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Weekly Muni Snapshot | 29 March 2021

Municipal New Issuance: New issue volume for this previous week totaled approximately $9.1 billion with the largest deal being the $1.0 billion New York City Transitional Finance Authority. AmeriVet participated as part of the syndicate group. This issue was well oversubscribed with almost $2.1 billion in orders which allowed the underwriters to lower yields by as much as 16 basis points for the longer maturities. This refinancing enabled the city to save $255 million in debt service. The second largest deal of the week was the $746 million Maryland Transportation Authority’s issue for road improvements. AmeriVet was a Co-manager on the California State Public Works Board which issued roughly $694 million of tax exempt revenue bonds and was unique in that the issue has a forward settlement of 3/17/2022. AmeriVet was part of one more issue, the $400 million Triborough Bridge & Tunnel Revenue bonds which saw strong investor demand as well.

Municipal Secondary Trading: For the final full week of March secondary trading totaled $26.3 billion which has been the average volume in weekly secondary trading. Secondary trading this week should be fairly light as we head into Easter holiday with the bulk of the trading expected at the beginning of the week. According to the Bloomberg client bids-wanted totaled $3.2 billion for the week, down from the previous week of $3.42 billion.

Municipal Spread: On the basis of strong investor demand and a firmer tone to the treasury market municipal yields for the week fell, a quick reversal of what we saw the previous week in which we saw yields rise by 12 basis points. The Bloomberg 10-year benchmark yield fell by 6.3 basis points to 1.071%. The 10-year ratio also fell as it is now 64.05% of Treasuries compared to 65.81% a week ago, the ratio was 79.67% a month ago. We are getting closer to the all-time high of 59% which was achieved back in mid-February. The municipal bond curve also flattened for the week by flattening by 1.4 basis points to 167 basis points which is unchanged from a month ago.

Municipal bond inflows for the week added $592 million to municipal-bond mutual funds and ETF’s as of Wednesday. This followed last weeks $1.27 billion of inflows making it three straight weeks of positive inflows according to Refinitiv Lipper US Fund Flows Data. Continuing investor demand is solid evidence that investors remained bullish even as rates rose in response Fed Presidents remarks regarding their outlook on the economy, inflation and employment metrics.

The $350 billion in stimulus from Washington has basically erased many credit concerns as rating agencies have moved many sectors with negative outlooks to stable. Traders have seen spreads continue to tighten which means that investors are confident of the risk factors of various credits which is essentially allowing bonds from each state to be priced and traded within a few basis points from each other. For instance, if you look at New York City’s 10-year general obligation bonds which are Aa2 rated have dropped 4 points below AAA Bloomberg benchmark yield, while Aaa rated State of Washington are trading 5 basis points above it. Even the State of Illinois which is just above junk rated has its yields drop, proving that investors are much more comfortable with taking on various credit risks.

Municipal Supply: The negotiated calendar for this week will very light as we head into the Easter Holiday weekend. We are expected to see roughly $4.3 billion in new issues for the week with the largest deal being the $996 billion Golden State Tobacco Federally Taxable refunding bonds. The next largest deal will the Washington State Convention center $345 million green notes bonds., while the Pennsylvania Turnpike Commission will be issuing $250 million in revenue bonds.