Municipal New Issuance: The third week of June saw another robust calendar of new issues as roughly $13.3 billion of bonds were sold.  The largest deal of the week was the $1.78 billion New York State Urban Development Corp, which AmeriVet was part of the selling group.  The Texas Transportation Commission also came with a $794 million taxable bond, which AmeriVet was also part of the Selling group. The one deal that gained the most attention was the $360 million American Airlines JFK Airport Project done through the New York Transportation Development Corporation, which AmeriVet was a co-manager. The deal was originally supposed to be $100 million but with increase in demand it was upsized to the final size of $360 million. Both maturities were both bumped by 15 basis points after the initial sale, and has since traded up since it was free to trade as many are still seeking yield.

Municipal Secondary Trading: Secondary trading was down last week as we only saw about $29 billion in trades compared to $41.8 billion the week prior, as many investors continued to focus on the large new issue calendar. With the new issue calendar being small this week we should expect an increase in secondary trades, right before we hit the July 4th weekend. We did see a small decrease in bid-wanted as we saw about $2.90 billion last week, compared to $3.25 billion the week before.

Municipal Spreads: Even with municipal yields rising slightly this week they continue to lag versus treasuries as the 10-year is now yielding 122.078% up from 115.887% a week ago. The 10-year notes rose 2.9 basis points to 0.846% but still down from 0.991% a month ago and but still far better than 2.86% at the height of the pandemic. We did see a small flattening of the yield curve as the shorter end rose by 3.5 basis points compared to the long end which only rose by 1.6 basis points.

With the Federal reserve announcing their intent to purchase corporate-bonds fueling a rally in the market, as brought even more buyers into the municipal market as many are looking for yield as well a cheaper debt compared to corporates bonds, as we saw with the American Airlines deal last week.  Taxable municipals have continued to be a big part of the municipal bond issuance as we have seen $62.5 billion in issuance that is just $20 billion less of what we saw back in 2019.  With the fed buying corporate debt and an increase in municipal issuance, we have seen some sort of discord as we are seeing corporate debt yields fall by 1.57% more than treasuries since March.  But municipal bonds have yields have only fallen 1.9% more than the municipal benchmark, in reality municipal bonds should have fallen more since they are considered to have less risk of default. Should this continue we should expect to see new buyers come into the taxable municipal markets on a relative value stand-point.

This relative cheapness compared to corporate debt has brought an additional $1.7 billion into municipal bond mutual funds. This is the sixth straight week on inflows according to Refinitiv Lipper US Fund Flows.  This is a nice reversal of what we saw back in late March of which we saw about $13.7 billion of outflows. With this influx of cash into mutual funds, as well as investors expecting debt payments in the next coming months that is expected to be more than what the new issue calendar, we should continue to see a strong market going into the summer.  If this demand continues we should see issuers looking to issue new debt.

Municipal Supply:  After a week of seeing an increase of new issues, we are expected to see roughly $6.1 billion. As we start to get into the summer months, we should expect to see issuance be down as the current 30-day visible supply is currently at $8.99 billion compared to $14.1 billion a week ago. This can all change as states and municipalities may take advantage of the low yields as well as the robust demand for municipal debt.  We are expected to see IHC Health Services (Utah County, Utah) issue $350 million of Bonds as well as The Children’s Hospital Corporation issuing $300 million of taxable bonds. Northeastern University will also be issuing $300 million of taxable refunding bonds using a corporate cusip.