California’s ESG paradox; First half muni volume disappoints
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While California considers itself a leader in environmental, social and governance (ESG) policy, having spent billions and adopted policies to improve the environment and deal with social issues like homelessness and poverty, it remains challenged in those departments, as reflected in its blah-at-best scores from S&P Global Ratings for its handling of ESG issues.
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Municipal bond issuance plunged in June from the same month last year and is off 15% in the first half of 2021 as taxable issuance and refundings slumped. June is typically a heavier supply month, and this year's nearly $27 billion figure is low compared to historical standards. The last time June’s total issuance was less than $30 billion was in 2013 with $26.111 billion.
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Municipals were firmer to end the month but underperformed a U.S. Treasury rally following cooler-than-expected inflation data that fueled recession fears. Equities sold off leading to the S&P 500 closing with the worst first half performance since the 1970s. Municipals will end June and the first half of 2022 in the red, also marking one of the worst first half performances the asset class has seen in decades.