Municipal New Issuance: The negotiated calendar for the second week of 2022 had a volume of just over $7.6 billion, with the largest deal of the week being the $620 million State of Louisiana Taxable Gas and Fuels tax revenue refunding bonds. The Chicago Board of Education issued $500 million in revenue bonds and $372 million in refunding bonds which garnered a lot of attention as students returned to the classrooms amid a surge in Covid cases. Chicago schools preliminary pricing had spreads of 120 basis points for bonds maturing in 2042-2047 but bumped the pricing to 138 basis points to match the moves in MMD. AmeriVet was a Co-manager on one issue for the week which was the $23.9 million State of Wisconsin COPS issue.

Municipal Secondary Trading: The second week of 2022 we saw back normal secondary trading volume dip slightly from the prior week with trading volume at roughly $25.71 billion compared to the first week of January of roughly $26.8 billion in trades. Majority of the trading was dealers selling to clients with 55% of all trading going to clients. With yields being up for 2022 many clients have seeing this as a buying opportunity coupled with better valuations compared to Treasuries this is a great buying opportunity for buyers. According to Bloomberg client’s bids-wanted did increase for the week with bids-wanted totaling to $3.72 billion for the week, up from the prior week of $3.43 billion.

Municipal Spread: Municipal bonds are off to a rocky start for the year as we have seen yields rise all across the yield curve with the yields on 10-year notes rising by 8 basis points in the past week to 1.22%. One month ago, 10-year yields were at 1.03% a 17 basis point increase. With yields rising state and local debt did underperform Treasuries even as Treasuries yields rose as well with bonds maturing in 10 years is now yielding 68.93% if Treasuries a week of those ratios was at 68.93%. With yields rising we did see the municipal curve flatten 7 basis points to fall to 121 basis points for the week.

According to Refinitiv Lipper US fund Flows data for the 45th straight week investors added to municipal-bond mutual funds as they added about $231 million to those funds. This follows the previous weeks inflows of $841 million. This drop in inflows is mainly due in part of high-yield funds losing about $364 million for the week the first time since October. High yield municipals have lost about 0.73 % to start the year a stark reversal of 2021 where they returned almost 8% besting almost every fixed income asset. If yields continue to climb, we could see outflows flow into higher-grade funds.

The state 2022 has not been very kind to the municipal bond market as speculation of higher interest rates are fueling a rise in rate. With rates on the rise fueled by the rise in inflation as well as the anticipation that the Federal Reserve raising rates as early as March, this could also put a hold on some issuers issuing bonds mainly taxable advance refunding bonds, but with borrowing costs at 2% it still would be worth issuing. To start the year municipal bonds have lost 0.85% and on pace to have the worst start since 2001. The one positive for the rise in rates is better valuation for investors as municipals bonds are now cheaper compared to Treasuries as 10-ratios is at 72.08% compared to 69.50% at the end of 2021.

Municipal Supply: This week, the negotiated calendar will be slightly lower than average as the markets will be closed on Monday for the Martin Luther King Holiday. The total expected volume for the week will be about $6.3 billion with five deals covering over half of the calendar. AmeriVet will be in largest deal of the week which is the $950 million New York City Transitional Finance Authority Future Tax Secured Subordinate Bonds. The second largest deal of the week will be the $750 million New Jersey Transportation Trust Fund Authority. The Metropolitan Washing Airports Authority for the Dulles Metrorail and Capital Improvements Projects will be issue $739 million in refunding bonds.