Municipal New Issuance: Last week, the negotiated calendar totaled to just over $9.31 billion with the largest deals of the week being the $1.8 billion Trustees of the California State University Systemwide Revenue Bonds issuance in which AmeriVet served as Co-Senior Manager on the transaction. The next largest deal of the week was the $791 million Massachusetts Bay Transportation Authority. The Massachusetts Port Authority issued $780 million. AmeriVet participated in the Selling-Group for the Rhode Island Housing and Mortgage Finance Corporation which issued $95 million in tax-exempt bonds and $53 million in taxable bonds.

Municipal Secondary Trading: Secondary trading volume for the week totaled to just over $42.66 billion, with 53% of secondary trading being dealer sells. According to Bloomberg (MBWDPAR Index), clients put approximately $5.25 billion up for the bid, a notable increase from the prior week’s bids wanted total of $2.60 billion.

Municipal Spreads: Munis saw cuts across the curve this past week with yields on 10-year notes rising by 8 basis points to finish the week at 2.99%. With yields higher this week, munis did underperform Treasuries as the 10-year muni-to-Treasury ratio is now yielding 65.54%, compared to the prior week when the ratio was at 64.86%. One month ago, the ratio was yielding 64.77%. We did see the muni curve steepen over the past week by 5.1 basis points to end the week at 186 basis points.

According to LSEG Lipper Global U.S. Funds Flows Data, muni bond funds continue to see strong fund flows as muni bond funds saw investors add approximately $1.4 billion to muni bond funds this past week. This follows last week’s inflow of $1.7 billion and marks twelve straight weeks of inflows into muni bond funds.

Munis weakened this past week as yields moved higher across most of the curve, due to pressure from Treasuries and renewed geopolitical concerns. The week started with a firmer tone with the front end seeing gains of about 1 basis point, but with the on-going conflict with Iran, Treasuries cheapened midweek, oil continues to rise, and coupled with added inflation concerns entering the market, these factors pushed muni yields higher. We moved further into the red for the month with returns for the month now at -.40% with returns for the year now at 1.91%. Last year, we were in the red at -.27% during the same time. Primary market activity was constructive, though buyers continued to focus on structure, concession, and relative value as yields moved higher. Overall, the week was marked by higher muni yields, decent technical support, positive flows, and continued sensitivity to Treasuries, oil, and Iran-related geopolitical headlines. Treasury volatility continues to be the main driver of munis with the 10-year muni-to-Treasury around 4.50% and the 30-year above 5.0% amid inflation, renewed bombing in Iran, and energy scarcity concerns as energy rich Russia will import fuel for the first time in many years due to Ukraine’s enhanced drone and cruise missile capabilities that are targeting Russian oil refineries and logistical transport.

Muni-to-Treasury ratios cheapened over the past week as tax-exempts underperformed the Treasury market during the broader rate backup. The move was most noticeable in the intermediate and long end of maturities in which muni yields rose more meaningfully and ratios moved higher, improving relative value. The front end still remains comparatively rich as Munis are being supported by July reinvestment cash and demand for short, high-grade paper, but even there the tone was less firm by the end of the week. The 30-year continues to be the cheapest portion on the curve from a relative-value standpoint especially with the curve steepening.

Municipal Supply: The negotiated calendar for the week will have an expected total of just over $6.16 billion, with the largest deal of the week being the $2.36 billion Aquarian Water Authority. The New Jersey Turnpike Authority will issue $1.059 billion in Turnpike Revenue Bonds. The Louisville/Jefferson County Metro Government plans on issuing $503 million in Health System Revenue Bonds for Norton Healthcare, Inc. The City of Quincy, Massachusetts plans on issuing GO BAN’s to the tune of $361 million.

Have a great week!