Municipal New Issuance:  The negotiated new Issue calendar for the second week of February totaled approximately $5.9 billion with larger deals seeing strong investor demand and were well over subscribed. The three largest deals for the week were the $713 million Tennessee School bond Authority taxable issue, followed by the $551 million New York City Industrial Development Agency Citi Field Stadium Project. The next largest deal was the $397 million Lower Colorado River Authority Revenue Bonds. The Mets Citi Field issue saw robust demand as it was 16 times oversubscribed with almost $9 billion in orders on both the tax-exempt and taxable bond issues as many investors are continuing to look for issues with additional incremental yield. With strong demand for municipal bonds and the modest new issue calendar coupled with an improving economy has continued to drive demand for both tax exempt and taxable issues.

Municipal Secondary Trading: Secondary trading totaled $27.99 billion as investors are continuing to look for value and are focused on the new issue calendar and the secondary market due to scarcity of new bonds. With the 30-day visible supply being only $7.48 billion we should continue to see low secondary trading volumes as investors are flush with cash they need to put to work. According to the Bloomberg client bids-wanted lists totaled $3.43 billion for the week.

Municipal Spread: Municipal bond spreads for the week showed solid performance as prices rallied after having 2 weeks of relatively unchanged yields. The Bloomberg 10-year benchmark fell 2.3 basis points for the week to 0.682, the one of the biggest moves we have seen we have seen this year. With the rally in municipals, we continue to see municipal prices outperform Treasuries with the 10-year municipal index now at 56.65% of the 10-yr T-Note making them the most expensive since 2001 when it was first tracked. During the beginning of the coronavirus pandemic on March 23^rd the 10-year Benchmark was at 365%. With the rally the municipal bond curve did flatten by 2.8 basis points to 132 basis points. With the scarcity of bonds in the primary markets we should continue to see yields move lower as investors will continue to want tax-exempt bonds especially since many are expecting a tax increase from the new administration.

For the 14^th straight week municipal bond funds continued to see positive inflows with $2.6 billion of new cash being put into mutual funds and ETF’s, making it the 4^th largest weekly influx on record according to Refinitiv Lipper. This follows last week’s positive inflow of $1.58 billion. With the continued demand for municipal bonds and the economy improving we should expect to see more week of inflows baring any news that would cause rates to increase dramatically.

Municipal bonds prices have seen exceptionally strong performance with billions of dollars flowing into municipal bond mutual funds each week since the pandemic wreaked havoc on the markets and the economy. Yields on tax-exempt bonds are currently at record lows against Treasuries signaling that the valuation is at an all-time high. According to Bloomberg Barclays indexes 2021 has been good for municipals as they have shown positive returns even as Treasuries and corporate bonds have posted losses. This rally municipal bonds are fueled by the lack of new issue supply along with low yields across fixed income markets coupled with the Biden tax policy plan municipal bonds will still have large demand as a nice tax haven.

Municipal Supply: The municipal bond calendar once again continues to be light with only $4.29 billion in negotiated issuance with the bulk of the issuance being taxable bonds or social bonds. The largest and most notable deals the $818 million Regional Transportation District of Colorado refunding bonds which are taxable and tax-exempt green bonds. Followed by the $658 million City of Tucson Arizona taxable bonds which are AGM insured. AmeriVet will also be part of the syndicate in the $125 million Florida Housing Corporation Social bonds. To give a better perspective how light the new issue calendar has been so far this year, in 2020 the average was $13.9 billion in negotiated issuance.