Municipal New Issuance: The second week of February negotiated calendar total to just over $5.6 billion for the week with the largest deal being the $930 million South Carolina Public Service Authority Revenue bonds which their bonds reprice and then trade higher than new issue in the secondary market. The second largest deal of the week was the $578 million Port of Oregon Airport revenue bonds which issued AMT and non-AMT bonds. AmeriVet was in one deal for the week which was the $104 million New York City Housing Development Corp as a selling group member.

Municipal Secondary Trading: Secondary trading was very active this week with roughly $35.1 billion in secondary trades. With yields rising continue to rise it comes to no surprise that secondary trading was active with 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 $5.6 billion down from the prior week of $4.8 billion.

Municipal Spread: Municipal bonds continue their slide again this week with yields on 10-year bonds rising by 17 basis points to 1.63%. as many investors continue to wait on the Fed rate hikes which is expected to happen on March 16th, with many expecting 25 basis point hike to as high as 50 basis points. At the start of the year 10-year yields were at 1.06%. Since municipal bonds tend to lag Treasuries, we could start to see some more volatility in the markets as we get closer to the Fed announcement. Municipal bonds have lost about 0.04% this month but have lost 3.16% year to date With municipal bonds are down for the week they unfortunately underperformed compared Treasuries this week as 10-year ratio is now at 85.24% compared to the prior week of 76.87%. With the rise in yields we did see the yield curve steepen by 5.5 basis-points to 105 basis-points.

Investors added $216 million to municipal-bond mutual funds during the week ended Wednesday which snapped 3 straight weeks in outflows. Last week we saw outflows of $2.9 billion, the largest outflow since March 2020. Municipal-bond mutual funds have lost almost $3.5 billion in funds as investors feel uncomfortable with the rising rates and feel that this trend may continue until at least after we get some rate hikes.

Volatility in the markets has put municipal bonds in some sort of frenzy as they try to find the correct levels to match adjustments to the Treasury sell off as we have seen in the past few weeks municipal bonds yields rising by just a few basis points one day to five to ten the next day. This has been some cause for concern for some issuers as well as buyers as they do not want to sell/ purchase bonds that may lose value. The one silver lining to the rise in rates is that municipals are getting closer to fair value as ratios for the past two years have been well below long-term averages for 10- and 30-year Muni-to-US Treasuries ratios current ratios are 77% and 87% with averages at 95% and 102% respectively. Many have been looking for those ratios to be around 80% for 10-year bonds and 90% for 30-year bonds.

Municipal Supply: This week’s negotiated calendar will have a projected volume of just $3.9 billion for the week with the largest deal being the $710 million Hillsborough County which will consist of Tax-exempt, taxable and AMT revenue bonds. Pennsylvania Housing will be issuing $255 million in social bonds this week. AmeriVet will be a co-manager in the $295 million University of Washington Revenue Refunding bonds. The State of Wisconsin who was supposed to issue $365 million last week is still day-to-day and could sell this week.