Municipal New Issuance: With the New Years holiday last week, we did not have any new issuance.

Municipal Secondary Trading: With just four trading days last week, secondary trading totaled to just over $24.24 billion with 60% of all secondary trading being dealer sells. According to Bloomberg, clients put just under $2 billion up for the bid.

Municipal Spreads: This past week, we saw munis rally with yields falling by an average of 6.9 basis points across the curve with yields on 10-year notes falling 6.9 basis points to end the week at 3.09%. With the rally in munis this past week, munis were able to outperform Treasuries as the 10-year muni-to-Treasury ratio is now yielding 67.18% compared to 68.31% from the prior week. We did see the muni curve flatten this past week by 1 basis points to close out the week at 106 basis points.

According to LSEG Lipper US Fund Flows data, investors pulled approximately $387 million from muni bond funds. This outflow follows the prior week’s outflow of $879 million. Outflows for the month of December are attributed to higher rates in US Treasuries as well as tax-swapping.

We have seen munis cheapen over the past month as investors are expecting that the Fed will take a pause in cutting rates this month as Chair Powell alluded to in the December Fed meeting. This approach by the Fed has pushed yields higher as well as the muni-to-Treasury ratio higher. In the past month we have seen 2-year ratio cheapen by 4.3 percentage points, while the 5-year ratio cheapened by 2.7 percentage points, the 10-year by 1.2 percentage points, and the 30-year ratio by .71 percentage points. Although munis ratios have cheapened overall in the past year, munis are still richer than their five-year average but still remain attractive as yields are higher than they were five years ago. In the past 11 January’s, munis have had a positive return in 8 of them while Treasuries have shown a positive return in only seven, showing us that we could see munis outperform Treasures if this trend continues. This should be a great opportunity for investors as they can purchase cheaper bonds on a relative value basis as well as gain higher yields with January usually being a favorable month for munis as demand should outweigh supply. AmeriVet anticipates that the muni market will have just over $9 billion in negotiated supply over the next 30 days.

Municipal Supply: The negotiated calendar for the first full week of the year will have an expected volume of just over $4.34 billion with the largest deals being the $998 million Southeast Energy Authority, followed by the San Diego Community College District which plans on issuing $700 million in tax-exempt bonds and $150 million in taxable bonds. AmeriVet will be participating in the Selling-Group for the $173 million South Carolina State Housing Finance and Development Authority Mortgage Revenue Bonds issuance. AmeriVet will also be participating in the Selling-Group for the New Hampshire Housing Finance Authority’s Single-Family Mortgage Acquisition Revenue Bonds issuance which will feature $75 million in tax-exempt bonds and $25 million in taxable bonds.