Weekly Muni Snapshot | 21 January 2020
Municipal New Issuance: Last week, we saw U.S state and local governments use more than $7 billion of bonds, with the most notable issues being the Chicago Sales Tax Securitization Corp (STSC) selling $998 million, and the $465.7 million city of Chicago.
On the Chicago STSC the long end was oversubscribed by 40 times. On the tax-exempt bonds, the 10- year maturity came in at 1.91%, 60 basis points above MMD after being bumped 22 basis points. The 4% long bonds (2040 maturity) originally came in at 100 basis points, priced at 65 basis points above MMD. With yields being so low this came to no surprise as investors continue to look for yield.
Municipal Secondary Trading: Based on data from Bloomberg institutional investors sold $2.99 billion via bid-wanted lists, up 4.4% from $2.86 billion from a week prior. Trading in municipals totaled $34.26 billion this past week and increase of 4.6% last week.
Municipal Spreads: Municipals continue their never-ending trend of outperforming treasuries as the 10-year ratio is now 71.961 of treasuries compared to 74.849% Yields on the 10- year notes fell 6.9 basis points to 1.308%
The 5- year ratio is currently 61.139% which is the lowest point since 2001, pointing out that accounts are looking at the front end more than the long end leading to some value dislocation.
Municipal Supply: This week will see an increase in new issuance as State and local governments are expected to sell ~$8.3 billion. As we said last week, we will continue to see an increase in taxable issuance with the largest deal being a $1 billion Partners Healthcare System taxable issuance. Followed by a $500 million Cottage Health Credit group taxable issue and a $318 million Johns Hopkins taxable issue.
The State of Connecticut Health and Educational Facilities will be doing a re-marketing of a $346 million tax-exempt bonds for Yale University.
30- day redemptions continue to increase as we will see $24.4 billion in the next 30-days an increase from $18.1 billion a week prior.