Municipal New Issuance: The third week of August saw about $9.6 billion in negotiated issuance, up from the week prior of $7 billion as many issuers are issuing before the long Labor Day weekend comes in 2 weeks. The largest deals for the week were the $1.25 billion New York City Transitional Finance Authority, which AmeriVet was part of the syndicate. The NYC TFA deal was well received during the institutional order period as it was repriced due to overwhelming demand despite a rise in yields in the municipal markets. The City of Los Angeles Department of Airports issued $1.05 billion in three parts consisting of tax-exempt bonds as well as AMT bonds. San Francisco Bay Area Rapid Transit District issued $625 million in green bonds, which was the second of the larger transportation authorities to take advantage of the record low rates to issue in the negotiated market.

Municipal Secondary Trading: With municipal yields on the rise, secondary trading was down once again as trade volume for the week as $23.66 billion compared to $36.71 billion the week prior. Majority of the trades last week were client buys as they took advantage of the higher yields. According to Bloomberg we did see a slight increase in bids-wanted from investors. Last week investors offered $2.71 billion in bids-wanted compared to $2.58 billion the prior week.

Municipal Spreads: Municipal bond yields for the second straight week rose, closing out the week again on a down note. The 10- year Bloomberg benchmark is now yielding 0.721% up by about 7.6 basis points from a week ago. Many investors have focused on the 10-year the last couple of weeks as it inched closer to 0.50 % as being the inflection point of where yields may go. The closest the 10- year got to 0.50% was on August 5^th when it was 0.60%. Once it hit that level yields have risen to their current levels we have today. With this steady increase in yields the 10- year benchmark yields lagged treasuries as they are now yielding 114.26% compared to treasuries making them significantly cheaper this week compared to last week when they were yielding 90.845%. With the rise in yields we did see the municipal curve steepen by 9 basis points this past week to 137 basis points. Although, we did see a rise in rates we did continue to see investors pour money into municipal funds as investors added about $1.8 billion into those funds marking the 15^th straight week in inflows as investors are still favoring the safe haven that municipal bonds give.

One of the interesting deals of the week came from New York Metropolitan Transportation Authority’s competitive issuance. The MTA was expected to issue $451 million in new debt to cover ever rising costs as they saw its ridership drop to record lows due to the coronavirus pandemic. The MTA rejected all bids from the banks and opted to have the Federal Reserve purchase those bonds and marking the second issuer to tap the Federal Reserve’s $500 billion emergency lending facility for states and local governments as it appeared to be cheaper to borrow form the Fed rather than sell to the major banks. By going to the Fed, they were able to save roughly 85 basis points relative to its attempted auction saving them millions of dollars if they went the public markets if you are comparing this to the AA+ rating by Kroll which has the highest rating for the Authority.

Many analysts still do not expect many state, or local government agencies to follow in the footsteps of the MTA when they became the second borrow to tap into the Federal Reserve’s $500 billion lending program as many have had zero problems in selling short term debt at lowest yields in decades. Some examples are the State of Texas who was able to sell $7 billion in notes with yield of 0.23% and San Diego County just paying 0.16% earlier this month.

Municipal Supply:  For the last week of August we are expect to see about $9 billion in new issuance on the negotiated side. The largest deals for the week will be the $1 billion New York City General Obligation, which AmeriVet will be a selling group member. There will also be a $1 billion California State University taxable revenue bonds. There will also be a $800 million State of Michigan Trunk Line Revenue Bonds where AmeriVet will be a Co-manager.