Municipal New Issuance: In the second week of June, the municipal market saw roughly $12 billion in new issuance.  The largest deals of the week were the $850 million taxable University of Michigan and The State of Connecticut priced a $400 million issuance, which was well received by investors as it was repriced by 10 to 20 basis points across the curve. The New York State Dormitory Authority also did a $3.3 billion Note deal that was well received as it was originally priced at 0.65, then tightened to a 0.55 showing continued over whelming demand for their paper is still strong.

Municipal Secondary Trading: We had a decrease secondary trading from a week ago as we had roughly $31.8 billion in trades compared to $44.3 billion the week prior. This drop in secondary trading was partially do to many focusing on the new issues that came to market.  We did see a small increase in bid-wanted as we saw about $3.25 billion compared to $3.12 billion the week before.

Municipal Spreads: With municipal spreads being relatively unchanged for the week as the 10-year benchmark fell by 4 basis points compared to last week. Even with this small of a change in municipals spreads they still lagged treasuries for the first time in weeks as investors sold off on equities due to large increases in positive cases in various states and the Fed expecting the hold interest rates near zero until 2022, and many there was a flight to quality on Thursday. This week the 10-year ratio is 115.72% of treasuries compared to 95.98% a week ago, but still positive news compared to 172.67% a month earlier and 209.14% in mid-March.

According to Refinitiv Lipper US fund Flows, investors for the fifth straight week added investments into municipal mutual funds as they added about $2.8 billion into those funds. This is more than double the $1.2 billion that were added the week prior.  This comes at a time investor sentiment is strong that the Federal reserve will intervene to stop another possible liquidity crisis that we narrowly avoided back in March. With the Fed’s assistance the market has rallied considerably amidst an economic contraction that has left states and cities facing major budget shortfalls, and leaving nursing homes, hospitals, universities and stadiums with massive uncertainties of making bond payments along with the possibility of defaulting.

 

With the Fed’s assistance and the influx on money into mutual funds, yields are right around their all-time lows even with the economic slowdown. Many do not see any states going into default as the last state to do that was Arkansas during the great depression and only a handful of local governments have gone bankrupt during the last recession. Demand should continue throughout the summer as many investors will be receiving debt payments, and will typically reinvest those payments into more municipal bonds possibly driving yields even lower.

Municipal Supply:  We are expecting to see roughly $10.3 billion in supply for the third week of June.  AmeriVet will be a selling group member on the $1.8 billion New York State Urban Development corporation, the $795 million Texas Transportation Commission and the $340 million Onondaga Civic Development Corp. AmeriVet will also be a co-manager on the $100 million American Airlines JFK Airport project under the New York Transportation Development Corp.