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Weekly Muni Snapshot | 13 October 2020

Municipal New Issuance: Last week, the negotiated calendar saw roughly $10.7 billion. The largest deal for the week was the $1.1 billion New York City General Obligation deal which AmeriVet was part of the syndicate. University of Massachusetts Building Authority issued $329.9 in taxable bonds. Oregon State University continued with the trend of colleges and university issued taxable bonds by issuing $302.9 million. AmeriVet was also part of the New York State Housing Authority $178 million issue. The New York City General Obligation deal was the focus of many portfolio managers as well as investors as it was the first time they issued since their credit was downgraded by Moody’s. This issue was five times oversubscribe during the institutional order period as the deal was tightened by a few basis points across each maturity after the pricing.

Municipal Secondary Trading: Secondary trading for the week totaled around $28 billion according to MSRB with 56% of all trades going to investors as yields continue to rise and investors are continuing to take advantage of cheaper levels. Customer bids-wanted increased slightly to $3.15 billion compared to $2.98 billion the week prior as customers sold more bonds in order to re-invest into the new issue market.

Municipal Spread: For the 2nd straight week yields rose as this is the most movement we have had in past few weeks. Yields on the Bloomberg 10-year benchmark last week rose 7.4 basis points to 0.933%. This is a significant move since we have been stuck at a yield of roughly .81% for the past month and a half. Municipal bonds did underperform compared to treasuries last week as they are now yielding 120.23% compared to 112.77% the prior week. With the rise in yields the municipal curve did steepen by 5.3 basis points to 162 basis points. The steepening of the curve was due to the long end rising by 10.6 basis points while the short end only rose by 1.2 basis points.

Although, municipal bonds have seen their record lows in the past few months, that still doesn’t necessarily mean that they are out of the woods just yet with their funding needs. Yields for the week have risen sharply due to a number of reasons, one being that the Hero’s Act 2 only included $436 billion in aid to municipal issuers, the second being that investors pulled money out of municipal bond funds as they are waiting to see what the election holds and if there will be another round of aid to municipals. The third being the surge in new bond sales which has driven up supply. Many issuers are issuing a head of the election as they are uncertain as to if there will be any more aid coming. With all of these parameters the municipal markets should be more volatile than most years going into election. Something that the municipal markets have lacked in the past few months.

Municipal Supply. With a shortened holiday week due to the Columbus Day holiday on Monday, we are expected to see roughly $11.2 billion in negotiated supply. The largest deals for the week will include the $705.5 million taxable City and County of Denver Colorado Airport System Revenue bonds, followed by the $535 million City of Kansas City, Missouri Industrial Development Authority, and the taxable $504 million City if Atlanta Georgia Water and Wastewater Revenue Refunding bonds. AmeriVet will also be a co-manager on the upcoming $88 million South Carolina Jobs-Economic Development Authority Conway Hospital taxable Revenue bonds.