Municipal New Issuance: Last week saw about $6.9 billion in new issuance with most of the issuance amount coming from 6 deals.  The issuers that received the most attention last week were, The State of Connecticut priced a $850 million tax-exempt deal, followed by a $525 million MTA’s Triborough Bridge & Tunnel Authority. The 2 taxable deals of note last week were the $425 Virginia Housing Development Authority and the $300 million University of Texas. Both the State of Connecticut and the Triborough received overwhelming demand as they were all repriced tighter than what MMD changed. The Triborough was also up sized by $125 million as it is showing that the agency can still gain interest despite its steep drop in ridership due to the coronavirus pandemic. This was the second time the MTA has up sized their deal this month, the MTA doubled their $1.1 billion revenue bond 2 weeks ago.

Municipal Secondary Trading: With most traders leaving early for an extended holiday weekend, trading was down this week as we saw roughly $32.6 billion in secondary trading down from $45.6 billion the week before. Going into a holiday shortened week investors roughly offered only $3.6 billion via bid-wanteds slightly up from the previous week of $3.4 billion.

Municipal Spreads: Spreads continue to improve as investors are continuing to look for more yield as the 10-year note is yielding 132.05% of treasuries, a month ago it was 205.08%. The 10-year note also fell 17.8 basis points to 0.83%. The short end of the curve has improved far better than the longer end last week as the Fed has continued to expand on its municipal bond buying program. This has steepened the yield curve as the 2 year – 3 year curve slope is now 1.578 compared to 1.485 a week ago.

As much of a surprise to many, municipal bonds are expected to have their best monthly gain since 2009 which has shocked many as the economic collapse from the coronavirus pandemic has driven many state and municipalities towards a fiscal crisis. So far in the month of May municipal bonds have returned an average of 2.7%, This rally as all but wiped out all loss’s investors have lost in March. This rally has also brought many investors to add to high-yield funds to seek more yield as many are believing that states will take steps to balance their budgets. This rally has also pushed yields to its lowest in over 60 years with the 10-year benchmark now 0.83%.

Municipal Supply:  With a holiday shortened week we should expect to see about $3 billion in new issuance, with the Great Lakes Water Authority doing a $715 million taxable issuance, a $500 million State of Colorado and the Stat of Connecticut doing a $500 million taxable deal, and the New York City Housing Development Corporation doing a $181 million bond issuance which AmeriVet will be a part of the selling group.