Weekly Muni Snapshot | 14 September 2020
Municipal New Issuance: The holiday shortened week the municipal calendar was rather small this week as there was approximately $6.4 billion in negotiated offerings. The largest negotiated deal of the week was the 2 part $770 million taxable and tax-exempt Michigan Building Authority revenue bonds. In addition, the Oregon State Department of transportation also issued a $611 million in revenue bonds for general road improvements across the state. The California State Department of Veterans Affairs issued $97 million revenue Housing Purchase Revenue bonds which AmeriVet Securities was a underwriting Co-Manager.
Municipal Secondary Trading: The Labor Day holiday shortened week saw only about $21 billion in secondary trading compared to $26 billion the week prior. Customer bids-wanted remained relatively unchanged at $2.18 billion last week compared to $2.11 billion the previous week.
Municipal Spreads: Municipal bond yields increased modestly for the week as yields on the Bloomberg 10-year benchmark yield rose slightly by 0.9 basis points to 0.82. The slight rise in yields the 10-year ratio last week as it is now yielding 123.08% compared to 113.07% from the previous week, which shows municipal bonds remain attractive relative to treasuries. The municipal bond curve did steepen slightly by 1 basis point to 148 basis points as the short end fell by only 1.3 basis points while the long end remained unchanged.
Investors added to roughly $1 billion to municipal bond mutual funds according to Refinitiv Lipper US Fund Flows data marking the 18th straight week of market inflows. Although, we saw marked inflows in the investment grade funds, the high-yield municipal funds saw $88 million in outflows as investors are anticipating more downgrades in the coming months issuers in transportation, health care and higher education.
Since the beginning of the year municipal bonds have returned about 3.2% rallying back from back from the coronavirus pandemic that caused a major sell-off from investors. In recent weeks, municipal bond yields have seen some of those gains reduced since its rally from the coronavirus pandemic. This slight pull back mainly due to increased supply, market volatility, the potential for credit downgrades and less cash available for reinvestment. With the potential downgrades paired with the lack of another stimulus package from Congress as well as any spike in coronavirus cases we could continue to see yields increase.
Municipal Supply: With everyone returning from the holiday shortened week, we are expecting to see a slight increase in negotiated calendar with roughly $6.6 billion in new offerings a slight increase from $6.4 billion the previous week. The largest deal for the week will be the $1.27 billion New York City Transitional Finance Authority Revenue Bonds which AmeriVet Securities will be part of the distribution syndicate. The City of Houston Texas Airport Systems is also slated to issue $835 million of revenue bonds as the airport sector has seen strong new issuance inspite of the slowdown in air traffic in recent months.