Nobody thought there was room left for rates to go any lower, but that’s just what happened since the beginning of November. Rates are now lower than when LBJ was president more than 40 years ago.
The possible explanations for these new records include a fixed income rally led by Treasurys, strong demand from investors seeking a safety net against federal tax hikes, and the fact that municipal bonds returned about 8% in the last year, according to Bank of America Merrill Lynch.
The threat that munis may lose part or all of their tax exemption in months to come does not appear to faze investor appetite for tax-exempt paper.
Rather than trying to make sense of it all, we prefer to congratulate hospitals who are in the markets right now selling fixed-rate bonds. Combined with a noticeable compression in credit spreads over the last few months, the low benchmark rates are sure to help not-for-profit borrowers of every stripe –not just hospitals — lock in what may be remembered for years to come as an absurdly low cost of capital.