Municipal New Issuance: For the second week of February, the negotiated calendar saw a total volume of just over $10 billion with the largest deals of the week being the District of Columbia which issued $1.3 billion, followed by the $1.25 billion Harris County Cultural Education Finance Corporation. The third largest deal of the week was the State of California Department of Water Resources which issued $546 million in tax-exempt bonds which AmeriVet served as a Co-Manager on. AmeriVet also participated as a Selling Group Member on the $7.25 million Maryland Community Development Administration Multifamily Development Revenue Bonds issuance.

Municipal Secondary Trading: Secondary trading volume totaled to approximately $44.26 billion, with 50% of secondary trading being dealer sells. According to Bloomberg (MBWDPAR Index), clients put roughly $5.55 billion up for the bid, which remains flat from the prior week’s total of $5.55 billion.

Municipal Spreads: Muni yields fell once again this past week with yields falling by an average of 4.6 basis points across the curve with the front end seeing the largest bumps. Yields on the 10-year notes fell by 6.1 basis points to finish the week at 2.53%. Although we did see muni yields fall this past week, munis did underperform Treasuries as the 10-year muni-to-Treasury ratio is now yielding 62.50% compared to 61.60% from the prior week. We did see the muni curve steepen by 3.3 basis points to 211 basis points.

According to LSEG Lipper Global U.S. Fund Flows data, investors added roughly $1.57 billion to muni bonds funds over the past week. This follows the prior week’s inflow of $2.37 billion, marking the fifth straight week in which we saw inflows of over $1 billion and is the ninth straight week of muni bond fund inflows.

Munis continued their rally this past week as we saw yields fall across the curve with the front end seeing the largest bumps. The 2027 maturity range saw the largest bump of 7.7 basis points while the 2028-2043 maturity range saw a 5-6 basis point bump, the 2044-2047 maturities saw bumps of 2-4 basis points, and the 2048-2056 maturity range saw just a 2 basis point bump. With the rally this past week, munis continued their rally for the year with returns for the month hitting .69% pushing returns for the year to 1.63%. At this point last year, munis were in the red for the month at -.29% and returns for the year were at just .21%.

Since the start of the year, we have seen the yield curve steepen with the front-end seeing bumps of 40 basis points, the belly seeing about 20 basis point bump, while the long end has only seen a 1 basis point bump for the year. This is due to long end yields rising over the past few weeks, while the front ends saw bumps, and Fed expectations to cut rates has fueled market participants to lower yields on the front end. This has also pushed the long end to underperform Treasuries as the 30-year muni-to-Treasury ratio is yielding 88.96% today while at the start of the year we were at 86.42%. While the rest of the curve has significantly outperformed Treasuries, the 2-year ratio is showing the best performance with ratios now at 60.66%, compared to the start of the year when the ratio was at 70.27%. The 5-year ratio is currently at 58.86% compared to 64.20% at the start of the year, and the 10-year ratio is currently yielding 62.51% compared to 65.43% at the start of the year. This outperformance can be short-lived as the Fed could potentially pause any Fed rate cuts for the long term.

Municipal Supply: For the third week of February, the negotiated calendar will have an expected volume of just over $4.6 billion with the largest deal of the week being the $475 million City of Chicago O’Hare International Airport General Airport Senior Lien Revenue Bond issuance, followed by the $452 million Bay Area Toll Authority Toll Bridge Revenue Bonds transaction. The South Carolina Public Service Authority plans on issuing $447 million of tax-exempt and taxable bonds. AmeriVet will be serving as a Co-Managing Underwriter for the Pennsylvania Housing Finance Agency’s Single Family Mortgage Revenue Bonds issuance, consisting of $211 million in tax-exempt bonds and $26 million in taxable bonds. AmeriVet will also be participating in the Selling-Group for the South Carolina State Housing Finance and Development Authority’s $205 million Mortgage Revenue Bonds transaction.

Have a great week!