Municipal New Issuance:  For the third week of March the negotiated calendar increased in size to a total of $9.5 billion due to an increase in the number of issuers coming to market and with one issue being in excess of $2 billion in size. The largest deal for the week was the $2.1 billion New York State Dormitory Authority which AmeriVet was part of the syndicate which saw its bonds repriced tighter to what it was initially priced despite yields rising as some investors are still bullish on municipals. The next largest deal for the week was the $1.3 billion State of Illinois General obligation bonds which saw very strong investor demand that allowed underwriters to lower rates by as much as 20 basis points in certain maturities. AmeriVet was also a syndicate participant in the $130 million State Of New York Mortgage Agency Social bonds which was well received by investors.

Municipal Secondary Trading: The third week of March saw secondary trading totaling approximately $26.3 billion with 54% of clients buying. Secondary trading market was very active throughout the week as many dealers had to re-price their bonds by lowering prices to attract buyers. Comments from Fed Chairman Powell unsettled the Treasury market as fears of rising inflation caused yields to rise. According to Bloomberg, client bids-wanted totaled approximately $3.43 billion in volume for the week an increase from the week prior of $3.03 billion.

Municipal Spread: Municipal bonds had a rough week as yields surged alongside Treasuries after Federal Reserve Chairman Powel stated that central banks will keep interest rates low until the economic recovery is on the horizon, which also stoked concern about rising inflation. With this news, the Bloomberg 10-year benchmark yield increased 12 basis points to 1.134 for the week which is 27.5 basis points higher than 1 month ago. With this big jump in rates, the 10-year ratio only risen slightly to 65.66% verse Treasuries compared to 62.36% a week ago. With the rise in rates, we did see the municipal bond curve steepen by 4 basis points to 168 basis points.

For the week ending on Wednesday investors added $1.27 billion to municipal- bond mutual bond funds adding to last week’s inflow of $1.1 billion according to Refinitive Lipper US Fund Flows Data. For the year we have only seen 1 week of outflows for 2021 with year- to-date total net inflows of $22.8 billion.

Municipal bonds had a rough week as did Treasuries as the Fed Chairman Powell stated on Thursday that the Fed will work to keep interest rates low until we see signs on an economic recovery especially as it relates to employment figures. The risk of rising inflation could jeopardize the influx of cash into municipal bond mutual funds as we have seen a weekly average of $2.3 billion going into those funds. Strong investor demand has helped overall municipal bond performance as well as well as strengthening municipal bond ratios to their all-time highs versus Treasuries. Investors have been pouring new money into those funds as states and local governments are poised to receive $350 billion in federal aid which as significantly eased their tax short falls due the economic slowdown caused by the pandemic. Although, yields have risen this week, investors still should have an appetite for municipal bonds due to President Biden’s push to raise taxes amongst the highest earners, which should increase demand for federally tax-free bonds.

Municipal Supply: The negotiated calendar for the third week of March should total about $8 billion which is significantly down from the previous week of $9.8 billion which was higher than usual for 2021 because of the $2.1 billion The State of New York Dormitory Authority Revenue Bonds. Two of the largest issues of the week will be the $1 billion New York City Transitional Finance Authority refunding bonds as well as the $690 million State Public Works Board of California refunding bonds which will have a forward delivery. AmeriVet will be a syndicate member in both issues. Adding to the weeks supply, Tennergy Corp of Tennessee is scheduled to sell $575.0m of bonds. With the 30-day visible supply increasing to $12.5 billion we should also expect to see a continuing increase in new issue supply as the year moves forward.