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AmeriVet Weekly Muni Snapshot

Municipal New Issuance: Issuers returned to the markets last week as they took a pause from the prior week due to the Columbus day holiday as well as CPI number being released. The negotiated calendar for the week totaled to about $8.6 billion with 5 issues being over $500 million. AmeriVet had a very robust negotiated calendar last week as we were in six deals. AmeriVet was Co-Manager on the two largest deals of the week which was the $1.1 million Commonwealth of Massachusetts and $1.1 billion State of Connecticut issuances. AmeriVet was also a Co-Manager on the $139 million Massachusetts Housing Finance Authority, the $105 million Indiana Finance Authority, the $88 million California Department of Veterans Affairs, and the $79 million Wisconsin Housing and Economic Development Authority issuances.

Municipal Secondary Trading: Secondary trading continues to be very volatile with over $47.5 billion of secondary volume. With yields continuing to move higher, trading volume should continue to be at elevated levels. According to Bloomberg, client’s bids-wanted lists continue to at elevated levels with about $10.4 billion in bids-wanted and almost $3 billion in bids-wanted alone on Thursday.

Municipal Spreads: Muni yields were relatively stable for majority of the week with yields rising by 1 to 4 basis points in the first four days of the week. On Friday, munis sold off losing about 1 basis point across the curve with 10-year notes rising about 18 basis points for the week to close at 3.34%. With the sharp rise in yields, 30-year notes crossed the 4% range for the first time since January 2014. With munis rising sharply again, munis lagged Treasuries for the first time in four weeks as the 10-year ratio is now yielding 79.81% compared to 79.13% from the week prior.

With munis continuing to be weaker, investors continue to pull their investments out of municipal bond mutual funds to the sum of $2.611 billion for the week. This follows the prior weeks outflows of $2.15 billion and the 5th straight week of outflows of over $2 billion and the 11th straight week of outflows according to Refinitiv Lipper US Fund Flows Data.

The fixed income markets have been battered this year due to high inflation and the Fed’s tightening program to combat high inflation which has made many investors shy away from longer dated bonds. With yields nearing their highest in almost 8 years, buyers should be focused looking at the longer end of the curve, more particularly, 15 years and out. If you look at 30-year notes, yields are now at 4% which is near its highest since 2014, and when compared to Treasuries are still relatively cheap as its about 93.93% of the rate of 30- year Treasuries, and when you move further down the curve, those ratios have dipped well below average relative value ratios. The average ratio for 30-year notes since 2014 has been about 100.16%. Although they are still relatively expensive from the average, it is still the cheapest part of the curve. When you look at 10-year munis, the average ratio is at 90%. Currently, those ratios are at 79.81% and when you move towards the 5-year range the average is at 81.46%, and those ratios are currently at 74.56%.

Municipal Supply: The negotiated calendar for the week will have an expected volume of just over $6.2 billion as issuers are slowly coming back to the market with three issues being over $500 million. The largest deal of the week, which AmeriVet will be participating as a Selling-Group-Member, is the $950 million New York City Transitional Finance Authority issuance. The Triborough Bridge and Tunnel Authority will be issuing $690 million in climate bond certified tax-exempt bonds which will include refunding bonds. Indiana Finance Authority will be issuing $500 million for the Fulcrum CenterPoint Project. AmeriVet will also be in two other issuances as a Co-Manager, the $78 million Massachusetts Housing Finance Agency and the $50 million University of Connecticut issuances.