Last week the number of coronavirus-related disclosures in the primary and secondary market dropped significantly from the week before to just over 200 filings from 1,200, marking the fewest COVID-19 related disclosures since the week of March 22.
That data came from a weekly Municipal Securities Rulemaking Board report released Tuesday morning. Analysts had mixed reactions on what the cause of the fewer filings could be, pointing to some municipalities closing out their fiscal years at the end of June. That would mean such disclosures would already have been included in the annual filings.
“I surmise you are seeing a decline due to a combination of things – holiday week and June 30 is, for a host of obligated parties, when certain filings may be due,” said Gregg Bienstock, CEO and co-founder of Lumesis — a municipal market software and data company. “As such, COVID related disclosures would be in the annual filings. Beyond, that, I would expect disclosures to continue, as warranted.”
Bienstock added that many have made disclosures, but would not attribute the reduction in disclosures to a view that a bulk of those disclosures are done.
For the week ending July 5, according to the MSRB, continuing disclosures decreased to 168 filings from 884 the week prior. Continuing disclosures are provided to the market on an ongoing basis.
Leo Karwejna, managing director at PFM, said the decrease in disclosures could involve issuers’ budget cycles and whether issuers already made their disclosures because of fiscal years ending on June 30.
“In a lot of cases, you have a fiscal year-end at the end of June for governmental units,” Karwejna said. “In that circumstance, all things aside from the relative nature of how crazy things are because of COVID, they have typically been in a place where they’ve already gone through the budget process and they’ve already passed and finalized the budget in the months or so prior.”
“That just had me initially thinking about the COVID-related disclosures taking place,” Karwejna added. “If you were going to do it, you’ve already done it because you’ve gone through the budget process.”
As issuers are doing their budgets, they may be looking for what is material to disclose, and COVID-19 could be one of those events they disclose, Karwejna said.
Some analysts believe that most issuers have already disclosed their COVID-19-related events, though they expect more to come as the pandemic continues to wreak havoc on state and local budgets.
As of last month, according to data from Lumesis, just about 2.5% of municipalities had filed COVID-19 related disclosures.
"What you have is a tiny portion of the 50,000 issuers making disclosures about the pandemic," a Maine strategist said. "And so 99% of the market has lawyers telling their issuer clients not to disclose to save them from regulatory trouble down the road. This is the problem with 'voluntary' disclosure. [Issuers] technically do not have to say anything."
