(Bloomberg) – Even one of the safest financial havens in the world is not completely immune to coronavirus.
Investors demanded higher yields on US-backed state and local government bonds, which are already showing signs of a slowdown in travel caused by the spread of the epidemic. Bloomberg Barclays Index of Lower-rated Municipal Debt Linked to Airlines – Including those Secured by Rental Payments They Make at Airport Terminals – has declined in the past three days, resulting in a loss of 0 , 88% this month, almost triple that of the municipal junk bond market.
“It may be prudent to be cautious at airports in the short term,” said Peter Stettler, director of Piper Sandler, underwriter and investment management firm.
The growing number of cases worldwide and in the United States has prompted businesses and vacationers to cut back on travel plans. United Airlines Holdings Inc. and JetBlue Airways Corp. are reducing their number of flights and Southwest Airlines Co. has said it expects the epidemic to reduce first quarter revenues. On Thursday, the International Air Transport Association predicted that the impact of the coronavirus would cost the airline industry between $ 63 billion and $ 113 billion in revenue this year, compared to an estimated loss of $ 30 billion a year ago. only two weeks.
United Airlines-backed debt issued by the California Municipal Finance Authority, which funded a new aircraft maintenance and ground services complex at Los Angeles International Airport, traded on Thursday with a yield of 2.17%, or about 1.3 percentage points higher than top-rated bonds with the same maturity. On February 20, investors demanded a premium of 0.7 percentage points.
American Airlines backed bonds issued in 2016 by a New York agency in connection with the construction of its terminal at John F. Kennedy International Airport in New York are trading at a yield of 2%, or approximately 0.8 percentage point higher than where Bloomberg Valuation anchored this spread in February 28.
It is impossible to judge whether the virus will have a long-term impact, given the lack of certainty about its spread and its severity on economic growth. But Piper Sandler recommended that investors reduce their exposure to airports in the short term, especially given the price hikes during the market recovery in recent years.
“We expect this to continue, but over the next two months, as it happens, we may see a drop in passenger volumes,” said Stettler. “This is a short-term warning.”
To contact reporters on this story: Shruti Date Singh in Chicago at [email protected]; Martin Z. Braun in New York at [email protected]
To contact the editors responsible for this story: Elizabeth Campbell at [email protected], William Selway, Allan Lopez
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© 2020 Bloomberg L.P.
(Bloomberg) – Even one of the safest financial havens in the world is not completely immune to coronavirus.
Investors demanded higher yields on US-backed state and local government bonds, which are already showing signs of a slowdown in travel caused by the spread of the epidemic. Bloomberg Barclays Index of Lower-rated Municipal Debt Linked to Airlines – Including those Secured by Rental Payments They Make at Airport Terminals – has declined in the past three days, resulting in a loss of 0 , 88% this month, almost triple that of the municipal junk bond market.
“It may be prudent to be cautious at airports in the short term,” said Peter Stettler, director of Piper Sandler, underwriter and investment management firm.
The growing number of cases worldwide and in the United States has prompted businesses and vacationers to cut back on travel plans. United Airlines Holdings Inc. and JetBlue Airways Corp. are reducing their number of flights and Southwest Airlines Co. has said it expects the epidemic to reduce first quarter revenues. On Thursday, the International Air Transport Association predicted that the impact of the coronavirus would cost the airline industry between $ 63 billion and $ 113 billion in revenue this year, compared to an estimated loss of $ 30 billion a year ago. only two weeks.
United Airlines-backed debt issued by the California Municipal Finance Authority, which funded a new aircraft maintenance and ground services complex at Los Angeles International Airport, traded on Thursday with a yield of 2.17%, or about 1.3 percentage points higher than top-rated bonds with the same maturity. On February 20, investors demanded a premium of 0.7 percentage points.
American Airlines backed bonds issued in 2016 by a New York agency in connection with the construction of its terminal at John F. Kennedy International Airport in New York are trading at a yield of 2%, or approximately 0.8 percentage point higher than where Bloomberg Valuation anchored this spread in February 28.
It is impossible to judge whether the virus will have a long-term impact, given the lack of certainty about its spread and its severity on economic growth. But Piper Sandler recommended that investors reduce their exposure to airports in the short term, especially given the price hikes during the market recovery in recent years.
“We expect this to continue, but over the next two months, as it happens, we may see a drop in passenger volumes,” said Stettler. “This is a short-term warning.”
To contact reporters on this story: Shruti Date Singh in Chicago at [email protected]; Martin Z. Braun in New York at [email protected]
To contact the editors responsible for this story: Elizabeth Campbell at [email protected], William Selway, Allan Lopez
bloomberg.com“data-reactid =” 38 “> For more articles like this, visit us on bloomberg.com
Subscribe now to stay one step ahead of the most trusted source of business information. “data-reactid =” 39 “> Subscribe now to stay ahead with the most trusted source of business information.
© 2020 Bloomberg L.P.
