Municipal Bond Investor Weekly - Raymond James

JULY 15, 2024

Municipal Bond Investor Weekly

High Net Worth Wealth Solutions and Market Strategies // Fixed Income Solutions

NOREEN MCCLURE

THE WEEK AHEAD

Director Fixed Income Private Wealth

1.

New issue calendar remains robust, expecting nearly $11 billion with the largest deals coming in New York, California, and Florida.

DREW O'NEIL

Director Fixed Income Strategy

2. Treasury and municipal bonds rallied last week, investors will see municipal yields down ~ 5 to 15 basis points.

3. The economic calendar this week is highlighted by retail sales data and

import/export price index data, both of which are released on Tuesday.

MONDAY'S COMMENTARY The Difference in State Capital Gain Rates Illustrative Portfolios

Page 2 Page 3

THE NUMBERS THIS WEEK

Lower than expected inflation data sparked a bond rally on Thursday leading to lower yields for the week. Treasury yields ended the week 8 to 15 basis points lower. Municipal bonds rallied as well although much larger moves were seen in shorter maturities. 1 to 5 year yields on the benchmark AAA curve dropped by 12 to 18 basis points while yields from 10 to 30 years fall by 4 to 5 basis points.

Year

Treasury

Municipal (AAA)

Municipal (A)

Municipal TEY* (AAA)

Municipal TEY* (A)

Muni (AAA)/Tsy

Ratio

1 2025 4.87 2.98 3.23 5.04 5.45

61%

2 2026 4.45 2.92 3.16 4.93 5.34

66%

5 2029 4.10 2.82 3.09 4.76 5.22

69%

10 2034 4.18 2.80 3.22 4.73 5.44

67%

20 2044 4.50 3.38 3.99 5.72 6.73

75%

30 2054 4.39 3.69 4.29 6.23 7.25

84%

*Taxable equivalent yield @ 40.8% tax rate

Muni TEY* (AAA)/Tsy

Ratio

103% 111% 116% 113% 127% 142%

8.00

7.25

7.00 6.00 5.00 4.00 3.00

5.22

5.44

4.76 4.10

4.73 4.18

6.23 4.39

2.00 1

3 5 7 9 11 13 15 17 19 21 23 25 27 29

AAA Municipal TEY

A Muni GO TEY

Treasury

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MUNICIPAL BOND INVESTOR WEEKLY

THE DIFFERENCE IN STATE CAPITAL GAIN RATES

Most investors are aware that they may be required to pay capital gains taxes at the federal level --- up to 20% depending on the filing status and income of the investor. However, are you aware that a large percentage of states also levy capital gain taxes? These additional taxes on capital gains can have implications for investment decisions and overall strategy.

Now that we have passed the mid-year mark, there's no better time to review with your financial advisor where there may be opportunities to capture gains and losses to reduce your overall tax liabilities --- at both the federal and state level. As we always note, we are not tax advisors, and we offer our commentary within the broader context of making investment decisions, not wanting to address specific tax implications, e.g., deciphering regulations regarding short and long term gains and losses, and carrying losses into the future --- all subjects best left to your tax advisor!

Most municipal bond investors are buy-monitor-hold to maturity (or call) type investors and therefore are not actively evaluating tax implications of changing values within their bond portfolio.

That said, on occasion, advisors come to us looking for opportunities, typically to sell bonds (to capture losses) as a way of offsetting gains within other investments in client portfolios. Sometimes it is with an outright sale of securities or other times we propose swapping one security for another. Bonds swaps have many moving parts and we will focus on those in future issues of the MBIW.

Today, our focus is on the capital gains at the state level. In the majority of states (33), capital gains taxes are

levied at the same rate as ordinary income. Two states tax at higher levels (Minnesota, 10.85%; and, Washington,

7.0%.) There are

eight states where

capital gains rates are

lower (see graphic

below from the Tax

Foundation.) Finally,

there are the eight

states with no capital

gains tax as well,

including most of the

states with no state

income tax. As noted

by

the

Tax

Foundation, there are

exceptions

and

exclusions in certain

states --- like we said,

topics best left to your

tax advisor!

In our world of tax-

exempt municipal

bonds, we appreciate

the importance of

taxes and the

implications

for

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MUNICIPAL BOND INVESTOR WEEKLY

investment decisions. Taxes can certainly be confusing with each state having its own rules surrounding tax rate liabilities, exemptions, deductions, etc. Given the uniqueness of each investor's situation, before proceeding with any transactions that will result in a tax consequence, we encourage you to review the rules within your state and have a conversation with your financial advisor and your tax professional.

Raymond James is not a tax advisor and does not give tax advice. Please consult a tax professional prior to making any investment decisions.

ILLUSTRATIVE PORTFOLIOS Our illustrative proposals reflect three opportunities along the yield curve with bonds maturing from 1 to 30 years. Municipal yields were off over the past week down ~16 bp on the short end and 5 bp on the rest of the curve. Strategically, to lock in long-term, reliable tax-efficient cash flow, our duration focused 10?20-year maturity illustration continues to offer an excellent tax efficient solution. Looking to maximize yield? The 20 ? 30-year range continues to offer an additional 55+ basis points (over 10 ? 20 years) and may be appropriate for some investors. The yield to worst is ~4.00%, which equates to a taxable equivalent yield to worst of 6.75% for an investor in the top federal tax bracket and subject to the net investment income tax. If the callable bonds are not called, the yield to maturity increases to ~4.23%, which equates to a taxable equivalent yield to maturity of ~7.14%. This is a solution with 4-5% coupon bonds with an average coupon of 4.31% and a market price of ~$1012.35 (101.235). The current yield is ~4.26%. An investment with $1 million par value (~$1,012,346 market value with accrued interest) will generate a federally tax-exempt annual coupon cash flow of ~$43,125.

NAVIGATING TODAY'S MARKET Nearly $11 billion in new issuance is expected to come to market this week according to The Bond Buyer. Some of the larger deals include: the New York City Transitional Finance Authority (Aa1/AAA/AAA) is selling $2.1 billion of future tax secured subordinate bonds; the Regents of the University of California (Aa2/AA/AA) is issuing $1.3 billion of general revenue bonds; Miami-Date County, FL (-/A+/A+) is bringing a $924 million aviation revenue refunding bond deal to market; the Lamar Consolidated Independent School District, TX (Aaa/AAA) is selling $348 million of

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MUNICIPAL BOND INVESTOR WEEKLY

PSF backed bonds; the Ohio Housing Finance Authority (Aaa/-) is issuing $275 million of social non-AMT residential mortgage revenue bonds; and Phoenix (Aa1/AA+/AAA) is bringing a $239 million general obligation deal to market. See table below for additional new issuance. HISTORICAL YIELDS

6.00 5.00 4.00 3.00 2.00 1.00 0.00

Municipal AAA 10-Year

Municipal AAA 2-Year

Fed Funds (Upper Bound)

Date Amount

Issuer

ST

Description

Moody's/S&P/Fitch

7/15 $60MM City of Beaumont

TX Waterworks & Sewer System Revenue

/AA / (A1 / / ) BAM

7/16 $97MM Trinity River Authority of Texas

TX Denton Creek Regional Wastewater

/AA+ /

7/16 $506MM The Regents of the Univ of

CA General Revenue Bonds 2024 Series BX Aa2 /AA /AA

7/16 $818MM The Regents of the Univ of

CA General Revenue Bonds 2024 Series BW Aa2 /AA /AA

7/16 $2MM Parma City (Cuyahoga County) OH OH Capital Improvement Bond Anticipation NR /NR /NR

7/16 $76MM New York City Transitional Finance NY Future Tax Secured Subordinate Bonds, Aa1 /AAA /AAA

7/16 $119MM New York City Transitional Finance NY Future Tax Secured Subordinate Bonds, Aa1 /AAA /AAA

7/16 $126MM New York City Transitional Finance NY Future Tax Secured Subordinate Bonds, Aa1 /AAA /AAA

7/16 $1791MM New York City Transitional Finance NY Future Tax Secured Subordinate Bonds, Aa1 /AAA /AAA

7/16 $45MM New Mexico Mortgage Finance

NM Single Family Mortgage Program Class I Aaa / /

7/16 $105MM New Mexico Mortgage Finance

NM Single Family Mortgage Program Class I Aaa / /

7/16 $10MM Missouri Housing Development MO Single Family Mortgage Rev Bonds (First /AA+ /

7/16 $180MM Missouri Housing Development MO Single Family Mortgage Revenue Bonds /AA+ /

7/16 $140MM Miami-Dade County, Florida

FL Aviation Revenue Refunding Bonds, Series NR /A+ /A+

7/16 $784MM Miami-Dade County, Florida

FL Aviation Revenue Refunding Bonds, Series NR /A+ /A+

7/16 $105MM City of Phoenix

AZ Various Purpose General Obligation

Aa1 /AA+ /AAA

7/16 $128MM City of Phoenix

AZ Various Purpose General Obligation

Aa1 /AA+ /AAA

7/16 $36MM City of Bradenton, Florida

FL Capital Improvement Non-Ad Valorem

Aa1 /NR /NR

7/17 $15MM Yavapai County Commty College AZ Revenue Bonds, Series 2024

/AA / (A1 / / ) BAM

7/17 $14MM West Branch Area School District PA (Clearfield and Clinton Counties) General NR /AA /NR ( /A / ) AGM

7/17 $11MM Township of Willingboro BOE

NJ (Burlington County) Energy Savings

NR /AA /NR ( /A / ) AGM

7/17 $19MM Museum Development Authority of WA Special Obligation Refunding Bonds 2024 /AAA /

7/17 $390MM Metropolitan Transportation

NY Dedicated Tax Fund Green Bonds, Series

7/17 $348MM Lamar Consolidated Independent TX Unlimited Tax Schoolhouse and Refunding Aaa /AAA / (Aa3 /AA- / )

7/17 $19MM Christoval Independent School TX Unlimited Tax School Building Bonds,

/AAA / ( /A+ / ) PSF

7/18 $3MM Vermont Housing Finance Agency VT Multiple Purpose Bonds 2024 Series E -1 Aa1 / /AA+

7/18 $10MM Vermont Housing Finance Agency VT Multiple Purpose Bonds 2024 Series D Aa1 / /AA+

7/18 $17MM Vermont Housing Finance Agency VT Multiple Purpose Bonds 2024 Series E-2 Aa1 / /AA+

7/18 $25MM Vermont Housing Finance Agency VT Multiple Purpose Bonds 2024 Series C Aa1 / /AA+

7/18 $30MM Sinton Independent School District TX Fixed Rate & Variable Rate Unlimited Tax /AAA / ( /A+ / ) PSF

Maturity

09/01/2025-49 02/01/2025-44 05/15/2025-41,54 05/15/2025-41,54 7/31/2025 11/1/25-31 11/1/24-38 11/1/25-26 11/1/25-41 09/01/202509/01/202511/01/202511/01/202510/1/25-37 10/1/27-36 07/01/2032-47 07/01/2032-47 9/1/25-54 07/01/2025-44 5/15/25-50 7/15/25-45 04/01/2025-31 tbd 2/15/2025-59 02/15/2025-54 11/01/2025-30 11/1/2054 11/1/2026 11/01/20308/15/2025

This offering calendar is for information purposes only, and is not intended as an offer for solicitation with respect to the purchase or sale of any securities. For more information on the new issues go to .

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MUNICIPAL BOND INVESTOR WEEKLY

There is no assurance any of the trends mentioned will continue or forecasts will occur. Investing involves risk and investors may incur a profit or a loss. Past performance may not be indicative of future results. Prior to transacting in any security, please discuss the suitability, potential returns, and associated risks of the transaction(s) with your Raymond James Financial Advisor. This communication is not an offer to sell or a solicitation to buy any securities mentioned herein. High grade and High yield securities mentioned herein may not be suitable for all investors. A credit rating of a security is not a recommendation to buy, sell or hold securities and may be subject to review, revisions, suspension, reduction or withdrawal at any time by the assigning rating agency. All expressions of opinion reflect the judgment of the Fixed Income Municipal Department of Raymond James & Associates (RJA) at the time of publication and may be subject to change without notice. Information has been obtained from sources considered reliable, but we do not guarantee that the foregoing report is accurate or complete. Other departments of RJA or its affiliates may have information that is not available to the Fixed Income Municipal Department about companies or Issuers mentioned in this report. Further information on the securities mentioned herein is available upon request. Interest on Municipal Bonds is generally exempt from federal taxation and may also be free of state and local taxes for investors residing in the state and/or locality where the bonds were issued. However, bonds may be subject to federal alternative minimum tax (AMT), and profits and losses on tax-exempt bonds may be subject to capital gains tax treatment. Bonds are subject to risk factors including: 1) Default Risk - the risk that the issuer of the bond might default on its obligation 2) Rating Downgrade - the risk that a rating agency lowers a debt issuer's bond rating 3) Reinvestment Risk - the risk that a bond might mature when interest rates fall, forcing the investor to accept lower rates of interest (this includes the risk of early redemption when a company calls its bonds before maturity) 4) Interest Rate Risk - this is the risk that bond prices tend to fall as interest rates rise. 5) Liquidity Risk the risk that a creditor may not be able to liquidate the bond before maturity. High-yield bonds are not suitable for all investors. The risk of default may increase due to changes in the issuer's credit quality. Price changes may occur due to changes in interest rates and the liquidity of the bond. When appropriate, these bonds should only comprise a modest portion of a portfolio.

Sourced from Bloomberg: Treasuries: US Fed H15 CMT Curve - The H15 curve is comprised of the constant maturity treasury rates as published daily by the Federal Reserve in the H15 report. Municipal (AAA): BVAL Municipal AAA Yield Curve (Callable) - The curve is populated with high quality US municipal bonds with an average rating of AAA from Moody's and S&P. The yield curve is built using non-parametric fit of market data obtained from the Municipal Securities Rulemaking Board, new issues, and other proprietary contributed prices. The curve represents 5% couponing. The 3 month to 10 year points are bullet yields, and the 11 year to 30 year points are yields to worst for a 10-year call. Municipal (AA): US General Obligation AA Muni BVAL Yield Curve - The BVAL curve is populated with pricing from uninsured AA General Obligation bonds. Municipal (A): US General Obligation A+ A A- Muni BVAL Yield Curve - The BVAL curve is populated with pricing from uninsured A+, A, and Arated General Obligation bonds. Fed Funds (Upper Bound): The federal funds rate is the short-term interest rate targeted by the Federal Reserve's Federal Open Market Committee as part of its monetary policy. US Treasury securities are guaranteed by the US government and, if held to maturity, generally offer a fixed rate of return and guaranteed principal value. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.

The illustrative portfolios are intended as a starting point for a conversation on individual bonds. They are not intended as specific recommendations and bonds are shown for illustration purposes only. The bonds listed in the illustrative portfolios are rated A or better, with average ratings from Moody's and Standard and Poor's of Aa2 / AA. The yields shown in the proposals are based on pricing models, not current market offers. Yields shown are indicative of general market levels but are not a guaranteed result. Prices and yields are not inclusive of any fees or commissions.

US Treasury securities are guaranteed by the US government and, if held to maturity, generally offer a fixed rate of return and guaranteed principal value. The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ. The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.

Investment products are: not deposits, not FDIC/NCUA insured, not insured by any government agency, not bank guaranteed, subject to risk and may lose value.

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Raymond James? is a registered trademark of Raymond James Financial, Inc.

M23-184726 through 4/28/26

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