Municipal New Issuance: The final week of January saw the negotiated calendar’s total volume of $5.8 billion, with the largest deal being the $744 million California Infrastructure and Economic Development Bank for the Brightline West Passenger Rail project connecting Southern California to Las Vegas. The city of San Francisco issued $732 million for the San Francisco International Airport revenue bonds. Thomas Jefferson University issued $672 million in revenue bonds through the Montgomery County Pennsylvania Higher Education and Health Authority.

Municipal Secondary Trading: Secondary trading volume increased from the prior week with trading volume at roughly $37.2 billion with yields rising and many investors pulling money out of municipal bond funds it comes to no surprise that we saw larger than normal trading volume. According to Bloomberg clients put up over $5.36 billion up for the bid with three days having over a billion in bids-wanted. This was one of the largest weekly volume of bids-wanted since April 2020 when the markets went into a frenzy during the beginning of the pandemic.

Municipal Spread: Municipal bonds continue their slide again this week with yields on bonds maturing in 10- years rising by 25 basis points this week to 1.56% the highest since April 2020, and the biggest jump since February 2021. With 10-year US Treasuries only moving about 1 basis point for the week, municipals did underperform again as the 10-year ratios is back up to 87.43% compared to 74.54% a week ago. This is the cheapest relative to Treasuries 10-year municipal bonds have been since November 2020. Although it appears that the longer end of the municipal bond curve is getting hit the hardest so hard this year, we are still seeing the yield curve flatten with the gap between the short-term and long-term bonds flattening by 8.5 basis points this past week to 110 basis points.

For the second straight week municipal bonds investors pulled money out of municipal-bond mutual funds to the sum of about $1.4 billion marking the largest outflow since April 2020 and follows last week’s outflow of $239 million. This outflow is due to many awaiting the Federal Reserve rate hikes which can happen as soon as March.

With month being almost over, the municipal market is headed to the biggest monthly loss since the height of the pandemic in 2020 buyers are now being more cautious of what they purchase as rising concerns on inflation as well as the fed prepares to raise rates. Municipal bonds have lost as average 2.26% so far this month which is the most since the height of the pandemic-fueled market route in March-April 2020. Although, municipals have been hit hard this month, the front end have fared slightly better than the long end with just losing an average of 2.05% so far while the long end has lost an average of 2.91%. This can all change depending on how much or how little the Fed will bump rates.

Municipal Supply: The first week of February’s negotiated calendar will have an expected volume of roughly $6.9 billion. The largest deal of the week will be the $650 million Tri-Borough Bridge and Tunnel Authority. The Virginia Small Business Financing Authority will be issuing $627 million for the 95 Express Lanes LLC Project. AmeriVet will be part of the selling group for the $500 million New York City Water & Sewer System issue. This week new issue calendar will be closely watched as many will be very selective in which issues they will be participating in. With yields continuing to rise, clients may sit on the sidelines until things settle down.