Hurricane Irene may have roared up the coast last weekend, but she did not leave complete financial wreckage in her wake. Neither the insurance industry nor the municipal bond market was devastated, despite the billions of dollars in damage.
A healthy insurance industry, according to Steven Weisbart, senior vice president and chief economist at the Insurance Information Institute, combined with a “relatively moderate level of insured losses,” according to Moody’s Investors Service, resulted in insurers emerging perhaps a bit bruised but unbowed from Irene’s wrath.
Municipal bonds, despite warnings earlier this year and last from analyst Meredith Whitney, barely slowed during the week before the hurricane, and have been delivering returns that beat the S&P 500 handily. According to J.R. Rieger, vice president of fixed income indices at S&P Indices, they retreated only slightly in the week before the storm despite its multiple threats to municipalities.
Despite “low new issuance, sleepy summer trading in the secondary market and the uncertainty that Hurricane Irene brought to bear,” said Reiger in a podcast, “the S&P National AMT-Free Municipal Bond Index (investment grade, tax-exempt bonds) has seen its weighted average yield drop by 13 basis points for the month so far, giving up four basis points last week as the storm introduced additional uncertainty into the market. The index has seen a positive total return for Q3 so far of over 2.7% and a year-to-date return of 7.67%.”