Municipal New Issuance: After the Veterans day holiday week the municipal bond market had a large negotiated calendar as underwriters priced approximately $11 billion in new issue pricings. The largest deal for the week was the $3.6 billion New Jersey General Obligation Emergency Bond, proceeds of which are being used to finance the state’s revenue shortfall due to the economic downturn caused by COVID-19 The next largest deal for the week was the $1.45 billion Commonwealth of Massachusetts General Obligation bonds consisting of taxable and tax-exempt bonds, where AmeriVet was part of the syndicate. AmeriVet was also in the syndicate for the $289 million New York City Housing Development Corp. The State of New Jersey issue was of some significant importance is it was one of the first issues that was earmarked for COVID-19 relief. Bonds in the long end with a 4% coupon were originally set a $115.474 or a +150 spread, then tightened to a $117.671 +132 versus MMD’s AAA scale and once they were free to trade, they tightened even more by 5 points. The 3% coupons of the same maturity had similar upticks with some trades being up over 4.5 points. With the improved market performance in these bonds and the market in general it continues to show that many investors are confident to look at State G.O. debt for yield, even if the issuer has a negative outlook among the major rating agencies.

Municipal Secondary Trading: The 3rd week of November saw a was about $31.4 billion in volume for the week, a slight increase from the week prior of $29.7 billion. According to Bloomberg client bids-wanted for the week increased to $ 2.8 billion for the week an increase of about $800 million.

Municipal Spread: Municipal bond market performance for had once of its best weeks in recent months with the yields falling across the curve with 10-year Bloomberg benchmark yield falling by 10.4 basis points to 0.724% and the 30-year Bloomberg benchmark falling by 13 basis points to 1.506%. With the drops in yields municipal bonds outperformed treasuries again for the week as the 10-year ratios are now yielding 87.86% compared to 92.20% from the week prior. The 10-year ratio was 120.33% a month ago and these ratios indicate that municipal bonds are continuing show the strong level of investor support for tax exempt income. With the overall improvement in these ratios versus treasuries and we could reach ratios where we were back in March just prior to the Coronavirus pandemic which was 76.32%. The municipal bond curve once again flattened for the week as it flattened by 10.7 basis points to 135 basis points.

With the rapid increases of Coronaviruses cases across the nation and worldwide and with shutdowns/ lockdowns and travel restrictions looming once again states and local governments that will be affected once again are ones with are more depended upon tourism, such as Hawaii, Las Vegas and Orlando. With travel restriction in place many of these places who rely on tourism revenue could see unemployment levels return to levels we saw back in March which spiked to 19% nationwide. National unemployment numbers have improved to 6.9% but in those high tourism states they are almost double that level. With that being said, Airport debt spreads are continuing to see the side effect from travel restrictions as they are still above the average of what they were trading prior to the coronavirus pandemic. If these restrictions continue, we would expect these spreads to widen even more in as well as in states highly dependent upon tourism. This will force the states to dig deeper in the Municipal Liquidity Facility (MLF) which the State of Illinois as well as the New York MTA has already tapped into.

Municipal Supply: With Thanksgiving Holiday this week we are only expected to see roughly $1.1 billion in negotiated issuance with the largest deal being the $340 million JFK International Airport Terminal refunding bonds, followed by a $266 million Denton Independent School District taxable refunding bonds.