Municipal New Issuance: Last week the municipal market saw a significantly large amount of issuance, as we saw over $12 billion come to market as there were multiple issuers issue over $1 billion in size. The New York State Urban Development Corporation issued $2.3 billion using a combination of tax-exempt and taxable bonds which saw large support from investors. Another issue that saw strong support was the $1.27 billion Texas Transportation Commission taxable bonds issue, which AmeriVet was also part of the selling group for both financings. There was also a New York & New Jersey Port Authority issue $1.1 billion in debt for capital improvements and refunding purposes. All three deals saw significant interest from both retail and institutional investors allowing the underwriters to lower the debt services by 2-5 basis points perpetuity.

Municipal Secondary Trading: Secondary trading was down last week as traders and portfolio managers focused mainly on new issue market as we only saw roughly $30 billion in trading, compared to over $46 billion the week prior. We did see a slight decrease in bids-wanted last week, as institutional investors put roughly $2.4 billion up for the bid compared to $2.3 billion the week prior.

Municipal Spreads: Municipal market performance improved this week as the yields this week, as the Bloomberg 10-year benchmark fell 6.1 basis points this week to 0.745%. This represents the first real movement in yields in the past two weeks as previous market performance remained relatively unchanged. With this drop in rates municipals finally outperformed treasuries as they are now yielding 119.391% of treasuries of the 10- year treasury benchmark. This represents a significant improvement as the 10 years was yielding 124.768.01% a week ago and 114.885% a month ago.

With many states hard hit by the coronavirus, and are experiencing a significant loss of tax revenues and as a result are experiencing significant budget deficits and some may issue more debt to counter the short falls. Just last week the State of New Jersey just approved a $10 billion to finance half of the states’ estimated budget gap. In the mid-west the state of Illinois also is planning on selling $5 billion in notes through Municipal Liquidity Facility which was set up by the Federal Reserve in order to fund their growing budget deficits. New York State has approved $11 billion in short-term borrowing while New York City alone is seeking approval for up to $5 billion in additional funding. These deficits will continue to grow as the shutdowns continue, sales and income tax revenue for states will be severely stressed. Even with all of these financial issues we will continue to see investors adding to assets to municipal bond mutual funds on a consistent basis. For the week ending July 8th Investors added about $1.38 billion marking the 10^th straight week of inflows.

With the rising health-care continuing to rise due to treating the coronavirus and health-care system bonds are down due to many hospitals postponing elective procedures. The value of Healthcare systems bonds both in the primary and in the secondary have experienced have had a volatile past few month but have rebounded since the spring, and have tightened back significantly. Although they appear to be cheap relative to what they were trading pre-coronavirus according to the Bloomberg Barclays Municipal hospital Index of 146 basis points they appear to be trading rich.

Municipal Supply:  As we get deeper into the summer months, we anticipate mew issue supply to fall New issue supply is expected to be around $7 billion in issuance. A sharp drop in issuance of $12.2 billion a week ago. The largest deals of the week will be the $1 billion State of Maryland deal, followed by the $568 million State of Mississippi taxable and tax- exempt debt, and University of Rochester will issue $419 million of debt. Auburn University will be continuing the trend of many colleges and universities issuing 300 million of taxable debt.