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Weekly Muni Snapshot | 20 April 2020

Municipal New Issuance: New Issuance picked up last week as  about $6 billion came to market, with The State of California bringing a large deal $1.4 Billion run by Bank of America, as well as a $600 million State of Hawaii taxable deal run by Bank of America as well. The State of California, one of the first big names to come back to the market since the Coronavirus impacted the world. The State of California deal showed a lot of interest as the deal was increased from $1 billion to $1.4 billion. It was oversubscribed by roughly 6-times during the first order period, showing signs that people are willing to come back into the new issue markets.

Municipal Secondary Trading: Secondary trading was down about 4% this past week as about $51.1 billion in trades compared to a holiday shortened week of $55.5 billion. According to Bloomberg, Institutional investors offered up about $5.7 billion for sale via bids-wanted which is down from a holiday shorted week of $6.01 billion.  Showing signs that the sell off could be over as we have finally seen a week of market inflows into municipal bond mutual funds.

Municipal Spreads: Municipal yields had a small rally last week as the 10-year closed at a 1.13 compared to 1.25 a week prior. Despite having a rally municipal bonds continue to lag even more compared to treasuries as the 10-year municipals are 175.11% of treasuries compared to 174.06% a week ago. Spreads seemed to have normalized as seen in the recent State of California Deal as they are right around where they were in early 2019.

This continued rally seems somewhat puzzling as many analysts have been painting a doom and gloom picture on municipals, as many states and municipalities will have significant tax revenue losses due to the coronavirus pandemic. This is due to many people forced to stay home and work remotely, or were forced out of the workforce.

For the first time in 6 weeks we finally saw investors add to municipal bond mutual funds as we saw about $833 million in of market inflows, with $575 million going into long-term funds $67 million going into intermediate funds and $293 million going into high-yield funds.


Municipal Supply:  The new issue calendar is starting to show some life as we  will see roughly $4.1 billion come to the market.  The most notable deals on tap are the $720.9 million City of Riverside, California, the $490m UPMC Obligated group which was recently downgraded by Moody’s to A2, and the State Public Works Board of The State of California, in which AmeriVet Securities is a Co-manager.  As expected, the 30- visible supply is up as we should see roughly $21.6 billion coming.