Municipal New Issuance: The Negotiated calendar for the third week of June totaled to just over $2.4 billion as many issuers chose to hold off on their bond sales ahead of the Fed’s important rates decision. This was the lowest weekly new issue volume since January. The largest deal of the week was the $329 million Salt Lake City Utah Public Utilities Revenue bonds. The State of Washington issued $118 million for their Federal Highway. The County of Nassau was scheduled to sell $240 million but chose to push back their bond issuance a week instead of selling ahead of the Fed rates decision.

Municipal Secondary Trading: Secondary trading for the week totaled to just over $45 billion with the bulk of the trading happening towards the first half of the week as many traders were getting ahead of the Fed rate hike. Bids-wanted continue to be at elevated levels as mutual-funds are fearing the pressure to sell securities as redemptions continue hit the markets. Bids-wanted totaled to roughly $8.7 billion for the week with $2.1 billion coming from Monday alone according to Bloomberg.

Municipal Spread: Munis went into a frenzy in the first part of the week when it came apparent that the Fed would be hiking 75 basis points rather than what the 50 basis points many were expecting. Monday was one of the worst days since April 2020 with yields on bonds maturing in 10 years rising by 23 basis points alone on that day. Yields on 10-year notes finally closed out the week by rising by 31 basis points to 2.91%. This selloff virtually wiped all the gains we had in May and part of June as one month ago 10-year notes were yielding 2.92%. With yields on the rise, munis did lose ground with US Treasuries as 10-year bonds are now yielding 90.09% of Treasuries compared to 82.23% a week ago. One month ago, those ratios were at 98.99%. We continue to see the muni curve steepen as the gap between short-term and long-term bonds rose by 4.1 basis points to 137 basis points.

Investors pulled about $5.6 billion from municipal-bond mutual bonds last week marking the third largest withdrawal on record as investors pulled money out of their funds ahead of the Fed meeting which took place on Wednesday, hiking interest rates by 75 basis points. Investors have yanked cash out of the muni-funds in 17 of the last 18 weeks. Until we start to see the Fed get a handle of rising inflation, we should continue to see investors pull money from mutual funds.

Munis had one of the worst weeks since April 2020 with yields rising by 23 basis points alone on Monday. Majority of the volatility came on Monday and Tuesday in which traders and investors were trying to get a head of the Fed’s announcement of their rate hike. It was widely expected that the Fed would only hike 50 basis points, but once inflation data was released, many speculated a 75-basis point hike. The sell-off wiped out virtually all of the gains we had made back in May and early June and pushed yields towards an eight-year high. With inflation and the possibility of recession looming, we should expect to see more pain in the markets.

Municipal Supply: Supply will continue to be on the low end this week with the negotiated calendar being roughly $3.67 billion for the week with the largest deal being the $1.5 billion City of Los Angeles California Tax and Revenue Anticipation Notes issue. The City of Los Angeles Department of Water and Power will be issuing $390 million in revenue bonds. We are continuing to see many issuers hold off on their bond sales as the muni markets have been getting battered as the Fed continues to try combat high inflation.