- Jonathan Poyer
SVB and the Muni Market - To Refund or Not Refund...
Our friends at Bond Buyer have a new article about the banking crisis and the SVB "collapse". The title is forthtelling:
Experts Don't Expect Banks' Collapse to Spur Bond Refunding
From the article (and highlighting one of our friends):
"While the SVB collapse added significant volatility into the financial markets, I don't believe it will materially change the thinking of the Federal Reserve," said Roberto Roffo, managing director and portfolio manager at SWBC Investment Company.
From our point of view, the last few days have been volatile across different sectors in different markets at different times, but one thing that seems to be emerging is that the Fed is likely to pause for the March 22nd meeting next week.
Markets are pricing in cuts as soon as the July meeting
Banks that mismanage interest rate risk and have a concentrated deposit base are always at risk
The market is likely to uncover additional regional banks that have unsafe tangible capital ratios going forward
The banking news is a potential disinflationary force that could bring down Treasury yields.
As it relates to the municipal market,
"The municipal market was a passenger on the roller coaster ride the financial markets experienced, but I don't believe there is an immediate impact," Roffo explained.
Muni yields fell Monday between six and 12 basis points and the tax-exempt market followed the flight to quality in Treasuries after federal regulators stepped in as a result of the collapse of California-based Silicon Valley Bank and New York-based Signature Bank over the weekend.