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Weekly Muni Snapshot | 11 May 2020

Municipal New Issuance: Last week saw about $5.8 billion come to market with the bulk of the issuance coming from the $1.1 billion Metropolitan Transportation Authority (MTA) and the $1.13 billion taxable and tax-exempt Pennsylvania State University.  The MTA did their first bond offering since the coronavirus pandemic hit the US with attractive yields which increased buyers’ interest to over four times is last sale in January. The 2045 maturity originally came with a yield of 5.00% but with the increase demand sold a at a yield of 4.95%. Yields on the other maturities also cut their initial yields by 7 basis points. The Penn State University deal also garnered a lot of interest as the deal was tightened as well.

Municipal Secondary Trading: The first full week trading of May saw about $36.2 billion in secondary trading down from the week prior of $55 billion, as many investors continued to focus on new issues.  According to Bloomberg, Institutional investors offered up $4.6 billion, up slightly from a week prior of $4.3 billion.

Municipal Spreads: Spreads rebounded this week after having a down week the previous week.  The 10-Yield fell about 18 basis points to 1.18%. This rebound is from investors putting money back to work as they have roughly $20 billion to invest as well as cross-over buyers looking for more yield.  Although, the Muni-Treasury ratio is still high we are still seeing many cross over buyers looking for yield due to their cheapness versus corporate bonds. Short-term yields are about .52% near the lows for the year, which is roughly 4 times higher than similar treasuries.

We should start to see more money come back to the municipal market next month as the annual  reinvestment season starts.  We should expect to see about $100  billion  come back to municipal investors  $68 billion from principal and $31 billion from interest.  This will be some positive news for municipals as it should bring ratios closer to what they original were prior to the Coronavirus pandemic.

Municipal Supply:  This week should see about $3.7 billion on tap. With the most notable being the $715 million Great Lakes Water Authority followed by a $500 million New York Transitional Finance Authority which AmeriVet will be in the selling group. The State of Illinois is currently scheduled to price a $1billon deal this week, but was pushed to day to day status.