Municipal New Issuance: Last week’s negotiated calendar totaled to just over $7 billion with the largest deal being the $1.3 billion District of Columbia Income Tax Revenue bonds. Dallas-Fort Worth International Airport issued $553 million in refunding bonds. AmeriVet was a Co-Manager on one issue this week which was the $66 million Maryland Stadium Authority for the Baltimore City Public Schools which issued zero coupon CABS.

Municipal Secondary Trading: Trading for the week totaled to just over $36.4 billion for the week as traders and investors reacted to Junes Inflation numbers. Trading picked up from the prior week with 53% of the trading being customers buying from dealers. According to Bloomberg clients placed roughly $5.7 billion up for the bid with 4 days having over a billion in bids-wanted.

Municipal Spread: For the fourth straight week muni yields have fallen. Yields on 10-year notes fell by 4.7 basis points to 2.48% for the week. Signaling that the worse could be over as muni have started to diverged from US Treasuries. With inflation at its highest in 40 years and it still seems to still be rising, a 100 basis point hike is possible. Munis underperformed when compared to Treasuries as the 10-year ratios are now yielding 85.82% of US Treasuries compared to the prior week when ratios were at 82.83%. The Muni curve did steepen slightly by just 2.5 basis points to 130 basis points diverging from Treasuries as munis tend to lag Treasures but have followed this trajectory.

For the third time since February, investors added to municipal bond mutual funds. According to Refinitiv Lipper US Fund Flows data, investors added about $206 million to those funds which follows the prior week’s outflow of $313 million. Investors have pulled a record $47.1 billion this year.

With CPI coming in at 9.1% and inflation hitting its highest level in 40 years, the speculation of a 100 basis point hike has started to gain some traction as the Fed will look to be more aggressive to tame Inflation.This potential 100 basis point hike has inverted the Treasury 2s/10s curve by 20 basis points while 2s/10 muni curve is at 93 basis points showing that the the short end has become super rich. This is a sign that the short end of the curve has become extremely rich as investors have flocked to the shorter end as inflation is high and a recession is looming.

Municipal Supply: Municipal supply will be slightly higher this week with the negotiated calendar having an expected volume of about $6.6 billion for the week. The Commonwealth of Massachusetts is planning to sell $2.7 billion in Special Obligation Revenue bonds for their Unemployment Insurance Trust fund. New York City Transitional Finance Authority is planning on selling $557 million in refunding bonds which AmeriVet will be in the Selling Group. The Metropolitan Water District of Southern California will be issuing $251 million in refunding bonds. With the 30-day visible supply being just $10.9 billion and redemptions being $23.3 billion, we should expect to see high demand for new bonds.