06/24/2016

Brexit – Day One

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Global financial markets were turbulent during the first day of trading following the United Kingdom vote to leave the European Union.

Amid the market uncertainty, investors moved assets to the safety of U.S. government bonds, pushing prices higher and yields lower.   Yield on the 10-year Treasury note dropped to an intra-day low of 1.419% (near its record low yield of 1.404%), but by the end of the day, the yield on the 10-year Treasury was 1.575%; down from 1.745% on the previous day.

Thomson Reuters Municipal Market Data reported that municipal bond yields reached all-time lows, with the benchmark 30-year AAA dropping to 2.08%.  Total return on the Barclays 10-Year Municipal Index was 0.82% for June 24th with a yield to worst of 1.57% versus 1.70% on June 23rd.

During periods of market turbulence, a ‘flight to quality’ on the part of investors has resulted in buying US Treasuries and, to a lesser degree, municipal bonds.  That demand typically drives prices higher and yields lower.  Although the Federal Reserve had previously indicated that another rate increase was possible in 2016, it now appears that any increase could be postponed until late 2016 or sometime in 2017.

The Barclays US Corporate High Yield Index closed at 1,685.9, down 0.55% from the previous day’s close of 1,695.23, with a yield to worst of 7.25% versus 7.09% on the previous day.

In the US equity markets, the Dow Jones Industrial Average finished the day down 3.39% while the S&P 500 was down 3.59% and the Russell 3000 was down 3.65%.

Aquila Group of Funds takes a careful approach to investing, managing each fund conservatively, recognizing that most investors are more sensitive to potential investment losses than they are eager for outsized gains.  In the seven state municipal bond funds, we seek to manage interest rate and credit risk by consistently maintaining broadly-diversified, high-quality portfolios of bonds with an intermediate average maturity.  In the high-yield corporate bond market, we apply intensive fundamental research and a relatively conservative investment approach as we search for bonds issued by well-managed companies that can potentially respond to improvements in the corporate balance sheet.  We believe that same research provides insights that enable us to identify opportunities for capital appreciation in the stock of companies with improving balance sheets.

On the Aquila Group of Funds website, you will find information regarding the investment strategies and full portfolio holdings of each Fund. The investment objectives, risks, charges, expenses, and other information will be found in the Fund prospectus. Information on the Fund holdings will be found in the Fact Sheet, Annual and Semi-Annual reports, and the Portfolio Holdings report for each Fund. We encourage you to review this information, and to visit the web site frequently for updates on each Fund, and our perspectives on the markets.

Before investing in a Fund, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund prospectus. The prospectus is available on this site, from a financial professional and when you call 800-437-1020.