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Weekly Muni Snapshot | 23 March 2020

Municipal New Issuance: Last week, was expected to see roughly $12.2 billion in issuance, but with the municipal bond market seeing its worst route since 1981, many issuers decided put their issuance on hold until the markets volatility drops as  only $1.14 billion came in issuance.


Municipal Secondary Trading: : Secondary trading in municipals increased this past week, as many investors pulled a record $12.2 billion out of mutual funds last week according to Refinitiv Lipper US Fund Flows data.  To put it into perspective this is almost three times the previous record of $4.5 billion.  This sharp decline has caught the attention of US government as the senate has introduced a bill on Friday that would allow Federal reserve to purchase municipal debt.

Last week saw a record number bid-wanted as funds are under pressure to cover withdrawals as investors rush to raise cash amid the financial crisis brought upon the coronavirus.  We saw $13.9 billion for sale via bid-wanted, up about 44% from $9.64 billion the prior week. This cash raising has hit bondholders with the largest monthly loss since 1984 and has driven high yield bonds down by 12%. One of the most notable was the Ohio tobacco bonds maturing in 2055. They were once trading at its highest $116 in late February and are not trading as low as $73 last week.

Municipal Spreads:  Spreads continue to widen as many investors grow worrisome that some states and or municipalities will be unable to continue their debt payments for the short term.  The 10-year notes rose about 78 basis points this past week to 2.88% compared to 1.672 the week prior. 10-year debt is now yielding 209.13% of treasuries, which is up from 75.38% a month ago.

Yields on the short end have surged the most this past week as they are now 2.83% compared to 1.16% the week prior, highlighting the fact that liquidity is playing a major factor the markets.

Municipal Supply: This week is expected to see $2.8 billion in supply, which is a sharp decline as many issuers are in a holding pattern and waiting for the dust to settle.  This can all change as we saw this past week many issuers postpone their issuance.  The deals that are still scheduled to price this week are the County of Ann Arundel, Maryland selling $381 million and Rutgers University selling $223.5 million.