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AmeriVet Weekly Muni Snapshot

Municipal New Issuance: The final week of the August negotiated calendar saw a total of $6.6 billion in issuance. The largest deal of the week, which was well over subscribed was the Chicago O’Hare International Airport Revenue bonds which issued $1.8 billion. The second largest deal of the week was the $696 million Oklahoma State Development Finance Authority taxable issue. AmeriVet was in one deal for the week as a Selling-Group-Member which was the $202 South Carolina State Housing Finance and Development Authority.

Municipal Secondary Trading: Secondary trading for last week totaled to roughly $31.1 billion with 55% of all secondary trading going to clients. With only four days of trading this week, we should expect very light volume. According to Bloomberg, clients put up roughly $4.8 billion up for the bid with only 3 days of bids-wanted totaling over $1 billion.

Municipal Spreads: For the final week of August, we continued to see yields rise as 10-year notes rose by 13.4 basis points for the week to 2.67%. Muni bonds have lost roughly 2.19% for the month of August virtually erasing all the gains we had back in July. With muni yields rising for the week, they underperformed slightly compared to Treasuries as the 10-year ratios is now yielding 83.92% compared to 83.60% from the prior week. We continue to see the yield curve inverted as 3-month muni yields are at 2.45%, which is higher than 5-year munis which stands at 2.41%.  With the selloff continuing for munis, outflows from municipal bond mutual funds ramped up with investors pulling about $3.4 billion from those funds last week. This follows the prior weeks outflow of $1.8 billion according to Refinitiv Lipper US Fund Flows Data. This out flow marks the 4th straight week outflows.

With two thirds of the year over, munis are poised to have their worst year in decades as the Feds aggressive rate hike campaign to tackle high inflation has pushed investors away from the fixed income markets. Although we did see a positive gains in July of 2.64%, those gains were virtually erased in August as munis were down 2.19%. Long bonds lost the most in August losing roughly 3.52% and are now down 14.57% for year. There is some positive news for long bonds as ratios are now above 102% versus Treasuries. Munis year-to-date have lost around 8.62% and are still poised to lose even more ground unless we start to get a clearer picture as to when Fed Rate campaign will come to an end. With the next CPI number coming out in 2 weeks, followed by the Fed decision a week later, we should get a clearer picture as to where rates will go by the end of year. If inflation is held in check and the Fed backs off from another 75-basis points rate hike, we should start to see rates stabilize and investors moving back to munis.

Municipal Supply: With Labor Day holiday on Monday, the municipal calendar is very light with only $4.8 billion scheduled with one issue covering over half of the issuance. The largest deal of the week which AmeriVet will be a Co-Manager on will be the $2.4 billion State of California General Obligation issuance. We should expect that the State of California deal will garner the attention as the next biggest deal is the $405 million Omaha Public Power District issuance.