Municipal Bond Forum
Factors in muni supply
Q
Do you still believe in the premise of your article, “Muni Supply to Remain Tight in 2015“? CNBC today made it sound quite the opposite.
A
James A. Klotz responds:
Although we expect a marginal increase in new issue volume in 2015, there are many variables that will affect the supply and demand dynamic in the municipal bond market.
Changes in prevailing interest rates can affect the quantity of refunding issues (supply). Additionally, if muni bond funds experience outflows rather than the steady stream of inflows as in 2014, it could turn these funds into sellers rather than high-volume buyers, which would alter the demand side of the equation. Obviously, this would play a big role in determining the “tightness” of the market.
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