• Update From GFOA’s Federal Liaison Center On The Federal Funds Freeze.
• What Drives Trading Volume in the Municipal Securities Market? An MSRB Study of Likely Factors.
• DOGE Effect Stings Muni Bonds Backed by Federal Lease Payments.
• Research Universities Face Credit Risk from NIH Funding Cut.
• Summary of Tax Proposals in Leaked Document Detailing Policy Proposals: Proskauer Rose
• US Lawmakers Seek to Revive Early Refinancing for State, Local Governments.
• And Finally, Well That Would Explain The Short-Staffing is brought to us this week by Val Verde Hospital District v. Salazar, in which a young woman checked in to the ER, “because she was experiencing symptoms of shortness of breath, chest palpitations, and chest pain.”  A technician then set up an EKG, which we have just learned requires attaching twelve separate electrodes to the chest.  The patient subsequently sued the hospital, alleging that she had been inappropriately touched during the procedure.  We love the fact that the Texas Court of Appeals felt it necessary to stipulate that the EKG and the associated electrodes themselves did nothing wrong.  Noted.  More importantly, the patient/plaintiff did provide us with a god-tier insult when she stated that the technician, “did not have the appropriate demeanor, personality, and/or character to perform an EKG.”  Gonna have that one cue’d up on my next visit to Jiffy Lube.

Owners of low-income housing projects brought consolidated actions against the United States Department of Housing and Urban Development (HUD), alleging that enactment of Emergency Low Income Housing Preservation Act (ELIHPA) and Low-Income Housing Preservation and Resident Homeownership Act (LIHPRHA) constituted temporary regulatory takings under Fifth Amendment in that they prevented owners from exercising their contractual right to prepay government-insured mortgages on their respective housing projects, to terminate government rent restrictions.

The Court of Federal Claims granted summary judgment in favor of government. Property owners appealed. The Court of Appeals affirmed in part, vacated in part, and remanded.

On remand, the Court of Federal Claims held that:

• Owner did not establish that expectation to prepay its mortgage and convert to market rate rentals after 20 years was primary or “but for” reason for its investment;
• Other owner established that expectation to prepay its mortgage and convert to market rate rentals after 20 years was primary or “but for” reason for its investment;
• Expectation of owner to prepay its mortgage and convert to market rate rentals after 20 years was objectively reasonable in view of industry practice as whole;
• Expectation of owner to prepay its mortgage and convert to market rate rentals after 20 years was objectively reasonable in view of testimony from former employees of Department of Housing and Urban Development (HUD) supporting owner’s expectation and language used on owner’s secured note;
• Testimony from certified public accountant (CPA), determining that early tax benefits were more valuable than hypothetical residual 20 years later, did not refute objectively reasonable expectation of owner;
• District court could not credit economic loss calculation of owners’ primary expert who died prior to court’s decision, as adopted and promulgated by secondary financial analyst;
• Methodology of government’s expert for calculating economic loss was consistent, replicable, and reliable, and therefore admissible; and
• Economic impact of LIHPRHA on owners of between 5.9% and 27.4% did not constitute temporary regulatory taking.

Owners of 176 acres of land annexed to city brought action in state court against city for inverse condemnation under federal and state constitutions and violations of their constitutional rights under § 1983, based on allegations that they had been deprived of any and all economical and productive use of the property as result of city ordinances requiring them to connect to city water services at their own cost.

Following removal, both sides moved for summary judgment. The United States District Court for the Eastern District of Missouri entered summary judgment for city. Landowners appealed.

The Court of Appeals held that:

• Ordinances did not mandate a permanent physical invasion of landowner’s property and thus did not amount to a “taking” on that ground;
• Ordinances did not deprive landowners of all economically beneficial use of their property;
• Court would treat landowners’ parcel as a single parcel, rather than eight subdivided lots, when applying the Penn Central regulatory taking test;
• Economic effect on the landowner prong of the Penn Central regulatory taking test weighed in favor of city;
• Interference with reasonable investment backed expectations prong of the Penn Central regulatory taking test weighed in favor of city; and
• Character of the governmental action prong of the Penn Central regulatory taking test weighed in favor of city.

Fire district commenced article 78 proceeding against village seeking mandamus to compel authorization of land transfer and grant of easements that fire district alleged had been agreed upon by the parties.

The Supreme Court, Orange County, granted village’s motion to dismiss the petition. Fire district appealed.

The Supreme Court, Appellate Division, held that village board of trustees’ enactment of resolution authorizing land transaction was not a purely ministerial act for which mandamus was the proper remedy.

Village board of trustees’ enactment of resolution authorizing land transaction consisting of land transfer and certain easements between village and fire district was not a purely ministerial act for which mandamus was the proper remedy for village’s alleged failure to authorize agreed-upon land transfer and grant of easements; village was not required to enact or enforce resolution, and there was no otherwise clear legal right to land transaction.

Victim brought negligence action against city, city police department, and police officer who was handler of the police dog that allegedly bit victim for personal injuries suffered from the bite.

The Supreme Court, Orange County, denied defendants’ motion for summary judgment.

The Supreme Court, Appellate Division, held that defendants did not owe victim a special duty, thus precluding their liability for negligence.

When a negligence cause of action is asserted against a municipality, and the municipality was exercising a governmental function, the municipality may not be held liable unless it owed a special duty to the injured party; such a special duty can arise where the municipality took positive control of a known and dangerous safety condition.

City, city police department, and police officer who was handler of the police dog that allegedly bit victim did not owe victim a special duty, thus precluding their liability for negligence to victim from the dog bite; officer did not take control of a known and dangerous condition that gave rise to victim’s injuries, as, at the time of the bite, officer was an attendee at a training program conducted by a state agency at a state facility, he merely participated in the training exercise, and he took direction from the canine instructor.

Patient brought medical malpractice action against state hospital and staffing company, alleging negligence based on electrocardiogram (EKG) technician’s inappropriate touching of her breasts during exam.

The 83rd District Court denied hospital’s plea to the jurisdiction. Hospital appealed.

The Court of Appeals held that use of state hospital’s EKG machine by technician merely furnished the condition for injury to patient, and thus was insufficient to waive hospital’s immunity from suit.

Use of state hospital’s electrocardiogram (EKG) machine by technician merely furnished the condition for injury to patient, and thus was insufficient to waive hospital’s immunity from patient’s medical malpractice suit under the Texas Tort Claims Act (TTCA); patient sought damages for physical pain, mental anguish, and emotional distress from technician’s touching of her breasts while performing an EKG, but did not contend that she was injured by the EKG machine itself or its electrodes.

The tax debate comes as the munis landscape looks bright

The Trump administration’s efforts to cut taxes are threatening to upend the U.S. $4 trillion municipal bond market.

The potential change comes as local governments are increasingly relying on munis to finance public works. Municipal bonds issuance is growing, after a post-pandemic lull. Investors, in turn, have sought the low-risk securities to buffer their fixed-income portfolios while reducing their tax load.

“We truly benefit from a strong and sort of voracious market wanting to invest in safe, liquid and nearly riskless assets,” said Emily Brock, a lobbyist for the Government Finance Officers Association, a national organization of state and municipal finance officials.

The momentum in munis could now wane, as lawmakers look for ways to increase federal revenues and offset wide tax cuts proposed by President Trump. Tax exemptions that for generations have made municipal bonds attractive could be eliminated, pushing investors to demand higher payouts to finance infrastructure including schools, sewage systems, roads, airports and more.

“Far and away, the biggest risk [for munis] is a change in the tax system this year,” said Matt Fabian, partner at research firm Municipal Market Analytics.

The tax debate comes as the munis landscape looks bright. Local budgets are healthy after states and municipalities used part of Covid-related federal transfers to beef-up their rainy day funds, while volatile markets bolster demand from investors for this type of low-risk assets.

“We are very comfortable right now that the municipal bond market is starting [2025] from a position of strength,” said Matthew Norton, chief investment officer of municipal bonds at AllianceBernstein. Norton said AB research shows that munis finance around 75% of the U.S.’s infrastructure.

Municipal bonds typically offer lower yields than other fixed-income options, including Treasurys. The ICE US Municipal Securities Index effective yield was 3.4% on Feb. 13, compared to 4.5% on the ICE BofA U.S. Treasury Index.

It is the tax advantage that makes them attractive, particularly to high-income individuals and institutional investors.

The Securities Industry and Financial Markets Association estimates there were $4.2 trillion outstanding munis in the third quarter of 2024, 3% more than a year earlier. According to SIFMA, $36.3 billion in munis were issued last month, the highest January issuance in records going back to 1980.

Using SIFMA data, the National Association of Bond Lawyers estimates that the vast majority, or around $3.5 trillion of outstanding munis, are tax-exempt.

The concerns about exemptions stem from discussions regarding the Tax Cuts and Jobs Act approved in 2017 with Republican support. Some cuts expire by year end and are widely expected to be extended or even deepened. But given the growing federal budget deficit, lawmakers face pressure to find alternative revenue sources.

Nixing tax exemptions on interest earned by municipal bondholders has been mentioned by the House Ways and Means Committee as a way to save $250 billion over 10 years. Local authorities are trying to dissuade lawmakers from doing so, arguing it would do more harm than good.

“There is a good chance, maybe 50% chance, that the Republicans remove the tax exemption entirely…to pay for extension of the TCJA,” Fabian said, referring to the 2017 Tax Cuts and Jobs Act.

The critical role munis play in reducing local governments’ reliance on federal handouts, however, makes some investors believe that the tax exemptions will survive.

Dan Close, head of municipals at Nuveen, said he is monitoring developments in Washington. “We are always concerned every time there is discussion about tax exemptions,” he said. But Close is confident that incentives will survive. He expects issuance to be around $500 billion this year —about the same as in 2024— with returns also unchanged. He isn’t changing strategy or holding cash.

The Wall Street Journal

By Paulo Trevisani

Feb. 14, 2025

Write to Paulo Trevisani at paulo.trevisani@wsj.com

Fitch Ratings-New York-11 February 2025: Resilient consumer spending momentum supports U.S. economic growth, although growth will decelerate in 2025 due to the effects of higher U.S. import tariffs and slower investment and government spending growth. The risk environment continues to evolve with shifts in key federal policy, according to Fitch Ratings in the 1Q25 U.S. Credit Brief. Ratings with Negative Outlooks exceed those with Positive Outlooks, largely driven by sub-investment-grade ratings on Negative Outlook.

Continue reading.

Elon Musk’s aggressive push to cancel federal leases is pressuring some municipal bonds backed by payments from the US government.

The White House has urged the General Services Administration, the government’s real estate manager, to cut federal office space. The efforts are part of the crusade by President Donald Trump and Musk to lower spending, creating turmoil at federal agencies. Musk’s Department of Government Efficiency has tweeted about some lease cancellations already.

There is a subsection of the $4 trillion state and local government debt market backed by federal lease payments. It’s hard to tally how much debt is impacted, but investors have funded hundreds of millions of dollars of debt tied to buildings like NASA’s DC headquarters and an office for the Social Security Administration in Baltimore.

The campaign to cut costs and reduce the US government’s office footprint is already spurring some bonds tied to GSA leases to start to sell off, amid concerns that the contracts won’t be renewed. Taxable debt sold in 2022 to refinance obligations for the US space agency headquarters traded on Wednesday at a roughly 26% yield, or about 55 cents on the dollar, according to trading data collected by Bloomberg. That is about 11 percentage points wider than where the bonds traded before November’s presidential election.

“These leases are kind of a political football right now,” said Nicholos Venditti, senior portfolio manager at Allspring Global Investments. “You’ve started to see price reaction to these news stories,” he said.

The NASA bonds aren’t the only securities to widen. Junk-rated taxable debt sold for the Social Security Administration’s office in Birmingham, Alabama, have also sold off. Those bonds traded at a yield of 27% on Feb. 11, compared to about 16% in October, data compiled by Bloomberg show. The federal government’s lease on the building expires in early 2028. And bonds sold for an FBI field office in San Diego have also dropped – the General Services Administration has a lease on the building until April 2033. Even debt sold for a veterans’ affairs clinic changed hands at a lower price in February.

Still, some of the trades are smaller in size, making it harder to gauge how investors across the board are evaluating the credits. Some of the bonds had lower credit ratings to begin with, in the BBB or junk range, so they already traded at elevated yields.

The falling prices for some government-lease backed bonds illustrate how the Trump administration’s push to cull spending is reverberating across the US. The public finance sector is already reeling from the myriad of executive orders, with colleges and universities bracing for a reduction in research funding, and state officials challenging a proposed halt in federal grants.

Moody’s Ratings downgraded the NASA bonds to junk in March 2024, and on Monday cut the ratings again to B2, five levels below investment grade. The analysts said they see full lease renewal as less likely in 2028. The $275 million of principal is due in 2028, and it could be harder to refinance the debt given those uncertainties, according to Moody’s. “The downgrade also reflects emerging uncertainties in the GSA’s general leasing strategies more broadly,” according to the rating firm’s report.

There are longstanding concerns with the federal government’s use of office space. Biden in early January signed legislation with provisions to reform the GSA and consolidate office space, according to a press release from Rep. Scott Perry, a Republican from Pennsylvania. The Government Accountability Office found in 2023 that federal offices were underutilized amid the rise of telework. Federal agencies spend about $2 billion a year to operate and maintain their office buildings regardless of how often they are used, the report said.

Arnold & Porter, a law firm, said in a report that there are limits on the GSA’s ability to cancel leases. During what’s known as the firm term of the lease, the government has limited cancellation rights, according to the report. The NASA building, financed with a $275 million bond sale in 2022, is still in its firm term of the lease until 2028, Moody’s said.

The “Trump effect” is apparent in the trading of the federal lease-backed bonds, said Jason Appleson, head of municipals for PGIM. But even before his election, Appleson said there were concerns about the federal government’s office space needs, and bond valuations were starting to reflect that.

In mid-November, NASA had said it was searching for a new headquarters facility in DC. The bonds dropped in December, but the decline has been steeper more recently with the DOGE cost-cutting.

The federal government’s lease payments backing the bonds can be “generous,” at above-market rates, Appleson said. “If you had to re-let the building, it’s questionable what you could get and what the underlying real estate could be worth,” he said.

The NASA headquarters lease is one of the largest GSA leases by rent and square footage, according to Moody’s.

The fallout isn’t just limited to muni bond debt. About $12 billion of loans tied to commercial mortgage bonds are also at risk, according to a Barclays Plc report last week.

Bloomberg Markets

By Amanda Albright and Danielle Moran

February 14, 2025

— With assistance from Immanual John Milton

• Policy change would reduce research funding for universities
• Federal judge temporarily blocked the Trump-directed cuts

Proposed cuts by the Trump administration to a type of federal funding from the National Institutes of Health would pose a credit challenge to universities that receive the funds, analysts at JPMorgan Chase & Co. said.

The NIH has been ordered to slash funding for research at universities and hospitals, though on Monday a federal judge temporarily paused the change. A hearing date is scheduled for Feb. 21.

“The announcement is another demonstration of the new administration’s focus on cost cutting, reinforcing our view that credits with significant direct exposure to the federal government warrant a higher degree of credit scrutiny,” JPMorgan analysts led by Peter DeGroot wrote.

Some schools have warned about the cuts. Such a drop would lower the University of Pennsylvania’s annual federal funding by about $240 million, interim president J. Larry Jameson said in a statement on Tuesday to the school community. Stanford said the change will create a reduction in NIH funding of approximately $160 million per year.

Still, most of the universities threatened by efforts to pare back government spending currently have high-grade credit ratings, according to Barclays Plc. strategists including Mikhail Foux and Bobby Zauner. The exception is the Icahn School of Medicine at Mount Sinai. The school has $411 million in outstanding municipal debt and is operating with thin margins and increasingly higher leverage due to new capital leases, according to Foux. It received $95 million in federal contracts during fiscal year 2023.

The school is rated Baa3 after being downgraded by Moody’s Ratings from Baa1 in August.

“The school relies on the hospital for a sizable portion of patient care revenue and interim liquidity,” Foux said. “In our view, possible government contract cancellations might have a negative effect on this credit.”

Lucia Lee, a spokesperson for Mount Sinai, said the health system conducts lifesaving biomedical research. “These investments are important, and the indirect costs are real costs,” she said in an emailed statement.

Bloomberg Industries

By Elizabeth Rembert

February 12, 2025

Overview

S&P Global Ratings took 59 rating actions, made 26 outlook revisions, and placed five ratings on CreditWatch within the U.S. municipal water and sewer utilities sector in fourth-quarter 2024. We also affirmed eighty-two ratings with no outlook revisions.

Continue reading.

10 Feb, 2025

Mandatory processes and detailed rules have increasingly constrained officials’ discretion, leading to endless lawsuits, decadeslong project delays and multibillion-dollar cost overruns. There’s a better way.

In recent weeks, Elon Musk’s Department of Government Efficiency (DOGE) has moved to eliminate the U.S. Agency for International Development, while President Trump prepared an executive order to wind down the U.S. Department of Education. It’s the latest attempt to make government more efficient by eliminating things that it does. Merely shuttering departments, however, won’t get to the heart of the problem DOGE seeks to correct: The American public sector, at any level of government, can’t get things done in a time-effective and efficient manner.

A new Manhattan Institute report provides an antidote to this public malaise in the context of infrastructure. Its author, Philip K. Howard, offers a new governing vision that authorizes officials to weigh tradeoffs and make decisions for the public’s benefit.

Decades ago, Democrats and Republicans both understood the need for a well-functioning, results-oriented government to provide public goods. On Nov. 15, 1933, Harry Hopkins, overseer of much of the New Deal, called governors and mayors to Washington to request that they submit proposals to get their residents working again. By Nov. 26, he had approved 920 projects just for Indiana and begun employing nearly 50,000 of its residents to repave streets, roads and airport runways. In the early 1940s, the 6.5 million-square-foot Pentagon was built in just 16 months.

Continue reading.

governing.com

OPINION | Feb. 14, 2025 • John Ketcham, Manhattan Institute

Read the MSRB Publication.

Long-maturity municipal bonds are the cheapest since November relative to Treasuries as investors in the market for US state and local debt confront questions around tax policy and absorb swelling issuance.

Yields on 30-year, top-rated munis were about 85% of the level of similar-maturity Treasury rates as of Thursday, the highest since right after President Donald Trump’s election victory in November, data compiled by Bloomberg show. A climbing ratio shows munis are underperforming US government debt.

Long-term muni supply is up 27% in February from a year earlier, to about $21 billion, data compiled by Bloomberg show. That’s fed into the weakness, and some investors are starting to see value. State and local securities tend to offer lower yields than Treasuries because of the tax-free interest they pay.

Continue reading.

Bloomberg Markets

By Elizabeth Rembert and Shruti Singh

February 14, 2025

Despite economic data once again signaling inflation is on the rise, the future of rate cuts becoming uncertain and an evolving fiscal policy landscape, there is much to be optimistic about within the muni market. On this month’s Masters of the Muniverse podcast, hosts and Bloomberg Intelligence analysts Eric Kazatsky and Karen Altamirano talk to Tim Coffin, Director of Sustainability at Breckinridge Capital Advisors. We discuss the rise in separately managed accounts and how the demand for sustainable investing is unlikely to wane.

Listen to audio.

Feb 14, 2025

• Advanced refunding was cut as part of GOP’s 2017 tax overhaul
• Bill comes as tax-exempt status of munis comes under threat

A group of House lawmakers is seeking to revive a debt refinancing tactic for US state and local governments.

Legislation that would restore borrowers’ ability to sell tax-exempt muni bonds for so-called advance refundings were introduced Wednesday by a bipartisan group including Representative David Kustoff, a Republican from Tennessee, according to a press release from his office. The federal subsidy offered on the refinancing tool, which allowed governments to refinance debt that can’t yet be called back from investors, was eliminated as part of the GOP’s 2017 tax overhaul.

“This bill will give state and local governments a critical financing tool to stimulate economic development, create jobs, and save taxpayer dollars,” Kustoff said in a statement.

The four lawmakers who introduced the bill are members of the House Ways & Means Committee, which writes tax policy.

The move comes as the public finance market braces for potential further changes to the tax-exempt status on municipal bonds as part of Republicans’ effort to extend tax cuts when they expire this year. Past efforts to bring back the federal subsidy for advance-refunding bonds haven’t gone very far.

“We are viewing introduction of this legislation at such a critical time as a big win for protection of the tax-exemption as it highlights the importance to committee leadership and will show the depth of support for munis on the Republican side of the aisle in Ways and Means,” said Brett Bolton, vice president of federal legislative and regulatory policy for the Bond Dealers of America, a Washington-based lobbying group representing securities dealers and banks.

Municipalities can still sell taxable bonds to refinance tax-exempt bonds, but that’s unfavorable to borrowers.

“Right now, states and local governments are facing higher borrowing costs because they can’t advance refund bonds to take advantage of lower interest rates,” said Representative Jimmy Panetta, a Democrat from California who co-sponsors the proposed legislation, in a statement.

Bloomberg Markets

By Amanda Albright and Shruti Singh

February 13, 2025

The American Public Power Association on Feb. 13 said it applauds the bipartisan introduction of H.R. 1255, the Investing Our Communities Act of 2025, legislation to reinstate the ability to issue tax-exempt advance refunding bonds.

“This legislation will reduce costs and increase flexibility in financing the investments that keep the lights on in our communities,” said APPA President & CEO Scott Corwin. “This is an important improvement to an already potent tool: the tax-exempt municipal bond. Bonds finance more than three-quarters of the nation’s core infrastructure. They reduce costs for borrowers and are an incredibly valuable investment for millions of Americans, many of whom are fixed-income seniors.”

The bill is cosponsored by Rep. David Kustoff (R-TN), Rudy Yakym (R-IN), Gwen Moore (D-MI), and Jimmy Panetta (D-CA), all members of the House Committee on Ways & Means.

APPA is encouraging its members to contact their congressional offices in support of H.R. 1255 – to support the bill, but also to make the underlying case in support of tax-exempt financing.

American Public Power Association

by Paul Ciampoli

February 13, 2025

Key Takeaways

• Texas public schools faced significantly increased credit pressure in 2024, with downgrades and outlook revisions to negative outpacing upgrades and positive outlooks.
• We took negative rating actions on Texas school districts experiencing weaker local taxing base growth, declining enrollment, or management’s difficulty in closing structural gaps due to constrained revenue or expenditure flexibility.
• State legislative negotiations continue on increases to per-pupil funding and the establishment of a statewide Educational Savings Account (ESA) program for private and alternative school options, which could affect long-term funding for public schools.

Continue reading.

10 Feb, 2025

I. Introduction

On January 17, 2025, news sources reported that Republican members of Congress circulated a detailed list of legislative policy options, including tax proposals. This blog post summarizes some of the tax proposals and corresponding revenue estimates mentioned in the list.

II. Individuals

(a) SALT Reform Options

The $10,000 cap on the deductibility of state and local tax (“SALT”) from federal taxable income for most non-corporate taxpayers is set to expire at the end of the year. The list includes several alternative proposals for SALT deductibility going forward.

• Repeal SALT Deduction: The SALT deduction would be repealed for individual and business tax filers. This would raise $1 trillion over ten years, as compared to extending the current TCJA deduction cap.
• Make $10,000 SALT Cap Permanent but Double for Married Couples: The current TCJA deduction cap for individual and business tax filers would remain, but the cap would be raised for married couples to $20,000 at an estimated cost of $100-200 billion over 10 years, as compared to extending the current TCJA deduction cap.
• $15,000/$30,000 SALT Cap: The current SALT deduction cap would be increased to $15,000 for individual taxpayers and $30,000 for married couples, with an estimated cost of $500 billion over 10 years, as compared to extending the current TCJA deduction cap.
• Eliminate Income/Sales Tax Deduction Portion of SALT: Only property taxes would be eligible for the SALT deduction, and the deduction would not be capped. This proposal would cost $300 billion over 10 years, as compared to extending the current TCJA deduction cap.
• Eliminate Business SALT Deduction: This policy option would eliminate the SALT deduction for business filers only, while maintaining the TCJA deduction cap for individuals. It would raise $310 billion over 10 years.

Continue reading.

Proskauer Rose – Robert A. Friedman, Rita N. Halabi, Martin T Hamilton, Christine Harlow, Malcolm Hochenberg, Mary McNicholas, David S. Miller and Amanda H Nussbaum

February 12 2025

Read the Report.

February 10 2025

Washington D.C., Dec. 20, 2024 —

The Securities and Exchange Commission today charged registered investment adviser Silver Point Capital L.P. with failing to establish, implement, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information (MNPI) relating to its participation on creditors’ committees.

According to the SEC’s complaint, one of Silver Point’s core strategies was to invest in distressed companies. As part of this strategy, and because of the nature of its business, a long-time Silver Point consultant, a now-deceased lawyer, participated on creditors’ committees of those distressed companies on Silver Point’s behalf. However, the SEC alleges, the firm failed to enforce policies and procedures that were reasonably designed to address the specific risks associated with the consultant’s receipt of MNPI as a result of his participation on creditors’ committees.

Specifically, the SEC alleges that, from September 2019 through February 2020, the consultant sat on an ad hoc creditors’ committee in connection with the restructuring of Puerto Rico’s defaulted municipal bonds and received MNPI from a related confidential mediation. According to the complaint, the consultant had extensive communications with Silver Point’s public trading desk, without involving the firm’s compliance department, at times when he had MNPI from the mediation and while Silver Point continued to buy Puerto Rico bonds. According to the SEC, this created a substantial risk that Silver Point may have misused information from the mediation in connection with its trading of Puerto Rico bonds.

“Silver Point is alleged to have purchased over $260 million of Puerto Rico bonds during the same period that a Silver Point consultant, who possessed MNPI about the same Puerto Rico bonds, had more than five hundred calls with firm employees, including those who actively traded such debt, without involving the firm’s compliance department,” said Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement. “Allowing individuals who possess MNPI to have unfettered access to those making trading decisions presents an enhanced risk of misuse of MNPI, and the resulting risks to market integrity and investors are compounded when investment advisers fail to enforce their compliance policies and procedures to prevent the misuse of MNPI.”

The SEC’s complaint, filed in the U.S. District Court for the District of Connecticut, charges Silver Point with violating provisions of the Investment Advisers Act of 1940 related to establishing and enforcing reasonably designed compliance policies and procedures.

The SEC’s investigation was conducted by Sally Hewitt, Heidi M. Mitza, and Jonathan Wilcox of the Public Finance Abuse Unit and Annie Hancock of the Asset Management Unit and supervised by Kevin B. Currid. The SEC’s litigation will be led by Susan Cooke and Michael Moran of the Boston Regional Office.

The ‘AA+’ rating on the series 2025A bonds reflects strong growth prospects for state sales tax collections, the source of revenues pledged to the bonds and the resilience of the bond structure. Available sales tax collections, net of distributions that occur ahead of the Transportation Expansion and Congestion Mitigation (TECM) Fund distribution, provide strong debt service coverage, even when taking into account maximum future issuance. The rating is capped at one notch below the state of Idaho’s ‘AAA’ Issuer Default Rating (IDR), as the Idaho Legislature retains the ability to alter or repeal the continuing appropriation for debt service.

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Wed 12 Feb, 2025

The ‘AAA’ rating on the subordinate future tax-secured (FTS) revenue bonds reflects solid long-term growth prospects for pledged revenue and the bonds’ highly resilient structure. Fitch Ratings anticipates that the bond structure will be able to withstand changes in economic cycles and maintain solid debt service coverage. Fitch’s analysis indicates resilience would be strong even if New York City leveraged the pledged revenue up to its legally permitted amount, but Fitch expects issuance to be well below that level as excess revenue flows to the city for general operations. A very strong legal structure insulates bondholders from the operating risk of New York City (IDR: AA/Stable.

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Wed 12 Feb, 2025

The Wisconsin Environmental Improvement Fund (EIF) is issuing $28 million in Environmental Improvement Fund Revenue Refunding Bonds, 2025 Series 1 (Green Bonds), rated AAA by Fitch Ratings with a stable outlook. The EIF’s financial structure can absorb significant defaults without interrupting bond payments, supported by a large and diversified loan pool of over 590 participants. The bonds are secured by pledged loan repayments and other revenues. The program’s cash flow is strong, with projected annual debt service coverage exceeding 3.3x through 2043. The EIF is managed by Wisconsin’s Department of Natural Resources and Department of Administration, and has never experienced a payment default. Fitch’s analysis confirms the program’s robust financial health and ability to withstand stress scenarios.

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Thu 13 Feb, 2025

The ‘AA-‘ rating on the Pennsylvania Economic Development Financing Authority (PEDFA) revenue bonds reflects appropriation risk. Appropriations for PEDFA debt service payments are subject to annual appropriation by the state legislature. Pennsylvania’s ‘AA’ Issuer Default Rating (IDR) reflects Fitch Ratings’ assessment of solid operating performance, as well as the commonwealth’s low long-term liability burden and broad flexibility to manage spending pressures.

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Thu 13 Feb, 2025

There remains uncertainty around how the Administration’s funding freeze proposed on January 27 will ultimately play out. Two federal judges have temporarily blocked the freeze, the Office of Management (OMB) rescinded the memo calling for the pause in funding on January 29, and reports of entities like nonprofits and states having mixed experiences when trying to access federal funds, have all contributed to an already confusing set of circumstances. We continue to monitor this very fluid scenario.

Read more

Municipal bond funds may be a compelling opportunity in 2025, as muni bonds are currently offering the highest yields in the past decade.

Fortunately, for investors, there are currently opportunities to be found in various segments of munis. This means that investors can target the level of interest rate risk they’re comfortable taking on based on their personal investment outlook.

“Some opportunities are more present further out the curve. Some are more present on the shorter end,” Elizah McLaughlin, portfolio manager at Fidelity Investments, said during VettaFi’s Q1 2025 Fixed Income Symposium.

For investors looking to take on less interest rate volatility, Fidelity offers the Fidelity Limited Term Municipal Income Fund (FSTFX). FSTFX is one of the firm’s shorter duration funds, McLaughlin said.

Next, the Fidelity Intermediate Municipal Income Fund (FLMTX) and the Fidelity Sustainable Intermediate Municipal Income Fund (FSIKX) each target the two to 20-year range of duration risk.

Finally, McLaughlin said the Fidelity Tax-Free Bond Fund (FTABX) focuses on three-plus-year durations.

Muni Bond Sectors Well Positioned in 2025

“There are a number of opportunities that we have been investing in lately,” McLaughlin said.

The hospital sector is one area that currently looks attractive. Fidelity has a strong research team with extensive experience in that sector, McLaughlin said. “They have been able to steer us into those names they think are going to perform well,” she added.

The airports segment is another area that continues to be priced relatively cheap.

“Those are typically solid credits, but they’re subject to AMT tax treatment,” McLaughlin said. “Many of you are aware that the 2017 Tax Cuts and Jobs Act has provisions that are scheduled to expire at the end of this year. Many of the provisions that are relating to the individual AMT will need to be renegotiated this year.”

This means that investors need to evaluate their current AMT risk and what makes sense for their individual risk profile.

Looking At Housing Bonds

Finally, housing bonds, including bonds issued to fund both multi-family and single-family projects, are an interesting opportunity in the current environment.

The sector underperformed quite a bit when the Fed was raising rates because people stopped prepaying their mortgages, McLaughlin said. “They liked those low rates on their mortgages. We saw the maturities of a lot of those bonds back up.”

However, that has started to reverse now, creating opportunity for experienced managers.

“This is an area where you have to be able to do prepayment modeling,” McLaughlin said. “It’s one that really kind of lends itself to professional management. But there is a lot of opportunity in that sector as well.”

etftrends.com

by Elle Caruso

February 14, 2025

For more news, information, and strategy, visit the ETF Investing Channel.

Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.

‘I think you’re going to see more and more of the muni space moving toward ETFs,’ says Morgan Stanley’s Craig Brandon

Hello! For this week’s ETF Wrap, Morgan Stanley and BlackRock provide some perspective on investing in the municipal-bond market.

Please send feedback and tips to christine.idzelis@marketwatch.com or isabel.wang@marketwatch.com. You can also follow me on X at @cidzelis and find me on LinkedIn. Isabel Wang is at @Isabelxwang.

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By Christine Idzelis

Provided by Dow Jones Feb 13, 2025 5:13pm

Thursday, February 20, 2025 – 12:00 EST

Virtual Event
A growing number of communities are supercharging their local economy by building publicly-owned telecommunication infrastructure instead of relying on the expensive, spotty access offered by the regional monopoly or duopoly incumbent(s). Most of the communities who have joined the expanding public broadband sector were able to finance network construction and operations with little or no federal funds.

This free webinar will primarily focus on how municipal broadband networks can be financed in the context of a now uncertain BEAD program. It will also briefly touch on the cost of doing nothing.

Co-hosted by American Association for Public Broadband (AAPB) Executive Director Gigi Sohn and Sean Gonsalves from Institute for Local Self-Reliance (ILSR) Community Broadband Networks Initiative, the discussion will feature officials and municipal finance experts who have built public broadband networks and have successfully navigated the maze of municipal finance – both from the municipal and private sector side.

Panelists for the discussion will be:

• Ernie Staten, City of Fairlawn’s Public Service Department Director
• F.X. Flinn, ECFiber Governing Board Chair
• Laura Lewis, Principal and Co-Owner of LRB Public Finance Advisors
• Eric Rex, Vice President at KeyBanc Capital Market

Click here to learn more and to register.

Marks completion of the conversion of the BlackRock High Yield Municipal Fund into the iShares High Yield Muni Active ETF

NEW YORK–(BUSINESS WIRE)–Today, BlackRock announced the conversion of the BlackRock High Yield Municipal Fund into an active ETF, creating the iShares® High Yield Muni Active ETF (CBOE: HIMU). HIMU harnesses the expertise of BlackRock’s Municipal Bond Group to provide more choice and flexibility to clients seeking high yield, tax-exempt solutions in the convenience of an ETF.

“Today’s higher interest rate environment provides a generational opportunity to capture income, particularly in the municipal bond market,” said Pat Haskell, Head of the Municipal Bond Group at BlackRock. “Through the ETF wrapper, HIMU aims to take advantage of the attractive yield levels and strong credit quality in municipal bonds, delivering alpha to our clients in an efficient and transparent manner.”

The new ETF seeks to maintain identical investment objectives and fundamental investment policies as its predecessor mutual fund. HIMU aims to maximize federal tax-exempt current income and capital appreciation by investing in high yield municipal securities across a variety of sectors. The mutual fund was launched in 2006 and delivered top quartile performance over the one-, five-, ten- and fifteen-year periods as of December 31, 2024.1

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Distributed by Business Wire

10th February 2025

BlackRock Inc. (BLK) announced Monday it is turning its High Yield Municipal Fund into an exchange-traded fund, the latest sign that major asset managers are embracing ETFs to give investors a more tax-friendly and flexible way to tap into the muni bond market.

The transition of the $1.5 billion fund into the iShares High Yield Muni Active ETF (HIMU) comes as BlackRock projects global active ETF assets will surge to $4 trillion by 2030 from $900 billion in June 2024, the company said in a statement announcing the conversion.

The shift underscores how ETFs are becoming a preferred structure for investors looking for greater trading flexibility and potential tax advantages compared to traditional mutual funds. By moving the fund into an ETF, BlackRock, the world’s largest asset manager with more than $11 trillion in AUM, is giving investors a way to access high-yield municipal bonds while benefiting from lower costs and real-time market pricing.

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etftrends.com

by DJ Shaw

Feb 10, 2025

Reviewed by: Paul Curcio

Edited by: James Rubin

Municipal bond ETFs have exhibited steady growth since their introduction in September 2007. The municipal ETF market now consists of 112 ETFs that combine for USD 141bn in assets. The number of issuers has expanded, and there are now 36 issuers of municipal bond ETFs.

At a glance

• Municipal bond ETFs have exhibited steady growth since their introduction in September 2007. The municipal ETF market now consists of 112 ETFs that combine for USD 141bn in assets.
• CIO suspects that the outperformance of the high yield municipal market last year was a major driver of the increased demand.
• The growing need for customization among high net worth retail and institutional investors and technological advancements facilitating easier client communications and investment administration have driven SMA growth, a trend CIO expects will continue.

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by UBS Editorial Team

11 Feb 2025