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AmeriVet Weekly Muni Snapshot

Municipal New Issuance: With a shortened holiday week, it comes to no surprise that the negotiated calendar was very light with just $5 billion being priced with just two issues being over $500 million. The largest deal of the week was the $596 million South East Energy Authority revenue bonds deal. The second largest deal of the week was the $500 State of Colorado COPS issuance which had 6% coupons all across their maturities. AmeriVet was in one deal for the week which was the $463 million New York State Housing Finance Agency issue.

Municipal Secondary Trading: With only four days of trading last week, secondary trading was able to keep up with the volatility, with secondary volume of around $34.33 billion according to Bloomberg. Even with the big rally in the last two-week clients continue to put up high amounts of Bids-wanted with clients putting up $5.3 billion up for the bid according to Bloomberg. With two weeks to go until the Fed rate decision, we should continue to see a very active secondary market.

Municipal Spread: Coming off one of the biggest rallies we have seen in a few years, munis continued the theme last week with yields on 10-year notes falling by 5.8 basis points to 2.45%. With this rally we continue to see munis outperform Treasuries again with the 10-year ratios now yielding 83.32% of Treasuries the prior week, those ratios were at 91.68%, and three weeks ago we hit a high of 104.56%. Although we had a nice rally, we still saw the muni curve steepen slightly by 4.5 basis points to 105 basis points as investors are still favoring the shorter end of the curve until we get a clearer answer from the Fed on what they will do to combat high inflation. Munis are still in losing territory with year-to-date return of -7.3% which is still a vast improvement from its lows of -10.16%.

For the first time in over 15 weeks, municipal bond mutual funds saw inflows halting a mass exodus that saw withdrawals that exceeded over $60 billion. Funds were able to pull in $1.2 billion according to Refinitiv Lipper US Funds flow data, the biggest inflow since November 2021. The 15 weeks of outflows came amid a bond-market route that was due to the aggressive Fed rate-hikes to combat high inflation. This inflow can be contributed to Treasuries finally stabilizing as well as many investors taking an opportunity to purchase cheap bonds. Even though we saw inflows, we still should be still be a bit weary of the markets as retail investors are still a bit cautious when diving back into munis. June 15th will be an important date for the markets as it will dictate where the markets will move as the Fed is expected to hike another half a point.

Muni markets have made a complete 180 in the last two weeks prompting valuation to fall to 87% when compared to US Treasuries which is the lowest since March. Prior to the rally, ratios in bonds maturing in 10-year reached a high of 104.5% on May 20th. Since then, the same bonds are now yielding 84.25% of Treasuries, roughly around the same levels we saw prior to the sell off. Although, on a yield perspective, munis are cheaper than they were 5 months ago, they are on a relative value standpoint considered rich compared to Treasuries as the ratios are now 83.32%. However, they are still cheaper than one year ago when those same ratios were at 60%. If we continue to see a rally in the markets, coupled with the reinvestment inflows, and low supply, these ratios should continue to lower.

Municipal Supply: The Negotiated calendar will continue to be very light as issuers continue to put their funding needs on hold. This week we will have an expected volume of roughly $4.8 billion with just one deal being over $500 million. The largest deal of the week will be the $ 577 million City of Atlanta Airport revenue bonds. Texas Water Development Board will be issuing $254 million in revenue bonds. California Community Housing Agency has their $465 million deal still on a day-to-day status. AmeriVet will also be in two deals this week as a Co-Manager which will be the $75 million Massachusetts Housing Finance Agency as well as the $19 million Rhode Island Health and Educational Building Corporation issuance. AmeriVet will also be a Selling-Group-Member in the $160 million New York City Housing Development Corporation issuance.