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Weekly Muni Snapshot | 27 April 2020

Municipal New Issuance: New Issuance once again picked up last week as just over  $6 billion came to market, with the notable deals being the Los Angeles County Unified School District selling $829 million in bonds, The City of Riverside California bringing a $720 million deal, followed by a $113 million State Public Works of California, in which AmeriVet was a co-manager on. UPMC brought a 2-part $450 million deal, this was the first large health care issuer to come to market since the pandemic took off in early March.  The UPMC bonds we well received despite being downgraded a week earlier as they have traded up as of Friday April 24th. Majority of the new deals were well received in the primary market as most were re-priced despite municipal yields were up for the week.

Municipal Secondary Trading: Secondary trading for the week was roughly about $38 billion down from the week prior of $66 billion. This one partially due to many investors were focused on the primary market as many of the deals that were put in day to day status finally came to market. Investors offered about $5.5 billion for sale via bids-wanted compared to $5.65 billion the week prior.

Municipal Spreads: Spreads widened last week for the first time since the April 2nd as investor sentiment has become come somewhat worrisome due to investors believing that states and municipalities will be unable to make bond payments in the summer this sent the 10-year benchmark to 1.30 up from 1.13 a week prior. This jump in yield was assisted by Senate Majority Leader Mitch McConnell stating that he is in favor of allowing states to go bankrupt rather than give them a federal bailout.

The one notable bright spot for municipal bonds sector is taxable municipal bonds. According to Bloomberg Barclays Municipal Index Taxable Bonds (BTMNTR) taxable municipals have returned 3.10% making it the loan positive index in the sector.  Before the Coronavirus disruption taxable municipals were returning about 7.89% at the end of February. The ratio of taxable municipal bond yields to corporates has jumped to its highest levels since 2016. This jump was driven by the Federal Reserve’s involvement in corporate bonds. Taxable municipals have generally been rich over the past year but in recent times they have become cheap compared to corporates as the ratio is now at 120% the highest since 2016 signaling that taxable municipals are starting to look cheap towards corporate bonds.

Municipal Supply:  The new issue calendar will continue to grow, as we will see roughly $6.23 billion in supply. The most notable deal in the market will be the $1.1 billion New York Power Authority which AmeriVet Securities will be a part of the selling group. The New York Power Authority will have tax-exempt portion as well as a taxable portion. The University of Missouri will also sell $582.2 million in bonds, as well as the County of Howard, Maryland will sell $242.6 million.  The States with the most debt coming due in the next 30 days is New York with $2.1 billion maturing with $1 billion coming from the New York MTA. The state of California will also have $2.04 billion coming due as well.