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Municipal Market Weekly
Credit and Market Strategy

Weekly Recap:

Municipals sold off again in sympathy with Treasuries as markets embrace the risk-on trade amidst a perceived pro-growth Trump administration, continuing a rotation to equities from bonds. Last week the Muni market experienced $2.23 bil. of net outflows following the prior week’s outflow of $3 bil., causing Munis to underperform Treasuries 5yrs and out. MMD scale adjustments were 12bps in the 5yr spot, 11 bps in the 10yr spot, and 7 bps in the 30yr spot. Muni/Treasury ratios at COB Friday ended at...

2016 Year End Outlook:

Returns: We think Munis will finish 2016 with virtually zero total return. The large Dec roll will help the demand side of the equation over the next few weeks, although the momentum is pointing towards another few weeks of pain. We think it’s hard to say with a high degree of confidence whether or not the Muni sell-off has gone too far. However, we can say the market expects...

Supply: We had predicted, pre-Trump, a record $453 bil. in total gross supply in 2016. However, the bond market sell off and postponing of several deals will likely derail that forecast. Gross supply through...

2017 Outlook:

Returns: We expect average total returns of high grade Munis to be between 1.3% and -0.85%, excluding spread. Underlying this projection is for the MMD curve to bear steepen by about 25-50 bps in 2017. Structures we like for 2017: Bonds with...

Supply: We project gross supply of $368 bil. in 2017, comprised of new money bonds of $204 bil., current refundings of $106 bil., and advance refundings of $58 bil. We project net supply at...

Full Weekly Report

Quarterly Review

Samuel A Ramirez & Company, Inc.
Quarterly Macroeconomic Outlook
Financial Strategies Group – 2nd Quarter 2016

Dear Clients,

Please find attached Ramirez & Co.’s Quarterly Macroeconomic Outlook in our report, we continue to monitor the US economy, global events and the Fed’s outlook on the economy and rates.

In June, Brexit rolls markets in the short term, but its effects dissipate in the long term. Financial stress indicators retreat from their heights in 1Q 16.

The Fed continues to lower its longer term forecasts for the fed funds rate at the June meeting but it still far above market expectations. The likelihood of rate increases in 2016 narrows.

The expansion of negative rates internationally and unprecedented buying programs by the ECB drive rates in the US lower.

US goods inflation falls below zero, with services inflation approaching 3%.

Members of our Financial Strategies Group, Niso Abuaf, Konstantin Semyonov and Duncan Sinclair, would be happy to discuss further any of the material with you.

Full Q2 2016 Report