Demand Components, Alternative Financing Products

What do investors want for their investment strategies, a look at the various demand components in the market, as well as the uptick of alternative financing products issuers are using and what they mean for the buy-side community.

Transcription:

Christopher Brigati (00:08):

Thank you everybody. Very happy to be here and the panel and I, we're all really working hard to try and make sure we can provide some good content for everyone, so I hope it's value added to everybody. As mentioned, my name's Christopher Brigati. I was hired as the Director of Strategic Initiatives at SWBC. I'm actually looking for someone to hire to outsource, to tell me what that means. So I'm accepting applications. Please. I'm going to let the panel introduce themselves and we'll get right into it. Sure.

Giles Nicholson (00:36):

Giles Nicholson, head of Quantitative Solutions at Seabert. Williams Shank.

David Womack (00:41):

I'm David Womack, Deputy Director in the Office of Management budget for the City of New York.

James Pruskowski (00:47):

James Pruskowski, Chief Investment Officer at 16 Rock, which is an asset manager.

Nicole Riggs (00:52):

Good morning, I'm Nicole Riggs. I'm a Relationship Manager on the government banking east team at US Bank.

Christopher Brigati (00:59):

Great, thank you. And we want to thank the Bond Buyer for putting together a very diverse panel. As you can see, we've got bankers, we've got issuers, we've got asset managers, we've got quite a diverse array of opinions here, so hopefully that adds to the conversation we're going to get right into. The demand component of this demand has been influenced by many factors beyond the simple and basic common sense level of interest rates and relative value within the municipal market. The increase in the SMA and the ETF component has definitely added and changed the landscape of late. James, can you offer some insights from the asset management space with regard to this?

James Pruskowski (01:36):

Yeah, I think there's massive structural change that's underway in the market. At the center of it is obviously ETFs. There's just been sensational product growth, asset growth as well. Something in the tune of 30, 35% annual growth rates. In terms of a UM, I think when you look at it, it's all for very good reasons. Exceptional exchange based liquidity income and quite frankly performance that is topped traditional based products. And when you think about the passive buyer of the market, primarily retail investors, they want low tracking error, they want no leverage. They don't necessarily want higher yielding securities in that portfolio and especially no hedging. So it's a better sleep well investment structurally, I think basically it's a race to zero in terms of fees and that has important implications for the backdrop of the market. It's certainly a capital intensive business. So some of the biggest changes on the asset management side are how do you streamline your production process, the lifecycle of a trade through the PM trader function and to make everything run more smoothly given that fee compression.

(03:04)

And certainly it's putting a lot of pressure on traditional based asset management to absorb that and without sacrifice to the alpha side of the business. Obviously TFS are the beta side of the business and certainly if you weren't aware, I mean there's an arms race going on within Munis from a technology perspective given algorithmic trading. So we could talk about that offline. It's a separate panel in and of itself, but very important implications I think ultimately meaning very good things from a financing perspective. Compressing the bid ask, just maybe bite up another minute, is on the SMA side, it's really, it's that what I said about productionizing the process, there's really not a skilled labor shortage. It's happening only in technology rather than from a PM portfolio management function. And how do you eliminate the price taking behavior of the buyer base in terms of the asset management alpha side in that SMA that comes along with technology. So the price taking mentality I have to sell, let me go bid wanted I have to buy, let me buy a new issue, is really being called into question. And certainly there's been tremendous growth, at least selectively in the hedge fund world private equity space. So important source of liquidity. As you think about the Citi Banks of the world, if you think about what that means for high yield credit and how you finance it, certainly different ways to take advantage of market fragmentation and certainly from an issuer perspective, different ways to think about financing.

Christopher Brigati (04:56):

Thank you Nicole. With regard to government banking?

Nicole Riggs (04:59):

Sure. So as Chris mentioned, I'm kind of the bank representative on the panel and I took the opportunity to speak with colleagues in different areas of the bank besides my own that intersect with the Muni market. So on this topic of demand for product thought it'd be interesting to talk about bank investment portfolios. Not to belabor the point that I think we all agree on in terms of the impact of rates on the fact that municipal securities holdings by banks have been trending down over the last couple of years. And I think there are reasons for this. Simply beyond simply rates, we've seen a general decrease in banks holding assets that attract capital. So the regulatory environment incentivizes banks to hold like US treasuries for example, even general obligation municipals like we're all in the market, we understand the credit quality and the liquidity, but they are still less liquid and there's an additional operational burden on banks to prove their liquidity and qualify as HQLA.

(06:12)

We also found banks generally that post SVB liquidity in our investment portfolios, right? We're using our banks generally use their investment portfolios to manage their interest rate risks and hit their capital targets. Liquidity was even more important after the failure of Silicon Valley Bank. The monetization of Munis outside of sales was limited and those securities were not able to be pledged to the fed's discount window. One final thought that I'll leave you with in terms of the way that banks are potentially thinking about their municipal holdings is, and we'll talk a little bit more about this later, as with Basel three endgame as proposed, it could further reduce bank holdings of municipal securities. So the current way that banks account for the mark to market value of securities. So it's on the balance sheet in the other comprehensive income category. And one of the changes that's contemplated with Basel three endgame is that that mark to market value will have to be reflected in their CT one capital numbers. And the bottom line there is then banks will be required to hold additional capital. So the impact would be to some options for bank portfolios when it comes to demand from municipal product would be looking at reducing their duration to minimize volatility and also further limiting the appetite for lower liquidity issues.

Christopher Brigati (07:48):

Thank you, Giles.

Giles Nicholson (07:49):

Sure. Well we're finding SMA participation to be very helpful in the primary market. A good example is the TFA deal that we did yesterday with the city and in general, I mean in that case actually the amortization was from 12 years out to 30. So it's not what you think of as being the traditional individual retail areas of interest. But we got great interest from the SMA up and down the curve, including in the long end where we had four and a quarter and five and a quarter coupons. So a little different diversification from the traditional 5% you see in the long end. And that helped anchor down from the retail order period going into institutional, it really helped anchor down the deal and David and I were talking about this yesterday also just in general on that coupon structure in the long end, just thinking about what different interest rate environments might be in the future, depending on where you are at the 10 year call date, one of the bonds might get called out but not the other. And from an investor perspective and an issuer perspective, you have a little bit of hedging around that. So in general, both from the SMA and the institutional perspective, it's given this new curve environment. And I do think about the rate environment as well. Certainly the SMAs are very helpful to us,

Christopher Brigati (09:06):

David.

David Womack (09:07):

Well yeah, we're talking about the demand side, but then there's also supply and I think you know all know that New York City provides a lot of it over the course of any given year. We've looked at over the last five years. We come to market anywhere from 12, 13, 14 times a year between our new money needs going forward, 10 to 12 billion a year and refunding. So we're deeply sensitive to demand. Where is the demand? Who is going to buy our bonds on a given day over the course of the last couple of years? It changes every day. The components of demand on any given deal can be completely different. We have seen the rise in retail and SMA and SMA participation, individual retail has been strong as well. Individuals still hold close to half of municipal bonds and so we have to be attentive to that. But on the new issue front, we're really, and the size issues we do, we're reliant on institutions, on SMAs, on ETFs and what they need.

(10:15)

So how do we approach this and how do we continue to generate demand and keep demand for our product? Because we do have a huge capital program, we do have to fix our infrastructure and keep it going. So our job as an issuer and as a government is to be transparent in our disclosure and we update it on a regular basis. We respond to investor feedback. We're very interested in what you have to say about what we are offering, how we are offering it. As an example, in the last couple of years we changed the way we approached our retail order periods. We had been taking bonds off the table if they were oversubscribed, we went to a 50% holdback because we wanted all of our bonds to be available to the entire market. And that's worked for us. It gives pricing tension all up and down the curve and we rely a lot on our investment banking partners and see many of you that we work with out there to really mine the demand portion of the equation and tell us who's out there and where are they, what are they looking for in terms of couponing, in terms of maturity structure and how do we best position ourselves to get the best result.

(11:29)

We also will come to market from time to time with specific things to target specific areas of demand. In the last couple of years we've done two taxable social bond deals in the way we finance. We felt that in the tax exempt market, the green and social structures didn't really fit us that well. But in the taxable market where most of our bonds were in affordable housing and there are CRA investors, there are socially responsible investors who are looking for that product. We structured something specifically for them. And again, with our banking partners, we've structured a long index eligible taxable bond. We had never really done that before. We've done it twice now and it's been very effective for us. On our water credit, we've done our RPIs, our refundable principle installments, that's our version of a put bond. So water tends to finance long bullets. The put bonds give us access to the shorter part of the market. So we are trying to find every possible pocket of demand because we have a lot of supply.

(12:35)

And so we are always again looking for alternatives that give us flexibility but don't detract from demand. And that might be whether we do our funding or your offering with a tender component. We've experimented with make hold calls on tax exempt bonds and we'll also approach the bank direct purchase market. We've been very active in that market as an alternative for variable rates. So I'll close by saying the fact that we are a large frequent issuer and we issue high grade bonds and we want to keep them as high grade bonds, we hope that we're putting out there a highly liquid investment that the investor market, the SMA market, the ETF market will be attractive to for years to come.

Christopher Brigati (13:23):

Thank you. And I think one of the things that we're talking about when the changing the demand components in here, looking at some things that are affecting the market looking dare I say it, transitional factors, that's a tough word for us to use in the fixed income market of late, but what are the transitional factors, inverted yield curve that we expect is going to go away at some point? What are more systemic issues, regulatory, et cetera. I think Giles, you had some comments on this, so want you share?

Giles Nicholson (13:49):

Yeah, no thank you. I think Natasha mentioned tenders first thing in the morning and it's true that a lot of that low hanging food is gone now from the taxable advanced fundings. But it is also true that if you look at the rate environment today, not just with the yield curve inversion, but the relationship of taxable to tax exempts and especially at certain parts in the curve, you can find a pretty compelling reason when you're able to go to a tax exempt status and taxable to do those. So the relationship in the curve is held from that perspective when you look at the tax exempt to tax exempt tenders where you're basically monetizing the call option and extending it in that case. A couple comments there. First of all, because of the inversion in the tax exempt curve, you're actually sort of buying the bonds back low at a relatively good price and then you're putting, depending on where exactly you put them on the curve, you put them a little further out, you're financing still at a pretty reasonable price or yield in relative terms to where you're buying them.

(14:50)

So given how rates have come down recently from the big peaks we had during last year, the tax exempt to tax exempt tenders can be good, but you always have to be aware that in the case when you're doing that different from the taxable to tax exempt, you are mining away your future value of the call option. So you have to weigh doing the tender now, which is sort of an alternative to an advance of funding a traditional tax exempt advance of funding, weigh that against the fact you're going to lose that ability to call it in the future. So what we like to think about too is when you're looking at that, not just to think about the financial aspects of that, but also to think about the practical aspects. What does your call profile look like? What do you have lumpiness in when your call dates are coming up in the future, do you want to manage around that?

(15:37)

Like a smaller issuer might want to either focus issue, focus a future issue or around some callable principle coming up, or they might want to manage it in different ways. So there are cases where a tender can actually help you in managing your future calls when right now, if you want to do it on a tax exempt basis, you have to do either a funding or a tender. So there's that aspect de Minimus. I think this is affecting couponing right now because people have a little bit of post-traumatic stress from what happened last year where for a while people were very complacent about issuing lower coupons and the investor community was perfectly happy to receive them and buy the low coupons. And then we saw what happened where a lot of bonds hit the Munis territory. Of course the yields blowout for tax reasons related to that.

(16:29)

And then you also saw those huge portfolios come out from some of the banks where some of that had to actually clear. So I think you're seeing that a little bit in the couponing now where you're able to do discount bonds like yesterday, those four and a quarters I was speaking about before. But I think even when rates come down further, people are going to be a bit gun shy. A little bit about the sub fours for a little bit longer on that. The only other thing I really wanted to discuss, but I think Jay Olson touched on this earlier was that just, and I think this is going to be a theme, maybe this will come up again later, but just what's happening with tax exempt floaters, not with taxable floaters, but tax exempt floaters, the variability in that is causing a lot of noise and heartburn for issuers in terms of just thinking what to do about that. So those are some of the things I just wanted to discuss today just to put it on people's radar screens.

Christopher Brigati (17:32):

Thank you. Nicole, you kind of touched on basil three a little bit. Can you expand on that a little?

Nicole Riggs (17:37):

Sure. So I drew the Basel three regulatory straw on this panel, I promise not to drone on about all a thousand plus pages of the new proposed rules, but thought it would be useful to really focus on how the rules as proposed specifically affect the Muni market. And I think what we've seen, and I know a lot of others, the GFOA other industry groups have commented on this, but I think there are three very specific ways that the rules as proposed affect the Muni market. So the first is the cat one banks or the GSIB. So the very largest banks are going to be moving from the advanced approach to a more standardized approach. And one of the biggest impacts here is under the advanced approach, the G SIBs had to hold very little capital against the very highest rated credits. And that is going to change with the move to the more standardized model.

(18:41)

So there's going to be increased capital requirements for the high grade credits, which is the vast majority of the volume in our markets. A second impact is the consolidation of the bank tiers as far as the different regulatory regimes that are applied. So going from four categories to two. So now you're going to see even the smaller banks, those with a hundred billion dollars of total assets are combined with their larger peers except for the gibs. And that's going to increase regulatory costs and compliance costs on these banks. And then the third, which I think is a smaller impact, but something that we at the banks have utilized to help cushion the blow of higher credit costs for our customers is the increased capital requirements for 364 day facilities. So we've been able to offer these shorter term facilities, they're more popular in the corporate markets, but we have had some uptake from our municipal customers because we're able to offer lower rates on those facilities.

(19:53)

So I think the end result, and again a lot of others have pointed this out, is less liquidity in the market and increased costs for issuers. And just to drill down a little bit more on the costs with respect to bank credit and liquidity facilities. So if banks in general are facing higher capital charges, higher compliance costs, those will be passed on to the issuers. And I think this will also affect the variable rate demand bond structure because these regulatory changes are increasing costs that decreases the profitability of the business. I think if you're having fewer credit and liquidity banks in the market, particularly those that qualify as tier one paper for tax exempt funds, you could see an impact on spreads in the variable rate market. And then just from the bigger picture, taking a step back, any regulation that disincentivizes banks from participating in the municipal markets ultimately increases costs for issuers and for taxpayers.

(21:04)

And I would argue that these disincentives actually make the banking system less stable because the municipal market is of such high credit quality and that part of the portfolio can serve as a counterbalance to more risky business endeavors. So a portfolio with less high grade municipal exposure due to regulatory costs or capital costs, I think it's a net negative for the financial system as a whole. Now I will say that regulators have indicated that changes are likely after the comment period, so we're looking forward to some certainty around what's going to happen because even just the uncertainty of the regulations affects the costs as well.

Christopher Brigati (21:56):

James, any thoughts on liquidity from your seat with regard to the Basel.

James Pruskowski (22:02):

Not necessarily Basel. I thought Nicole did a great job giving a general overview. Prior to me starting 16 ROCK last year, I spent 30 years at BlackRock traveling the world promoting Muni bonds. So I feel really fortunate about that and put me in a position to understand the various regulatory capital charges and codes that govern a lot of the UK and all parts of Asia domestically. A lot has changed post TCJA tax reform, the institutional buyer simply has less need to shelter. Most damaging was unlike 1986, the lack of a grandfathering cross. So it was a quick exit out of the market, but there was still much love for the uncorrelated benefits, the quality, and especially the cashflow that the municipal market provides. So I'd say attention has turned more taxable Muni oriented as opposed to tax exempts. And the tax exempt interest probably is more geared towards the new hedge funds or private capital that's entering the space and other forms and other ways to be creative to achieve the same objectives.

(23:21)

Beyond that, there's certain key codes domestically that the National Association of Insurance Commissioners has changed with what's called the RBC capital charge or capital factor, as well as the portfolio adjustment factor. So I'm trying to allude to the fact that there's very little attention being paid to the use cases, the application of Munis throughout the world, not just domestically with the NAIC, but jump over to the UK with solvency two and really get in the weeds of what's in the code amended to include a matching adjustment factor which gives preferential treatment to US infrastructure assets, public assets, and those buyers want taxable Munis, unlike tax exempts, they want certain structures to meet spread hurdles for underwriting profitability and the traditional call options, subordinated debt just aren't going to apply. And David mentioned creating bonds to facilitate different needs. Part of that in Europe is the UN sustainable development goals, which the capital factors and treatment immunities really serve up a phenomenal solution regardless of a sticker that says, yes, I'm green. So it's really the asset manager that's doing the subject to interpretation to meet those requirements. Yeah, so great.

Christopher Brigati (24:54):

David, any thoughts from an issue or perspective?

David Womack (24:57):

I think Nicole touched on an important point that we've lost in the last year, several banks that were important avenues of liquidity, large balance sheets, thinking of Citigroup UBS, even First Republic and getting absorbed. Silicon Valley had a large bank portfolio and anytime you lose balance sheets like that, it creates a liquidity hole for our market. There are pockets that just aren't there anymore. Banks still account for over 10% of municipal bond holdings and anything that makes it less attractive for them to hold those is going to increase cost for issuers. Losing banks' participation in our market also could affect the competitive market. Again, with UBS and Citi going out, we've lost two important bidders that undergird the competitive market and that's an important part of the taxable part of the tax exempt landscape. So to James' point, we are in over the next few years, expect to issue one to 2 billion a year in taxable municipals and finding new avenues, new pockets of demand, and that can be foreign banks, it can be foreign institutions. We've had international participation on our deals and that's welcome and we will continue to try to do that. The core of what we do is tax exempt. That's what, that's our lowest cost of funds and we have to keep doing that, but if we're going to be in the taxable market, we're going to try to structure vehicles that make sense.

Christopher Brigati (26:38):

Right. We'll quickly pivot into alternatives. Alternative spaces really grown of late, it's taken up a bigger portion of the market overall. And with regard to that, has it introduced any unknown risks or has it changed the landscape? James, any insights?

James Pruskowski (26:55):

Alternative financing.

Christopher Brigati (26:56):

Alternative financing vehicles?

James Pruskowski (26:59):

You alluded to this before, I mean there's new lines being carved both in private equity and hedge fund. I launched the hedge fund in August, one of a few that is in the space. I think that the approach, especially in private equity, is even more apparent right now or the opportunity set, given the downfall of city and maybe some others on the cusp. I just really think that there's a refinancing wave that's looming in certain sectors. I think away from that, it's definitely about those pockets of financing in the hedge fund world that are there as a liquidity provider, not necessarily to just arbitrage the entire market. And the more on the rise, the tighter the bid spread.

Christopher Brigati (27:55):

Great.

Giles Nicholson (27:57):

Yeah, just building on what I was talking about before, about which we're all aware of this whole whipsawing and the variable rate market, which is affecting issuers, budgeting, and when you parse through it is are you really saving money at that point? Are you just creating a headache for yourself? Especially when the yield curve is in the shape it's in right now. So whether you consider them alternative financing products or not, certainly different from standard fixed rate debt or traditional VRDBs. What David touched on before, if you have products like either put bonds or the refundable principle installments, which are effectively put bonds with a twist that New York water does, if you're able to do that and they're built in, they meet, you're able to amortize them in a favorable way in your additional bonds test. Those can be a helpful tool at this time. You do need to be mindful of the yield curve and of course if you have amortization, it makes it more complicated on 'em as well, like early amortization. I mean in that with the inversion, you probably want to find a sweet spot for where your put date is that's in that trough in the curve on the taxes at market. That's helpful. But again, that can be, I'm talking about a bullet put, it gets a little bit more complicated when you have principle before the put date.

Christopher Brigati (29:19):

That's a good segue into David with regard to issuers.

David Womack (29:22):

Yeah, Giles touched on variable rate market and we are the city of New York and all its issuers are very active users of variable rate product and they float in the short term, but we actually use them and think of them as alternatives to long-term fixed rate bonds because we put them in our longest maturities over time, they average out to the lowest rates and they take some pressure off of those big blocks of term bonds that we might have to sell in 25 and 30 years. On our geo and TFA credit, we have roughly $8 billion outstanding and variable rating instruments. Most of that is in VR DB product and as Giles mentioned, and I think Jay mentioned over the last year that's given us a little. The average weekly change in SIFMA over the last year is 65 basis points. The largest weekly change, 200 basis points, the largest weekly decline 120. We can remember a time when if variable rates moved 10 basis points. It was a lot. We're also seeing a differential between dailies and weeklies. Dailies and weeklies used to be right on top of each other. Now they're about 30 basis points apart. So our portfolios shifted to where the demand is and where the lowest cost is. We're more heavily involved in dailies than weekly.

(30:45)

The value proposition for variable rates right now is not great. And I think we have some reluctance to issue new variable rates, but over time they have been valuable instruments for us and hopefully as the yield curve gets back to a more traditional shape, that will make more sense over time.

Christopher Brigati (31:04):

I think that the reference to Darlene Weekly makes me think of a point 20 years ago and early in my career, a rep came to me suggesting he had this huge extension trade he wanted to put on and he was going to swap all of his clients out of dailies into weeklies to pick up the three extra basis points that day that the change was. I talked him out of it, I didn't want to deal with the headache of it, but it's a different dynamic when we've got spread in the product and it does speak to real savings and influences for the issuers. Nicole, any thoughts with regard to this?

Nicole Riggs (31:33):

Sure. So I would echo a lot of what David just covered, even from a broader market perspective, not necessarily just the specific New York City issuances in terms of the challenges of the VRDB market, our market has a long memory. We remember back 2008, 2009, getting burned by swaps in the auction rate securities market post grade recession. There was a continued move away from variable rate debt in the late 2010s and the pandemic era. We saw a lot of issuers taking advantage of the historically low interest rates and fixing out their debt issuers also took the opportunity to really look at the bank direct loan and direct purchase route, and that continues to be a popular alternative option to issuing variable rate debt on the public markets.

(32:29)

Now, we've had a couple of representatives from New York City, I think we'd all consider them large, sophisticated issuers. Those issuers are continuing to issue variable rate debt and integrating that structure into their overall debt portfolio. But I think it really indicates some of the challenges of the markets when you have some of the biggest users starting to think about possible alternatives and really thinking hard about the challenges in this market. So despite the fact that the last two years we have seen an uptick in the issuance of variable rate debt, we're still seeing a lot of market forces that are working against greater issuance. So especially on the margins, right? We still see New York City and the MTA and the large states issuing volume of variable rate debt, but we no longer see as many issuers with individual series of variable rate debts where it's just one series in their portfolio.

(33:35)

So we've talked a lot about rates, how rates have risen, but the curve is still not normal. So the savings that you would typically see in a normal interest rate environment on the short end of the curve, that magnitude of savings isn't outweighing the risks and the volatility that we've talked about. Again, I mentioned the regulatory changes that require banks to hold more capital for the credit and liquidity facilities that support this debt. So that is overall increasing. Again, that's eating into the savings to some degree for a variable rate debt issuance versus fixed rate issuance, bank rating downgrades, that's impacting the availability of bank credit and liquidity facilities. We recently were speaking to a client about possibly converting a direct purchase into A-VRDB structure, but their current authorization required their bank to be rated aa. So you've got the rating downgrades in the market for some of the banks, you've got the market changes that we've talked about with firms exiting, and that's a large management burden to have to switch credit providers with this structure.

(34:46)

And then I'll just close with the SIFMA volatility. I think David gave some very specific numbers. I've talked to some traders who are like, yeah, in their 30 year careers, they have never seen the volatility in the index like they've seen over the past two years. And so with the tax exempt funds being such a big driver in this volatility and they're finding alternative investments, so at better rates causing additional volatility in the market with the money coming in and the money going out, they're looking at taxable products or other bank products as alternatives. So I think there's a lot of headwinds in this market right now.

Christopher Brigati (35:37):

Great. Thank you. We got a few minutes. Is there any question from the audience?

Audience Member 1 (35:46):

Nicole, with magnitude of weather related of that we're seeing, what's just happened in California as one example? And that obviously creates a substantial number of disclosure events, and I was wondering whether that's overlapping or spilling over with to cause any limitations in the demand side from banks?

Nicole Riggs (36:32):

So not that I'm aware of, and like I mentioned, I'm not an expert in Basel three. I did not read the whole thing.

James Pruskowski (36:42):

George. I mean, to your point, I mean it definitely is changing behavior from an international perspective, what that climate score is and to the extent that the issuer lacks continuing disclosure or timely disclosures, investor preference is definitely changing.

David Womack (37:02):

And at least touch on from an issuer perspective, both the weather events and the impact of the Covid pandemic. We've all had to adjust our disclosure and look at that very closely, especially those who come to market very often. You have to change it every time. And we try to be as proactive and as accurate as we can be. Obviously the city has gone through several different events and it's important for us to make the investment market aware of what we're doing. I do want to touch something that Nicole touched on and I think that has affected our market more than, and we brush over it, but it's volatility and Munis were often thought of as a very sleepy, quiet part of the finance world. Well, money moves at lightning speed and James has talked about electronic trading and platforms. We have daily variable rate bonds and investors are moving in and out of instruments at a moment's notice.

(38:12)

And that's something that our industry, I think has had a hard time catching up with. And I think that's driving the sip a volatility, particularly in the short end of the market. They have a better opportunity for the next three days over in treasuries. They'll come back. The market is just going, they're shooting to get the extra basis point. And that may just be an ongoing fact of life that the investors and the participants in our market can have the ability to move money around at lightning speed. You have the ratio trades. I'm in the market today at this ratio. I'm not in it tomorrow. And so that's something that we have to navigate every time we come to market again, we look to our advisors, we look to our underwriters to keep us informed because we sit where we sit and we don't see it every day.

(39:02)

We're not looking at a Bloomberg screen every day, much as you think we might be. We're not. And so we rely on our banking partners, our underwriters, our advisors, to make us aware and help us navigate this challenging landscape. Municipals, I've been around for a long time. I see my old friend Jim Hadden, we started, I won't give the number a long time ago. And this industry has changed a lot. The participants in it have changed a lot. The characteristics of who's buying bonds and how you put them together, it's always evolving. It's challenging. And to me, it's exciting to see this industry and to see all of you invested in it. We will get through this. We have to.

Christopher Brigati (39:48):

Charles, did you have any comments?

David Womack (39:51):

No, I think everybody covered it pretty well.

Christopher Brigati (39:55):

Great. Well, I think that wraps up our time. Thank you very much. I hope it was informative and we added some value.