Municipal New Issuance: With the holiday shortened week, the negotiated calendar saw very limited issuance with a total calendar size of just $5.7 billion with one issue covering almost half of the week’s issuance. The largest issue of the week which garnered the most interest was the $2.3 billion State of California GO deal which AmeriVet as a Co-Manager on. The State of California issue saw great demand it was heavily oversubscribed due to the size as well as the lack of supply in the markets for the week. AmeriVet was also in one other deal last week as a Selling-Group-Member for the $748 million Triborough Bridge and Tunnel Authority issuance.

Municipal Secondary Trading: With only four days of trading last week, secondary trading totaled to just $30 billion for the week as traders returned to their desks after the Labor Day Holiday on Monday. Although we only had four days of trading, we did see clients still put up about $4.8 billion in bids-wanted compared to $4.7 billion from the prior week according to Bloomberg.

Municipal Spreads: Continuing the same theme of August, in the first week of September we continued to see yields rise as yields on 10-year notes rose by 5.4 basis points in the past week to 2.73%. In the last 30 days we have seen yields rise across the curve by an average of 57 basis points. Even as yields rose this past week, we did see munis outperform Treasuries as the 10-year ratio is now yielding 82.37% compared to 83.89% from the prior week. We are starting to see the yield curve steepen once again as the gap between short-term notes and long-term notes steepen by 7.1 basis points to 117 basis points.

We continue to see outflows in municipal bond mutual funds and according to Refinitiv Lipper US Fund Flows, data has showed that investors pulled about $1.9 billion out of funds last week compared to $3.4 billion of outflows from the prior week. This marks the fifth straight week of outflows. ETFs saw outflows of $189 million for the week compared to $310.9 million of outflows from the prior week.

It appears that ratios have finally stabilized in the past three weeks even as yields have risen dramatically in same amount of time. In the past three weeks, we have seen yields rise by an average of 28 basis points while ratios have remained relatively stable with only 30-year bonds moving by three percentage points in the same time frame. With 30-year ratios above 100%, investors should start looking at the long end due to relative cheapness towards Treasuries even though the long end has lost roughly 16% this year based off the stabilization of ratios. However, munis could see a rebound before year end.

Municipal Supply: The negotiated calendar will pick up this week as everyone returns to their desks after a holiday shortened week last week. The expected negotiated volume for the week will be roughly $7.3 billion with the largest deal being the $755 million Los Angeles Community College District issuance. North Texas Tollway Authority is planning on selling 667 million in refunding bonds and the Port Authority of New York & New Jersey is scheduled to sell $450 million.