Municipal New Issuance: Last week US State and local governments sold ~ $5.77 billion of bonds, with the most notable being the $589.4 million Baptist Health Care, and the $475 million NYU Langone Hospital. Howard University also did a $147 million taxable deal using a corporate cusip.

 

In recent months, the demand for new issues has left dealers no problem with selling to investors as they have been outperforming treasuries, as well as there has been an increase of new buyers lining up to purchase municipal bonds especially taxable bonds.

 

Municipal Secondary Trading: Trading in municipals dropped, as institutional investors offered for sale $3.2 billion through bids-wanted lists this past week, down from $3.5 billion from the previous period. According to MSRB, trading totaled ~ $61.6 billion last week down 9.7% from $68.3 billion the week prior.

 

While institutional investors demand for municipals has been increasing, dealer inventories have been steadily dropping to $12.1 billion, lowest since 2014 showing signs of the market strengthening as municipals are poised to make a return of 1.77% for January which is the best since January 2015.  Investors are willing to pay up for bonds because of the lack of supply as well as the need for investors to reinvest

Municipal Spreads:   Last week Municipal bonds continued to lag treasuries as the 10-year yielded 78.396 % of treasuries compared to 74.481% a week prior and 77.280%  a month ago. Yields continue to fall as the 10 year benchmark is now 1.192, a drop of 7.9 basis points from a week ago.

 

As yields have fallen, municipal bond funds are continuing to have in inflow of funds as we saw ~1.8 billion of new cash, marking the 56^th straight week on inflows with $1.4 billion going into long-term funds.

 

Municipal Supply:  This week will see State and local governments issue roughly $9.32 billion with the most notable being the $1.51 billion taxable and tax-exempt Grand Parkway Transportation, $812.7 million California State University, and $465 million New York City Municipal Water Finance Authority. The state of Nevada will be auctioning off a rare $157 million Las Vegas Valley Water District.  This deal is expected to perform well as issuance in Nevada has dropped slightly since 2016.  Debt from Nevada have been posting a return of 1.84% this month beating the over market of 1.69% according to Bloomberg Barclays index.

 

The states with the most debt coming due are Texas with $4.4 billion, followed by New York with $3.45 billion and Minnesota with $1.24 billion. New York State Thruway Authority has the most debt maturing with $25.8 billion coming due in the next 30 days.

 

Redemptions will continue to increase as we will see $23.8 billion coming due as compared to $25.8 billion a week prior, showing signs that we should see an increase in supply soon.