After more than two months of extreme volatility, the municipal market gained clarity as to the Fed’s intentions with its news that it would charge a large premium on issuers who choose to access its Municipal Liquidity Facility. Instead, investors turned their heads to the stock market in hopes that strength in equities will continue and governments will start to reopen. Triple-A benchmark yields fell two or three basis points in thin secondary trading. The Fed on Monday essentially said it was standing 10 feet back from the market, allowing it to manage the pandemic-driven crisis itself. Triple-A issuers can use the traditional means of accessing the exempt and taxable markets; however the Fed gave the nod that it is there if needed. The dealer community also said it was on hand to manage the market. “The pricing for the facility is above market under current conditions,” the Bond Dealers of America said. “However, the Fed has said that the facility is intended as last-resort financing, and it is priced as such. We hope the Fed is able to bring the facility online soon.” SIFMA said it was evaluating the proposal and the “dealer community stands at the ready to facilitate where we can be helpful.”
(Read more: The Bond Buyer)
