Municipal New Issuance:  The negotiated new Issue calendar continues to be light as there was only about $6.3 billion priced this past week, with almost half of the issuance coming from 4 deals. The largest deal of the week was the $1.0 billion Texas Municipal Gas Acquisitions & Supply Corp., followed by the $628.3 million Met Government Nashville & Davidson County Tennessee taxable and tax-exempt issue. The Chicago Board of Education also issued around $557 million which was strongly supported by investors so much so underwriters were able to lower yields by as much as 37 basis points in some maturities. Another issue that saw large demand was the Los Angeles Department of Airports which issued $893 million in both taxable bonds and tax-exempt bonds. We saw yields tighten from 7 basis points on the shorter end of the scale to 10 basis points on the long end.

Municipal Secondary Trading: For the final week of January, secondary trading was roughly $28.4 billion of which 54% of the trading being dealers selling to clients. With the 30-day visible supply estimated to be approximately $9.4 billion, the secondary market should continue to be a focus for investors as individuals and professional investors continue to have a strong appetite for municipal bonds. According to Bloomberg customer bids-wanted totaled to around $2.7 billion for the week, right around the average amount we see per week. Municipal bond fund inflows total $2.79 billion for the week, the second highest amount on record. With bond roll offs and new cash coming into the market we expect pricing performance to remain strong over the near term.

Municipal Spread: Municipal bond spreads for the week had a nice rally as the Bloomberg 10- year fell 4.7 basis points and overall rates have remained about the same for the past month. With the rally in both municipal and treasury bonds this week we did see the 10-year ratio improve as they are now 64.94% of Treasuries versus 68.72% a week ago and 73.27% a month ago. The lack of supply in new debt sales has contributed as well has new cash pouring into mutual funds have contributed to ratios falling to new levels. We have not seen 10-year bonds at these levels for almost two decades, signaling that municipals are unusually expensive. The municipal bond curve did flatten for the week by 3.4 basis points to 134 basis points.

Municipal bond mutual bond funds saw its second largest inflow on record with investors adding $2.79 billion to those funds which has driven bond yields to historic low according to Refinitiv Lipper US Fund Flows. This week’s inflow marks the 12th consecutive week of inflows continuing the trend where we saw record number of inflows in 2020.

Last week we spoke about how the New York MTA was expecting to receive some additional funding relief from the federal government which would be used to help with budgetary shortfalls from reduced ridership. Earlier this week President Biden did in fact announce that the MTA will see a significant portion of the $20 billion federal aid earmarked for mass transit. With this news, MTA bonds have rallied significantly from where they were issued back on May 6^th. Bonds maturing in 2055 were issued at a spread of 355 basis points, have rallied significantly with bonds trading at a spread of 180 basis points earlier this week with an average yield of 2.46% which is just 93 basis points more than top rated municipal bonds. Even though the MTA bonds have showed significant upside in recent months the system is by no means on completely solid financial footing, as the risk of default or bankruptcy remains elevated.

Municipal Supply: The municipal bond calendar continues to be light continuing the trend for the year. Currently we will see about $5.6 billion on tap on the negotiated calendar with almost half of the issuance coming from only 3 issues. AmeriVet will be very active this week as we will be part of the syndicate for the 2 largest deals of the week, which will be the $ 1.14 billion Nassau County Interim Finance Authority Sales Tax, taxable and taxable issuance, followed by the $990 million New York City Transitional Finance Authority Refunding Bonds. The next issuance with significant size is the Seattle Children’s Hospital Taxable bonds which will be using a corporate cusip. With the significant drop in the new issue calendar, we should expect to see large demand for the bigger issuer for the week.