Weekly Muni Snapshot | 15 March 2021
Municipal New Issuance: The negotiated issuance for the second week of March saw around $7.46 billion for the week a modest amount for the week compared to previous weeks. Although it was a larger amount than previous weeks, bulk of the issuance was from three issuers. The State of California issued roughly $1.8 billion in tax exempt bonds, followed by the New York City Municipal Water Authority which issued $574 million in tax-exempt bonds. The next most significant issue of the week was the $405 million Massachusetts Port Authority revenue bonds consisting of AMT bonds as well as tax-exempt bonds. Of the largest three issuers, AmeriVet partook in all three syndicates.
Municipal Secondary Trading: The second week of March saw secondary trading totaling to about $27.25 billion with 53% of clients buying as clients took the news of the new stimulus package as a positive news as it gives states and local governments the much-needed boost to help support their tax shortfalls they may have endured in 2020. According to Bloomberg, client bids-wanted totaled to around $3.03 billion for the week just down from the week prior of $3.66 billion.
Municipal Spread: Municipal bonds continued to rally this week as the Bloomberg benchmark 10-year note fell 6.5 basis points to 1.01% which is still higher than where we were at a month ago where 10-year yields were at 0.682%. Ratios continued to improve versus Treasuries as the 10-year is now yielding 62.36% of Treasuries compared to 68.81% a week ago, and 56.32% one month ago. With the drop in yields, the municipal bond curve flattened by 6.3 basis points to 164 basis points within the past week.
State and local governments now have some breathing space as President Biden’s stimulus plan help remove some of the financial burden that they had endured due to the pandemic that forced massive shutdowns that have lasted over a year now. The $1.9 trillion stimulus package has set aside $360 billion for states and local governments which will hopefully soften the economic and tax hit they endured over the past year.
This was welcome news to municipal bond investors as bond prices have risen since the signing of the stimulus package. With the relief bill, Moody’s raised its outlook on states and local governments to stable from negative siting that it will help stabilize support important sectors such as mass transit, hospitals, higher education and “help stabilize state finances and coming amid most states’ legislative budget sessions likely allow them to avoid downstream funding cuts for local governments, colleges, and universities, and other programs.”
With the rally in municipal bonds, we saw many investors return to the municipal-bond mutual funds last week as investors added about $1.1 billion to those funds. This follows the previous weeks $605 million in outflows which ended 16 straight weeks of inflows according to Refinitiv Lipper US Fund Flows Data. Even though we saw a significant rise in rates in the last couple of weeks this shows that investors are still favoring tax-exempt bonds instead of their taxable counterparts.
Municipal Supply: The weekly negotiated supply has slowly trickling upwards as we will have roughly $9.8 billion this week. The most notable issues for the week will the $2.1 billion The State of New York Dormitory Authority Revenue Bonds which AmeriVet will be part of the syndicate, followed by the $1.26 billion State of Illinois Refunding General Obligation bonds. BJC Healthcare Obligated Group will offer $806 million, and the State of Oregon will be bringing $627.1 million to the market. We should expect to see state and local government debt sales to increase as the request for CUSIPs rose 23.8% in February versus January.