Tom Kozlik, Municipal Strategist from PNC Capital Markets, presented Municipal Bond Market Outlook: 2016, Focus on State and Local Government Credit Quality. Tom publishes municipal bond market commentary, evaluates the strengths and weaknesses of municipal bond market credit profiles and related investment portfolios. Tom discussed the current economic trends affecting the municipal market. Among the key themes Tom noted is that overall municipal bond credit conditions at the start of 2016 are favorable. He pointed out that an increasing number of credit profiles have the potential to improve during 2016 and there is no looming crisis affecting the overall municipal credit market. Tom explained how local governments are facing a “new fiscal reality” resulting from local tax revenue increases falling below pre-recession trends which has resulted in issuers facing credit quality downgrades.

Tom summarized a number of key factors affecting the municipal market. Tom expects municipal credit volume to range from $325 to $375 billion during 2016 as compared to $398 billion in 2015. He noted that although state and local governments generally have well-funded pension plans, funding has failed to recover to pre-crisis levels. He cautioned that local government downgrades are occurring at an above-average pace and that investors should continue to monitor credit profiles for signs of structural imbalance. He also feels that municipal investors today are less prepared for the next recession than for the 2009 market crisis.

Following his expert analysis and commentary, Tom answered a series of provocative questions from the financial managers in attendance.