Bond issuers are rushing to complete financings before Election Day 2020.

Ahead of the election, municipal issuance is expected to rise at the same time investor demand may be fading, according to HilltopSecurities’ Head of Municipal Strategy and Credit Tom Kozlik.

“If too much issuance comes to market and buyers do not have capacity, that lack of demand can be reflected in higher financing costs,” wrote Kozlik in a Sept. 18 commentary. “That being said, we have seen investors with a voracious appetite for municipal bonds in recent weeks and months.”

Investments in Municipal Funds are Slowing
According to Lipper data, $65 billion flowed into municipal mutual funds in 2019 and a net $11 billion has flowed into municipal funds so far in 2020.

However, the pace of investments flowing into muni funds has slowed, says Kozlik. In the first three weeks of September, investors have only deposited $1.8 billion into muni funds, compared to $5.7 billion in the first three weeks of August.

Source: Lipper Data and HilltopSecurities

Avoiding Election Uncertainty
The municipal market is gearing up for a strong week. The week beginning Sept. 21 is showing an issuance volume of nearly $14 billion, an increase from last week’s $10 billion, according to the IPREO calendar.

“This week’s calendar is a good example of that rush to market we indicated,” says Kozlik. “Now, the race is on for issuers to complete their financings before capacity or buying interest falls away.”

An increasing number of municipal issuers appear to be positioning themselves to avoid relying on market circumstances after the 2020 election—a concern that could stem from the delay of the 2000 election and the market volatility following the 2016 election, Kozlik wrote in a Sept. 14 commentary.

“Issuers are concerned investors could react to instability in November and December of this year like they did in 2016,” says Kozlik.

Learn More
For a more in-depth analysis of how the election is impacting bond issuers, read Kozlik’s recent municipal commentaries:

• Municipal Issuers Rushing to Market Before Election “Month”
• Rush to Market Continues, $14 Billion of Municipal Issuance Coming Next Week
• Video: Fed Unchanged, Officials Discuss MLF and Issuers Rushing to Sell Debt Before 2020 Elections

Follow Tom Kozlik on Twitter, @tomkozlik, or connect with him on LinkedIn.

Hilltop Securities, Inc. (HTS) is a registered broker-dealer, registered investment adviser and municipal advisor firm that does not provide tax or legal advice. This information is intended for educational and informational purposes only and does not constitute legal or investment advice, nor is it an offer or a solicitation of an offer to buy or sell any investment or other specific product or service. HTS is a wholly owned subsidiary of Hilltop Holdings, Inc. (NYSE: HTH) located at 1201 Elm Street, Suite 3500, Dallas, Texas 75270, (214) 859-1800. Member: NYSE/FINRA/SIPC