2000s
  • The $2.3 billion represents 12 percent of annual operating expenses, topping the 8% mark also set in 2009

Read More>

The Wall Street Journal: New Tax Laws Drive More Americans Into Muni Bonds

  • Inflows for municipal bonds this year have been massive, with funds for CA, NY and NJ receiving over $6.5 billion through the end of July
  • This marked the most of any seven-month period since 2014
  • Bond yields in high tax states have come under extreme pressure with the changes under the Tax Cuts and Jobs Act
  • Clients are being advised to look at out-of-state bonds as alternatives rather than take on credit risk

Read More>

Brookings: Is Municipal Bond Insurance Still Worth the Money in an ‘Over-Insurance’ Phenomenon?

  • In theory, municipal bond insurance should reduce the cost of municipal borrowing by reducing expected default costs
  • White paper examines whether bond insurance provides any value to issuers of muni bonds and explores the phenomena of over-insurance, which may/may not be influenced by conflicts of interest between underwriters and financial advisors
  • One conclusion reached is that highly-rated issuers appear to be subsidizing the lower-quality issuers for whom insurance continues to provide positive gross value

Read More>

Pennsylvania Capital Star: Wolf’s Natural Gas-Backed Infrastructure Plan Enjoys Majority Support, New Franklin & Marshall Poll Finds

  • Pennsylvania’s Governor has proposed a $4.5 billion infrastructure plan that would be funded by a severance tax on natural gas drillers
  • Money would be borrowed against 20 years of revenue from a tax on natural gas produced in the Commonwealth
  • Estimates for rates on borrowings have been floated at around 5%, but supply and demand imbalance in the muni market would help lower borrowing costs
  • While polling indicates public support for the bill, there is very little legislative support to tax shale producers in PA

Read More>

Kiplinger: Municipals Rock On

  • Year-to-date returns have solidified tax-exempt bond holdings as core portfolio allocations
  • Standard and Poor’s rates the U.S. Treasury as AA+ but rates 15 states and many local borrowers as AAA
  • Credit risks associated with rising pension costs in some states have been taking a back seat to the hunt for yield
  • Foreign buyers fleeing negative rates have found an unlikely home in U.S. local muni bonds

Read More>

The Washington Post: A Silent Pension Crisis is Eating Away Local Government Services. Here’s What You Need to Know.

  • “Over the past few decades, policymakers from California to Wyoming have made public pension benefits ever more generous— while setting aside too little money to pay for them.”
  • Governments have underfunded pensions by at least $1.28 trillion
  • Strong legal guarantees protect pensioners’ benefits
  • Governments continue to cut costs and jobs rather than a focus on increasing revenues to meet growing pension obligations
  • Raising taxes has become politically more difficult given the new SALT limitations

Read More>

 

The views expressed are those of the author(s) and do not necessarily reflect the views of Clark Capital Management Group. Certain information referenced above is from third-party sources not affiliated with Clark Capital. Any forecasts, figures, opinions or investment techniques and strategies described are intended for informational purposes only and should not be considered investment advice or an offer to sell any product. Material presented has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. The opinions and/or third-party information referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. There is no guarantee of the future performance of any Clark Capital investments portfolio. Nothing herein should be construed as a solicitation, recommendation or an offer to buy, sell or hold any securities, other investments or to adopt any investment strategy or strategies. For educational use only. This information is not intended to serve as investment advice. This material is not intended to be relied upon as a forecast or research. The investment or strategy discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Past performance does not guarantee future results.

This document may contain certain information that constitutes forward-looking statements which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology (or the negative thereof). Forward looking statements cannot be guaranteed. No assurance, representation, or warranty is made by any person that any of Clark Capital’s assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future.

Clark Capital Management Group, Inc. reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security, sector or industry. There is no assurance that any securities, sectors or industries discussed herein will be included in an account’s portfolio. Asset allocation will vary and the samples shown may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. Clark Capital Management Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Clark Capital’s advisory services and fees can be found in its Form ADV which is available upon request.

CCM-1143