Brexit – Day One


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. Read more “Brexit – Day One”


Utah Ranks 7th in National Study of Fiscal Condition


Utah with imageOnce again, the state of Utah has been recognized for its fiscal health. In a study of fiscal condition by the Mercatus Center at George Mason University, Utah ranked 7th in the nation based on short and long-term debt, and other obligations such as pension funding and health care costs. According to the report, Utah is in sound financial shape with over 4 times the cash needed to cover short-term liabilities, and revenues exceeded expenses by 14% for a surplus of $500 per capita in fiscal year 2014. The state’s net assets were 29% of total assets and total liabilities were found to be only 18% of total assets. In fiscal year 2014, the state carried a debt of $4.9 billion, and the unfunded pension liabilities were $29.8 billion, on a guaranteed-to-be-paid basis, which is considered healthy.

The report ranked each state in five categories of financial solvency: cash solvency (Utah ranked 6th), budget solvency (Utah ranked 5th), long-run solvency (Utah ranked 16th), service-level solvency (Utah ranked 12th) and trust fund solvency (Utah ranked 26th).

Utah’s resilient and diverse economy and judicious fiscal policies have been cited as primary reasons for the state’s continued financial strength.


Aquila Three Peaks High Income Fund Celebrates 10 Years


Tenth anniversary symbol in gold isolated on white backgroundTen years ago, with the launch of Aquila Three Peaks High Income Fund, we introduced what we believe is a time-tested, distinctive high-yield investment strategy to the market.

The strategy focuses on finding high-yield corporate issuers with experienced management teams that are generating free cash flow and committed to improving the corporate balance sheet. We avoid highly-cyclical industries and invest most, if not all, of the Fund’s assets in high-yield, income producing, corporate debt securities, making Aquila Three Peaks High Income Fund a true high-yield portfolio.
The implementation of the strategy over the last 10 years has resulted in positive total returns for the Fund in each year other than 2008 (an extremely tough year for most asset classes in the wake of the financial crisis). The Fund has never experienced the default of a bond held in the portfolio.

The strategy’s success is rooted in intense, hands-on research by a team that is sticking to their recipe. The portfolio managers and analysts do their homework – they kick the proverbial tires with visits to the companies in which the Fund invests. They meet with management teams, employees, customers and even competitors. They also take a conservative approach by avoiding what they believe are overly-risky sectors and securities – this approach has served the Fund well in periods of volatility, but also means the fund may lag during particularly strong markets.

The Fund was recently recognized for its one-year performance in both the WSJ’s Category Kings and InvestmentNews’ Best-and-Worst Performing Fixed-Income Funds. Current quarter-end performance can be found on the Fund Fact Sheet.
Read more “Aquila Three Peaks High Income Fund Celebrates 10 Years”


Aquila Municipal Bond Funds Continue to Avoid Puerto Rico Debt


Each of the municipal bond funds offered in the Aquila Group of Funds adheres to an investment strategy focused on investment grade bonds as a means of managing credit risk, and an intermediate average portfolio maturity as a means of managing interest rate risk. In keeping with our emphasis on high-quality holdings, the seven state-specific municipal bond funds offered by Aquila have no Puerto Rico holdings.

On Monday, May 2, 2016, Puerto Rico’s Governor Alejandro Garcia Padilla announced that Puerto Rico’s Government Development Bank did not plan to make the full $422 million debt payment due on that date, “faced with the inability to meet the demands of our creditors and the needs of our people”. Puerto Rico cannot declare bankruptcy under Federal law, and some lawsuits have been initiated.

On the Aquila Group of Funds website, you will find information regarding the investment strategies and full portfolio holdings of each state-specific municipal bond 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.


Aquila Three Peaks High Income Fund Recognized as a Category King


sAquila Three Peaks High Income Fund was included in a Category Kings report by The Wall Street Journal for the one-year period ending March 31, 2016. The Category Kings report recognizes the top 10 performing funds, based on total return, in 16 Lipper categories for the one-year period. Aquila Three Peaks High Income Fund class Y (ATPYX) was listed at #6 in the Lipper High Yield Taxable category, out of 646 taxable high yield funds. During this period, the Fund generated a total return of 3.13%, compared to the Lipper High Yield Taxable category average of -4.03%, and the Barclays US Corporate High Yield Index Return of -3.69%.

We believe our relatively defensive positioning within the high yield market in recent years, with a focus on higher-quality names and lower-duration securities within those names, has been prudent, and as a result has produced relatively stable performance within the high yield asset class.

We remain focused on evaluating high yield issuers based on our fundamental research process in which we look for companies that are improving their balance sheets and growing their businesses in a disciplined manner. We believe our focus on providing a less volatile investment strategy within the high yield asset class is judicious given the potential for elevated volatility in this relatively low-yielding fixed-income environment.

Read more “Aquila Three Peaks High Income Fund Recognized as a Category King”


Are You Free of Your Tax Bill for the Year?


Tax return form with pen and calculatorNext week marks the end of the 2015 tax season, and as you send in your tax forms, you might be surprised to learn that the nation will still be working to pay this year’s taxes.

Every year the Tax Foundation calculates Tax Freedom Day®, which determines the day when the country has earned enough money collectively to pay its total tax bill. The calculation takes into account all federal, state, and local taxes and divides them by the nation’s income. For 2016, Tax Freedom Day® falls on April 24th. So, the average taxpayer will spend 114 days working (excluding leap day) to pay taxes.

In another calculation, the Tax Foundation figures in the federal deficit. When that is taken into account, we will have to work another 16 days; until May 10th, to reach Tax Freedom Day®.

In the Foundation calculations, America will spend more on taxes in 2016 than on food, clothing and housing combined.
Read more “Are You Free of Your Tax Bill for the Year?”


Proactive Steps to Defend Tax-Exempt Munis


House members from both parties announced the launch of the Municipal Finance Caucus on March 1, 2016 during the annual meeting of the National Association of State Treasurers (NAST) in Washington, DC. The Caucus will work in partnership with NAST to promote policies that will enhance access to the capital markets for state and local governments and defend tax-exempt munis.

Although there are no expectations that tax law related to the municipal tax-exemption will change this year, members of the Caucus are concerned about a number of recent proposals that would alter the tax-exempt status of municipal bond income. The Caucus intends to educate legislators regarding the municipal market and the potential implications of impairing the tax-exempt status of municipal bond income; impacts that include increasing the cost of issuing state and local debt and hampering infrastructure development. Read more “Proactive Steps to Defend Tax-Exempt Munis”


Tax-Exempt Assets Looking for a Home


In 2016, a record $201 billion in municipal bonds will mature. The bulk of maturing bonds are expected in the June to July time frame. And, a total of $402 billion – the 4th highest annual amount in history – will come from the combination of municipal bonds being called, municipal bond coupon payments, and maturing bonds, over the course of 2016.

Begin making plans to reinvest those assets for tax-exempt income. Yields in the municipal bond market have recently returned to historical norms in which municipal bonds trade at yields of approximately 80% of comparable Treasuries, and taxable equivalent yields remain attractive, particularly for investors in the upper tax brackets.

You will find complete information on Aquila Group of Funds seven state-specific municipal bond funds, exempt from both Federal and State income tax, on this site.

Shares of the Funds may only be sold by offering the Funds’ Prospectus. 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 your financial adviser, and when you call 800-437-1020.


Chris Johns on the Municipal Bond Market in Asset TV Masterclass


Chris Johns, portfolio manager of Aquila Tax-Free Fund of Colorado and Aquila Tax-Free Trust of Oregon, was a panelist in the January 19, 2016 Asset TV Municipal Bond Masterclass. The panel discussion covered opportunities and challenges within the municipal bond market, and Mr. Johns discussed the investments strategies implemented by the Aquila municipal bond funds in order to manage both interest rate risk and credit risk.

Chris Johns is Senior Vice President, Managing Director and Portfolio Manager with Davidson Fixed Income Management, sub-adviser to Aquila Tax-Free Fund of Colorado and Aquila Tax-Free Trust of Oregon. Joining Mr. Johns on the panel were JR Reiger, Head of Fixed Income Indices, S&P Dow Jones and Tom Weyl, Managing Director and Head of New Business Development, National Public Finance Guarantee.

We think you’ll find the panel discussion insightful and informative.

Shares of the Funds may only be sold by offering the Funds’ Prospectus. 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 your financial adviser, and when you call 800-437-1020.

If you experience difficulty viewing this video on your equipment, you may also view it by registering (at no cost) on the Asset TV site.


2016 Colorado Municipal Bond Outlook – The Market Awakens


By Timothy Iltz, Vice President and Municipal Bond Analyst, Kirkpatrick Pettis Capital Management

As 2015 comes to a close, Colorado finishes the year with tax-exempt municipal bond issuance exceeding 2014 by over 30%. Low interest rates, refunding opportunities and economic development all contributed to elevating Colorado municipal borrowings above 2014 levels. Issuance over the year was highlighted by several transactions, in which we participated, incluCO 1 2016 issuance graphicding: $83 million City of Colorado Springs Utilities System Revenue Bonds, $194 million Regional Transportation District bus and light rail certificates, $22.75 million Telluride School District General Obligation Bonds and the $15.5 million Colorado Water Resources and Power Development Authority Clean Water Revenue Bonds.


During 2015, issuance was relatively steady with 59% of bonds issued during the first half of the year and 41% issued during the second half. Unlike other states where issuance waned at year-end, Colorado finished the year strong with 13% of annual issuance in December. It is likely not a coincidence that 99% of bonds issued during December were sold prior to the Fed’s meeting, as issuers rushed to sell bonds prior to the Fed’s one-quarter percentage point rate hike.

Read more “2016 Colorado Municipal Bond Outlook – The Market Awakens”