Municipal New Issuance: The first full week of July saw about $9.2 billion of issuance, an increase from the July 4^th holiday shortened week of $7.5 billion.  We did see a large amount of Universities issue debt as we saw the University of California issue $2.6 billion of taxable and tax-exempt debt.  The University of Pennsylvania also issued $300 million of debt using a corporate cusip as well as Howard University which issued $209 million issued using a corporate cusip. With many colleges and universities having issues regarding enrollment and tuition payments due to the coronavirus pandemic, we should expect to see more institutions of higher education issue more debt by using a corporate cusip.  The University of California yields saw huge demand as bonds maturing in five years were at a 0.26% which is 15 basis points below the 5- year benchmark and bonds maturing in 30 years were at a 2% or 37 basis points above the 30- year benchmark.

Municipal Secondary Trading: As traders and portfolio managers returned from the July 4^th holiday, we saw trading total to around $30 billion, compared to around $29 billion we saw the prior week.  We did see bids- wanted increase back to normal levels to $2.4 billion, compared to only $1.09 billion the week prior.

Municipal Spreads: The municipal market finally saw some movement in spreads last week, as many traders and portfolio managers returned from the July 4^th holiday week. We saw the 10- year benchmark yield fall by 5.2 basis points to 0.806%, the previous week it was 0.858%. Even with a drop in yield across the curve municipal bonds still lagged treasuries as many are still fearful of the coronavirus cases spiking in the southern states.  The 10- year is now yielding 126.73% of treasuries and decrease from 128.06% the week prior.  We did see the municipal curve flatten as the long end tightened more than the short end as the curve is now 126 basis points. Even as yields continue to hover around their all-time lows, they are still considered cheap versus any other asset classes, as they have returned only 2.4% this year verse 6.6% for corporates and 9.2% for treasuries.

For the ninth straight week we did see inflows into municipal bond mutual funds as we saw $1.73 billion go into those funds. This is a 33% decrease from the week prior but this was due to the July 4^th holiday.  We have seen nine straight weeks of gains totaling to $16.6 billion.

The one thing that has been on the minds of Americans is when and how schools will reopen.  As the fall semester is approaching many colleges and universities have started to issue more debt and putting their new guidelines to reopen into their offering documents.  Many have paused on issuing debt until they got a clearer picture on how their fall semesters will look like, such as full in person classes, or all virtual classes or a hybrid type of learning. In recent weeks we have seen many colleges and universities once again start to issue debt as we have now seen about $27 billion sold, that is more than they sold in 2019. Many have started to use a corporate cusip instead of a municipal cusip due to the restrictions a municipal cusip has when issuing.  Many students will have to weigh in on if it’s worth going to a more expensive school if its going to be all virtual learning versus a much cheaper option with the same result of being all virtual learning.

The one university that has faced some hardships recently from the coronavirus pandemic is the University of California which just priced a $2.6 billion in revenue bonds. This was their first deal since the state removed 12% of their funding. Although, they had this issue, they did not have any issues selling any bonds to investors. Many are banking that the name alone will weather the storm the best.

Municipal Supply:  This week we are expected to see roughly $10.2 billion on new issues as many of the states and local government took a short pause in issuance due to the July 4^th holiday.  We are expected to see the New York State Development Corporation issue a $2.3 billion taxable and tax-exempt which AmeriVet will be part of the selling group. We should also expect to see the Port Authority of New York and New Jersey issue $1 billion on AMT and Non-AMT bonds. The New York Metropolitan Transportation Authority (MTA) which was just recently downgraded to BBB+ by S&P will issue $1.1 billion of debt in the form of bond anticipation notes and tender bonds. The Texas Transportation Commission will also issue $1 billion of bonds which AmeriVet will be party of the selling group. We will also see the Maryland Health and Higher Education Facilities Authority issue $765 million of taxable and tax-exempt bonds.