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Weekly Muni Snapshot | 8 June 2020

Municipal New Issuance: In the first week of June, the municipal market say roughly $ 8.1 billion of new issues.  The most notable issue for the week was the $595 million Great Lakes Water Authority, which finally priced as it was put on hold for the past month. We also saw a $1.5 billion Yale University taxable bond that used a corporate cusip. New York City Water Authority also issued $708 million of bonds which AmeriVet was part of the selling group. The deal has enough demand as it was up-sized from $630 million to $708 million.

Municipal Secondary Trading: In the first week of June we saw about $32.3 billion in secondary trades a slight decrease from a week ago of $34.45 billion the week prior.  We saw an increase in client bid wanted $3.1 billion an increase from the holiday week of $2.3 billion.

Municipal Spreads: Spreads for the week were relatively unchanged as we saw the 10-year benchmark on rise about 0.5 basis points to 0.86%. Despite, this small change the 10-year ratio is now 97.39% of treasuries a week ago it was 118.21% and 208.81% a month ago. Showing once again that municipal bonds are richer than treasuries. We have seen municipals do a complete 180 from what we saw in March when the Coronavirus pandemic began. With Municipal yields at or around their all-time lows we should not expect them to go any much lower as the actual tax-benefit of owning municipals will be eliminated.

Although, we have continued to see a rally in the municipal markets, states and local governments will likely need another lifeline as they are seeing a massive loss of revenues due to the pandemic. Many are expecting the federal government to pass another stimulus package that could be about $1 trillion, with most being earmarked for States and local governments.  According, to Bloomberg Barclays Index the general obligation sector has outpaced the revenue sector despite the uncertainty of tax revenues the states may receive investors are still pouring money into those bonds. With This positive sentiment we saw for the third week in a row of $1 billion or more of weekly of inflows into mutual funds as we saw $1.2 billion added.  On Wednesday, we saw the Federal Reserve add a $500 billion emergency lending program for state and local governments to include smaller borrowers.

Municipal Supply:  The second week of June we are expected to see about $7.7 billion in new issuance with the Dormitory Authority of the State of New York issuing a large $3.5 billion Notes deal.  The University of Michigan will also issue about $1 billion with $850 million in taxable bonds and $130 million in tax exempt bonds. Princeton University will also be doing a $500 million taxable bond issuance. Princeton University will using a corporate cusip which has been a going trend among major colleges and universities as it increases the number of investors who can buy and allow them to use the monies for various purposes that the municipal markets will not allow.