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AmeriVet Weekly Muni Snapshot

Municipal New Issuance: Many issuers decided to take a pause in issuing last week due to the Fed rate hike decision as many expected the Fed to raise rates by 75 basis points. Total negotiated issuance totaled to just over $3.26 billion, with the largest deal covering a third of the issuance which was the $1.2 billion City and County of Denver Colorado which issued AMT and non-AMT bonds. The second largest deal of the week was the $326 million New York State Environmental Facilities Corporation. The Denver Airport deal was upsized from $850 million to $1.2 billion due to strong demand. The 10-year bonds of the deal bumped by 13 basis points to 3.72% as demand for the 10 year portion of the curve has attracted a large portion of investors.

Municipal Secondary Trading: Secondary trading for the week totaled to roughly $48.4 billion as secondary trading levels continues to be at high levels due to muni outflows as well the lack of new issue supply as the 30-visible supply stands at only $7.99 billion. According to Bloomberg, clients bids-wanted continue to be at elevated levels with roughly $8.94 billion in bids-wanted.

Municipal Spreads: Muni yields fell for the first time in four weeks with 10-year notes falling by just 4 basis points for the week to 3.36% after reaching a 10-year high of 3.38% for the prior week. With yields falling, munis continue to outperform Treasuries for the week as 10-year ratios are now yielding 81.26% compared to 86.84% from the prior week. Just one month ago, those ratios were at 88.32%. The muni curve continues to flatten as the curve flattened by 1.7 basis points to 96 basis points.

For the thirteenth straight week, investors pulled money out of municipal bond mutual funds last week to the sum of $2.4 billion, this follows the prior weeks outflow of $1.8 billion. Investors have withdrawn about $117 billion year-to-date with $14 billion of outflows in October alone as munis have lost roughly 13% so far this year.

Over the past few weeks, we have discussed the relative attractiveness of the 10-year plus part of curve relative to Treasuries since the start of the year. Back at the start of the year, 10-year ratios were at roughly 69.5% and currently the 10-year ratio stands at 80.77% which is still attractive even though the 10-year average is around 90% when you compare this to the shorter end of the curve which the 5-year ratios are at 74.66% and the 10-year average is at 84.57%. This showed during the initial sale of the Denver Airport deal as the 10-year bonds yielded 3.72% which is 33 basis points more than AAA rated munis.

Municipal Supply: The negotiated calendar for the week will total to just over $3.9 billion for the week with three deals being $500 million or more in size. The largest deal for the week will be the $617 million Jobs Ohio Beverage Systems taxable issue. Santee Cooper South Carolina Public Service Authority will be issuing $500 million which will include taxable as well as tax-exempt bonds. The Los Angeles Unified School District will be issuing $500 million in Sustainability Bonds. AmeriVet will be in one issue for the week as a Selling-Group-Member which will be the $11 million Community Development Administration Maryland Department of Housing and Community Development. Supply is not expected to pick up anytime soon as we have Veterans day on Friday and the Thanksgiving holiday coming a few weeks later.