Weekly Muni Snapshot | 18 February 2020
Municipal New Issuance: Last week, US State and local governments sold about $15 billion via negotiated underwriting. The most notable deals in which AmeriVet was a part of were the $800 million tax-exempt Grand Parkway Transportation Corporation, and the $1 billion New York City GO. Grand Parkway Transportation also did a $1.3 billion taxable piece.
The tax-exempt Grand Parkway was well received as bonds on the short end tightened by 1 to 2 basis points with the long end tightening by 8 basis points from its initial price.
Municipal Secondary Trading: Trading going into a holiday shortened week saw institutional investors offer $2.62 billion for sale through bid-wanted a drop of 6.9% from a week prior. According to MSRB trading totaled about $31 billion down from the previous week of $44 billion.
Municipal Spread: Last week Municipal bonds continued to lag treasuries as the 10-year yielded 75.59% of treasuries compared to 75.24% week prior and 73.76%a month ago. Yields dropped on the 10-yr benchmark notes to 1.217 compared to last week of 1.237 a decrease of only 2 basis points.
With yields continuing their downward trend, taxable municipals have been gaining interest from international buyers as they are seeking more yield as well as better returns. If yields do continue to fall we may see international buyers look into buying tax-exempt bonds even if they do not U.S tax breaks, mainly for the returns.
Municipal Supply: With a holiday shortened week we will only see about $5.31 billion in new issuance with the District of Columbia leading the way with $961.5 million in bonds followed by a $699.1 million Central Texas Turnpike System, as well as a $650 million Commonwealth of Massachusetts and a $450 million New York State Thruway Authority.
Besides Taxable municipals gaining popularity, another type of bond that’s gaining popularity are green bonds. In 2019 we saw over $11billion in green bond issuance from municipalities, and we would expect that number to increase over the year. With that, interest from investors has been slowly gaining popularity as there has been at least five mutual funds created since 2015 that have environmental mandates, as well as the first sustainable municipal bond ETF fund created by Van Eck associates.