Municipal New Issuance: The first week of February negotiated calendar had a total volume of just over $5.8 billion for the week with the largest deal being the $638 million Virginia Small Business Finance Authority Revenue bonds for the 95 Express Lanes LLC project. The second largest deal of the week which AmeriVet was in the selling group was the $592 million Tri-Borough Bridge and Tunnel Authority which saw its bonds tighten by 16 basis points in the 2040 maturity and by 3 basis points in the 2057 maturity as people are starting to see some value in the higher levels. AmeriVet was also in one other deal which was the $350 million New York City Water Finance Authority deal which also saw their bonds tighten.

Municipal Secondary Trading: Secondary trading was very active this week with just over $42.5 billion in secondary trades. With yields rising for the past few weeks many investors saw value in purchasing cheaper bonds this week as 55% of all secondary trades were dealers selling to clients. Customer bids-wanted list are still higher than the average weekly total which was just over $4.8 billion down from the prior week of $ 5.36 billion.

Municipal Spread: For the first time this year we saw yields drop although across the municipal bond curve for the week with the 10-year notes falling by 9.6 basis points for the week to 1.47% which was due to many investors purchasing bonds at cheaper levels then they would have prior to the new year. With the drop in yields we did see municipal bonds outperform Treasuries for the first time this year as ratios in debt maturing in 10 years hitting 76.63% of Treasuries, a week ago those ratios were at 88.32% and a month ago those same ratios were at 66.22%. The municipal bond curve continues the flatten as the gap between short-term and long-term securities flatten by 9.3 basis points this past week to 100 basis points.

For the second straight week municipal-bonds mutual funds saw a weekly outflow which totaled to almost $3 billion in the week ended Wednesday the largest since March 2020. This was the seventh biggest withdrawal of funds for municipal bonds on record dating back to the early 1990s according to Refinitiv Lipper US Fund Flows data. This type of outflow was expected municipal bonds performed poorly last month losing about2.74% in January the worst start to the year since 1980.

With the volatility of the Treasury markets, municipal bond yields municipal bonds yields have a had a rocky start to 2022 with yields jumping by about 0.4 percentage points but have since rallied this week as returns to start the month appear to be 0.50% with year-to date returns now at -2.25%. It appears yields have stabilized this week as we have seen yields on 10-year notes fall by 7 basis points since the start of the week. This could be a good sign to things to come as in recent weeks investors have been concerned with the fact that the Federal Reserve will raise rates in March.

Municipal Supply: This week’s negotiated calendar will be very light with an estimated volume of just over $3.67 billion for the week with three deals taking up almost half of the issuance. The largest deal of the week will be the Kentucky Public Energy Authority who is scheduled to issue $683 million in tax-exempt bonds. The Port of Portland Oregon which will be issuing $511 million for the Portland International Airport. The State of Ohio will be issuing $426 million in taxable bonds for infrastructure projects, conservation projects, as well as common schools general obligations refunding bonds. Orange County Health Facilities Authority will be issuing $326 million in Hospital revenue bonds.