Municipal New Issuance: The negotiated calendar for the week totaled to about $5.3 billion with the largest deals being the $674 million Southeast Energy Authority issuance followed by the $566 million Port of Portland Oregon Airport which issued green revenue bonds. The Chicago Board of Education issued $520 million.  

Municipal Secondary Trading: Trading for the week totaled to roughly $35.85 billion for the week with about 55% of trades being clients buys. With a limited calendar last week, clients continue to purchase bonds in the secondary markets. With a large calendar this week, we expect to see the main focus being the new issue markets. According to Bloomberg, clients put up roughly $5.45 billion for the bid, up from the short trading week of $4.69 billion.

Municipal Spreads: Muni yields once again rose last week with yields rising for the fourth week in a row. Last week we saw yields on 10-year notes rise by 4.4 basis-points to finish the week at 2.67%. Munis were relatively unchanged for the majority of the week, but with the initial jobless claims lower than expected and revisions to labor costs, some are suggesting that the Fed can increase the Fed rate by 50 basis-points with a 20% probability. Munis lagged Treasuries last week for the first time in recent weeks as the 10-year muni-to-Treasury ratio now stands at 67.67% compared to 66.73% from the prior week. Ratios have seemed to have stabilized in the last couple of weeks and this past week, we did see the muni curve steepen by 1.9 basis points to 73 basis points.

According to Refinitiv Lipper US Fund flows data, this past week investors continue to pull their investments from muni- funds, with investors pulling about $905 million from those funds marking the third week in a row where investors have pulled money from the funds. This loss follows the prior weeks $1.7 billion of outflows.

With February finally behind us we can look forward into March but we could still see a continuation of February as demand is still limited and supply is still projected to be just small as well. With the Fed continuing to raise rates for the foreseeable future, things can continue to get worse. Although we are expected to see supply increase this month, muni issuance is down about 26% so far this year compared to the same period last year. With borrowing costs up, as well as infrastructure costs increasing, we are seeing many issuers hold off on issuing any new debt. With the CPI number coming out in a couple of weeks and the Fed rate decision coming later this month, we could see where investors stand on the direction of the economy.

Municipal Supply: The negotiated calendar will pick up this week with an expected volume of $10.1 billion. Unfortunately, although it is a sizable calendar, two thirds of the issuance is from only three deals. The largest deals of the week will be the $3.5 billion Texas Natural Gas Securitization Finance Corp. AmeriVet will be in the second largest deal of the week which will be the $1.8 billion State of California Taxable issue as a Co-Manager. AmeriVet will also be in the $1.24 billion New York City Municipal Water Finance Authority as a Selling-Group-Member.