Weekly Muni Snapshot | 5 October 2020
Municipal New Issuance: Last week, the negotiated calendar saw roughly $9.1 billion of new pricings. The largest deal for the week was the North Texas Tollway Authority $709.25 million issuing a combination of taxable and tax-exempt bonds. Another deal of note was the State of Louisiana issue of taxable bonds in the amount of $486.65 million. Given the lower level of interest rates more and more municipalities are turning to the taxable debt markets to raise capital. AmeriVet participated in one negotiated issue this week, the New York City Housing Development Corp $64 million issue.
Municipal Secondary Trading: Secondary trading volume for the week totaled around $26.4 billion according to MSRB with 60% of all trades going to investors as they are taking advantage of the relative value of tax exempt levels versus treasuries. Customer bids-wanted was roughly $2.98 billion for the week, which was slightly down from the week prior of $3.02 billion.
Municipal Spread: For the first time in a few weeks we’ve had some movement in the municipal yield curve as the 10-year Bloomberg benchmark yield rose by 3.3 basis points last week. The 30-year Bloomberg benchmark yield rose by 5.4 basis point while the 2-year benchmark remained unchanged. With the rise in yields on the belly of the curve as well as the long end the municipal curve steepened by 5.4 basis points to 153 basis points.
For the first time in 20 weeks investors took redemptions of approximately $775 million form municipal-bond mutual funds last week. This pull-back was due in part to Congressional Democrats and Republicans remain at a stand-still on the amount of aid to deliver to states and cities as they continue to grapple with the coronavirus pandemic. Investors remain concerned that no new deal will be executed prior to the November elections.
On Thursday, Moody’s Rating Services downgraded both the State of New York and New York City by one notch to Aa2. This announcement was just a head or their planned issuance of 2 Series of debt totaling $1.12billion of tax-exempt bonds for the city. This slight downgrade will require underwriters to offer the bonds at slightly higher rates to attract a large range of both retail and institutional investors. According to Moody’s the downgrade is due to the substantial financial challenges the city faces caused by the coronavirus pandemic and they are expecting a longer recovery than other major cities. This downgrade impacts roughly $38.7 billion of the New York City’s General Obligation bonds and $65 billion of the state’s debt. Moody’s continues to have a negative outlook because of the ongoing uncertainty about how long the pandemic economic consequences will impact the city’s economy. Moody’s commented that their outlook shift is unlikely to change until a vaccine is widely available.
Municipal Supply. For the first full week of October, we are expected to see roughly $12.4 billion in the negotiated calendar. The largest issues for the week will be the $3.2 billion DesertXpress Enterprises Las Vegas passenger rail project green bonds, followed by the $1.12 billion New York City General Obligation which AmeriVet will be part of the syndicate group. The Rockefeller Foundation will be issuing $700 million in taxable bonds using a corporate cusip next week.