Municipal New Issuance: Last week, the negotiated calendar totaled to approximately $2.9 billion with the largest deal of the week accounting for over half of the issuance. That deal was the $1.5 billion New York City Transitional Finance Authority Future Tax Secured Tax-Exempt Subordinate Bonds issuance which AmeriVet participated in the Selling-Group.

Municipal Secondary Trading: Secondary trading totaled to just over $49.16 billion for the final full week of trading for 2024 with 53% of the trading volume being dealer sells to clients. The majority of the trading was done on Thursday as traders reacted to Fed comments regarding any future rate cuts in 2025. According to Bloomberg, clients put up roughly $7.13 billion up for the bid which is a decrease from the prior week’s volume of $8.13 billion.

Municipal Spreads: Munis yields rose once again this past week with yields rising by an average of 23 basis points with the belly of the curve seeing the largest cuts. Yields on 10-year notes rose by 21.7 basis points to finish the week off at 3.13%. With yields rising this past week, munis did underperform versus Treasuries as the 10-year muni-to-Treasury ratio rose to 69.29% compared to 66.39% one week ago. Just one month ago, that ratio was yielding 67.06%. We did see the muni curve steepen by 5.9 basis points to end the week at 107 basis points.

According to LSEG Lipper US Fund Flows data, for the 2nd week in a row, investors pulled approximately $857 million from muni bond funds. This follows the prior week’s outflow of $316 million. With the volatility in the markets in the last couple of weeks, investors have been wiser and erring on the side of caution as rising yields and the Fed’s hawkish sentiment have pushed investors in a holding pattern.

Munis continued their slide this past week as yields rose 17 to 27 basis points across the curve as the Fed Chairman, Jerome Powell, has stated that the Fed will be taking a more cautious approach on interest rate cuts in 2025. This sent muni bonds lower and threatened any positive gains we made in 2024. Currently, month-to-date losses totals to 1.76%, pushing year-to-date returns to .74%. Prior to the decline, returns for the year were at 2.88%. We saw the largest losses in the belly of curve with yields in the 2038-2040 maturity range rising by 27 basis points, while the longer end of the curve saw yields rise by 24.5 basis points, and the front end of the curve saw cuts of 17-21 basis points. If these losses persist, we could see the first December monthly loss since 2013, a month in which we saw a month-to-date loss of .26%. With the rise in yields, we did see ratios increase as a result with the 2-year ratio rising from 62% to 65.41% over the past week, the 10-year ratio rise from 66.39% to 69.29%, and the 30-year ratio increasing from 79.20% to 82.43%. Just last week, we saw the 30-year ratio hit its lowest in 3 years.

Municipal Supply: With the Christmas holiday this week, there will not be any negotiated supply.