april 2, 2020 - citi.com

The COVID-19 Crisis: What it Means for the Affordable Housing Industry, A Financial Institution's Perspective

April 2, 2020

Kathy MillhouseCiti Community CapitalHead of Transaction & Asset Management & Managing Director

Richard GerwitzCiti Community CapitalCo-Head & Managing Director

Jeremy JohnsonCiti Community CapitalCo-Head & Managing Director

Dana PetersonCitiGlobal Economist with Citi Research

Your Moderator and Panelists

1

Welcome, and a Few Housekeeping Items

To ask a question

– email [email protected]

We will provide access to a recording of this

webinar to our email list in the next 24

hours

2

What the COVID-19 Crisis Means for the Affordable Housing Industry, A Financial Institution's Perspective

Agenda

Introduction

Impact on the Markets and Policy

Financial Institution Affordable Housing Lending & Investment

Construction and Project Operation

Q & A

We are all confronting a situation that is unprecedented and are facing situations daily that are testing our systems and ability to adapt quickly.

3

Treasuries Have Rallied Year-to-Date on Risk-Off Trading Surrounding the Global COVID-19 OutbreakHistoric UST Performance: Trailing 2-Years

UST Market Performance

5-Yr 10-Yr 30-Yr

Current 0.41% 0.72% 1.29%

2020 Year-to-Date

Weekly ∆ -11 bps -20 bps -26 bps

‘20 YTD ∆ -128 bps -120 bps -110 bps

High 1.69% 1.92% 2.39%

Low 0.38% 0.54% 0.99%

Average 1.18% 1.40% 1.90%

YE ’19 1.69% 1.92% 2.39%

Trailing 2-Years

High 3.09% 3.24% 3.46%

Low 0.38% 0.54% 0.99%

Average 2.19% 2.36% 2.71%

UST Summary Statistics

Source: Bloomberg as of March 27, 2020.

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20

TSY

Yie

ld (%

)

2-Yr UST 5-Yr UST 10-Yr UST 30-Yr UST

0.25%

0.50%

0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

2.25%

2.50%

Dec-19 Jan-20 Feb-20 Mar-20

1.29%

0.72%

0.25%0.41%

4

Muni Market PerformanceRecord Bid Wanted as Redemptions Created Selling Pressure1

EPFR Daily Intra-Month Fund Flows Rise after Thirteen Consecutive Days of Outflows2

After Reaching Historic Lows, Rates Hit Record 1-Day Sell-Off / Rally & Experienced Some of Greatest Volatility in History3

Historic MMD Performance: Trailing 2-YearsMMD Summary Statistics

March 19 posted the largest bid-wanted print on

record of ~$4.12bn

March 26 posted the first day of

inflows following 13-Day

consecutive outflows

+708.25

1. Bloomberg, “MBWDPAR Index” represents the total par amount for bonds out for the bid on MBWD. As of March 27, 2020. 2. EPFR Global Daily Fund Flows excluding month end prints as of March 26, 2020. 3. Thomson Reuters as of March 27, 2020.

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

Dec-19 Jan-20 Feb-20 Mar-20

1.09%1.06%

1.84%1.26%

5-Yr 10-Yr 30-YrCurrent 1.09% 1.26% 1.84%

2020 Year-to-Date

Weekly ∆ -147 bps

-153 bps

-153 bps

‘20 YTD ∆ 0 bps -18 bps -25 bps

High 2.56% 2.79% 3.37%

Low 0.49% 0.78% 1.38%

Average 1.02% 1.32% 1.95%

YE ’19 1.09% 1.44% 2.09%

Trailing 2-YearsHigh 2.56% 2.79% 3.46%

Low 0.49% 0.78% 1.38%

Average 1.60% 1.96% 2.61%

Largest 1-day sell-off across all MMD tenors of 50 bps, except 3-Yr. MMD; and 2-day sell-off of as much as 100 bps in some tenors

Largest 1-day rally of 65 bps across the curve; and 2-day rally

0.00%

1.00%

2.00%

3.00%

4.00%

Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20

MM

D Y

ield

(%)

2-Yr MMD 5-Yr MMD 10-Yr MMD 30-Yr MMD

5

50%100%150%200%250%300%350%400%450%500%550%600%650%700%

Dec-19 Jan-20 Feb-20 Feb-20 Mar-20 Mar-20

5-Yr Ratio10-Yr AvgOne Standard Dev Below Avg

75%

100%

125%

150%

175%

200%

225%

250%

275%



0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

2.25%

2.50%

2.75%

3.00%

3.25%

3.50%


30-Yr MMD 1-Yr Avg30-Yr UST 1-Yr Avg

50%75%

100%125%150%175%200%225%250%275%300%325%350%375%400%



0.25%

0.50%

0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

2.25%

2.50%

2.75%

3.00%



0.25%

0.50%

0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

2.25%

2.50%

2.75%

3.00%



Municipal Rates and Ratios Have Spiked and Remain ElevatedAfter dropping to historic lows, MMD / UST rates spiked and remain elevated on municipal underperformance due to investor uncertainty over the potential market impact of COVID-19.

Source: Thomson Reuters as of March 25, 2020; Basis point changes rounded to the nearest whole number.

5-Year MMD and UST Rates2020 Year-to-Date

5-Year MMD / UST Ratios2020 Year-to-Date





0.41%

673.7%

+207 bps

Max

Min

Feb. 20: Equity markets begin to react to

COVID-19

+292.1% +164%+611.6%

2.56%

1.26%

0.72% 1.29%

+201 bps

+199 bps

Max

Min

Max

Min

Max

Min

Max

Min

Max

Min

367.1% 253.4%

265.9%

175% 142.6%

1.09%

2.79% 3.37%

1.84%


COVID-19


COVID-19


COVID-19


COVID-19


COVID-19

6

Short-Term Market Activity

Short-Term Rates Rise as Dealer Inventory VariesSIFMA has reset significantly wider while the Fed Funds rate remains low follow cuts from the Federal Reserve

*

Source: Citi Internal, Bloomberg and the New York Fed as of March 27, 2020. *Represents Dealer VRDO Inventory for the week ending March 18, 2020 as the latest week is not yet released.

7

0

20

40

60

80

100

120

140

Jan-20 Feb-20 Mar-20

Cre

dit S

prea

d (b

ps)

CMBS DUS 10Y CMBS Freddie Mac K Class A1 CMBS Freddie Mac K Class A2

Taxable IG and Agency Credit SpreadsIG Credit Spreads Have Widened Substantially With Short-End Relief Following the Fed’s Market SupportU.S. Broad Investment Grade (BIG) Index and CDX 5-Yr. IG Index Performance: 2020 Year-to-Date1

Agency Credit Spreads2020 Year-to-Date1

40

60

80

100

120

140

160

180

200

50

100

150

200

250

300

350

400

Dec-19 Jan-20 Jan-20 Feb-20 Feb-20 Mar-20 Mar-20 Mar-20

CD

X 5-

Yr. I

G In

dex

(bps

)

BIG

Inde

x (b

ps)

CDX IG Index (5-Yr. Tenors) CDX IG Index (5-Yr. Tenors)

Feb. 20: Equity markets begin to react to COVID-19

308 bps

99 bps

+209 bps

Mar. 23: Fed implements facilities to buy IG corporate

credit in the primary (<4-Yrs.) and secondary markets (<5-Yrs.)

112bps

45 bps

-40bps

USBIG Index CDX IG IndexCurrent 308 bps 112 bpsYTD High 371 bps 152 bpsYTD Low 96 bps 44 bpsYTD Avg 146 bps 67 bps

1. Citi Velocity as of market close on March 27, 2020; Basis point closing value / changes rounded to the nearest whole number.

Mar. 23: Fed implements facilities to buy IG corporate

credit in the primary (<4-Yrs.) and secondary markets (<5-Yrs.)

USBIG Index (5-Yr. Tenors)

CMBS DUS 10YCMBS Freddie Mac K Class A1

CMBS Freddie Mac K Class A2

Current 118 bps 105 bps 110 bpsYTD High 120 bps 120 bps 135 bpsYTD Low 49 bps 46 bps 46 bpsYTD Avg 66 bps 62 bps 65 bps

53 bps

48 bps47 bps

118 bps

105 bps110 bps

+65 bpsFeb. 20: Equity markets begin to

react to COVID-19

+57 bps

+63 bps

8

What is Citi Seeing Across its Construction and Permanent Portfolio?

Pre-Conversion

– 190 + Projects Currently Under Construction

– 175 + Projects Completed and in Lease-Up

– Currently Active in 34 States, Territories and the District of Columbia

Permanent Loans

– 1,700 + Permanent Loans

– Approximately 1/3rd of Our Permanent Portfolio Has a Project Based Section 8 Contract

– Active in 52 States, Territories and the District of Columbia

Citi Community Capital has an extensive portfolio of affordable housing projects under construction.

9

To Ask a Question

Email [email protected]

10

IRS Circular 230 Disclosure: Citigroup Inc. and its affiliates do not provide tax or legal advice. Any discussion of tax matters in these materials (i) is not intended or written to be used, and cannot be used orrelied upon, by you for the purpose of avoiding any tax penalties and (ii) may have been written in connection with the "promotion or marketing" of any transaction contemplated hereby ("Transaction").Accordingly, you should seek advice based on your particular circumstances from an independent tax advisor.

In any instance where distribution of this communication is subject to the rules of the US Commodity Futures Trading Commission ("CFTC"), this communication constitutes an invitation to consider enteringinto a derivatives transaction under U.S. CFTC Regulations §§ 1.71 and 23.605, where applicable, but is not a binding offer to buy/sell any financial instrument.

Any terms set forth herein are intended for discussion purposes only and are subject to the final terms as set forth in separate definitive written agreements. This presentation is not a commitment to lend, syndicate afinancing, underwrite or purchase securities, or commit capital nor does it obligate us to enter into such a commitment, nor are we acting as a fiduciary to you. By accepting this presentation, subject to applicable law orregulation, you agree to keep confidential the information contained herein and the existence of and proposed terms for any Transaction.

Prior to entering into any Transaction, you should determine, without reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume these risks) as well as the legal,tax and accounting characterizations and consequences of any such Transaction. In this regard, by accepting this presentation, you acknowledge that (a) we are not in the business of providing (and you are not relying on usfor) legal, tax or accounting advice, (b) there may be legal, tax or accounting risks associated with any Transaction, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) youshould apprise senior management in your organization as to such legal, tax and accounting advice (and any risks associated with any Transaction) and our disclaimer as to these matters. By acceptance of these materials,you and we hereby agree that from the commencement of discussions with respect to any Transaction, and notwithstanding any other provision in this presentation, we hereby confirm that no participant in any Transactionshall be limited from disclosing the U.S. tax treatment or U.S. tax structure of such Transaction.

We are required to obtain, verify and record certain information that identifies each entity that enters into a formal business relationship with us. We will ask for your complete name, street address, and taxpayer ID number.We may also request corporate formation documents, or other forms of identification, to verify information provided.

Any prices or levels contained herein are preliminary and indicative only and do not represent bids or offers. These indications are provided solely for your information and consideration, are subject to change at any timewithout notice and are not intended as a solicitation with respect to the purchase or sale of any instrument. The information contained in this presentation may include results of analyses from a quantitative model whichrepresent potential future events that may or may not be realized, and is not a complete analysis of every material fact representing any product. Any estimates included herein constitute our judgment as of the date hereofand are subject to change without any notice. We and/or our affiliates may make a market in these instruments for our customers and for our own account. Accordingly, we may have a position in any such instrument at anytime.

Although this material may contain publicly available information about Citi corporate bond research, fixed income strategy or economic and market analysis, Citi policy (i) prohibits employees from offering, directly orindirectly, a favorable or negative research opinion or offering to change an opinion as consideration or inducement for the receipt of business or for compensation; and (ii) prohibits analysts from being compensated forspecific recommendations or views contained in research reports. So as to reduce the potential for conflicts of interest, as well as to reduce any appearance of conflicts of interest, Citi has enacted policies and proceduresdesigned to limit communications between its investment banking and research personnel to specifically prescribed circumstances.

© 2020 Citigroup Global Markets Inc. Member SIPC. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

© 2020 Citibank, N.A. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

© 2020 Citigroup Inc. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

© 2020 Citigroup Global Markets Limited. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. All rights reserved. Citi and Citi and ArcDesign are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

Citi believes that sustainability is good business practice. We work closely with our clients, peer financial institutions, NGOs and other partners to finance solutions to climate change, develop industry standards, reduce ourown environmental footprint, and engage with stakeholders to advance shared learning and solutions. Citi’s Sustainable Progress strategy focuses on sustainability performance across three pillars: Environmental Finance;Environmental and Social Risk Management; and Operations and Supply Chain. Our cornerstone initiative is our $100 Billion Environmental Finance Goal – to lend, invest and facilitate $100 billion over 10 years to activitiesfocused on environmental and climate solutions.

april 2, 2020 - citi.com

Documents