Every year around this time, Americans face the certainty of tax time, and that means – in general – finding the cash to pay Uncle Sam his just deserts. This scramble for cash is seasonally evident in the variable-rate tax-exempt (Muni) bond market, where the typically wealthy stash their cash, as rates rise into tax time and fall after (as flows come and go). This year however, the scale of the outflows is enormous, spiking money-market fund rates from 1bp to 29bps…
The weekly benchmark for yields in the variable-rate tax-exempt bond market, after being stuck at a record-low 0.01 percent, has surged in the past four weeks: The SIFMA Municipal Swap Index reached 0.29 percent on Wednesday, the highest since January 2011.
Chart: Bloomberg
As Bloomberg notes, while part of the climb mirrors the jump in variable-rate demand note inventory, another reason is the lead-up to the U.S. tax payment deadline of April 15, according to Vikram Rai at Citigroup Inc.
“Money market funds and especially tax-exempt money market funds witness outflows around tax-season as investors tend to sell their near cash alternatives in order to pay their tax bill,” Rai wrote in a report. “We see that the SIFMA index stays elevated about one month before and one month after the tax deadline.”
So, it appears, 2016's tax toll means wealthy Americans are more than ever scrambling for cash to make ends meet.
via Zero Hedge http://ift.tt/1MnOQQV Tyler Durden