Municipal New Issuance: Last week, US State and local governments sold about 8.56 billion of bonds, the City of New York, in which AmeriVet was part of the selling group, sold $860 million in bonds, and Maryland sold a $779.3 million in bonds competitively. California Earthquake Authority also did a short 3-month $400 million taxable note that AmeriVet was a co-manager on.

 

The New York City GO was originally offered at a 1.10 on the 10-year maturity but had to cheapen to a 1.21 when it finally priced. Bonds maturing in 20 years also had to cheapen as they were originally offered at 1.55 then was cut to a 1.71. This much of a change could be a start of investors not willing to pay up for bonds.

 

Despite the sharp moves in treasuries the California Earthquake deal was originally offered at a 1.30 and did not have to reprice.

Municipal Secondary Trading: Secondary trading in municipals was up slightly, as we saw roughly $44 billion, as compared to the previous week of $55.6 billion in trades.

 

Investors offered $6.67 billion for sale via bid wanted lists this past week, which was up 107% from the prior week of $3.22 billion. This was expected as we finally saw outflows from tax-exempt funds.

Municipal Spread: The Coronavirus has continued to plague the markets as yields on US Treasuries saw the 10-year fall below 1.00%. Although municipal yields fell as well, they failed to keep up with treasuries as the 10-year municipal yields 107.35% of treasuries compared to 78.37% a week ago.  Municipal yields should continue to lag treasures for the time being as retail investors are not willing to pay up for bonds.

 

The 10-year municipal yield fell once again this week as it is now 0.894 compared to 0.977 a week ago, and 1.237 a month ago.

As we expected for the first time in 60 weeks, we saw outflows to tax-exempt funds. Investors pulled about $250 million from municipal bond mutual funds according to Refinitiv Lipper US Fund Flows data. There could be multiple reasons for this reversal, it could be from the fear of coronavirus, or from low yields. Until the coronavirus gets under control and yields slow their downfall, we should continue to see the outflows continue for the time being.

Municipal Supply: This week, we will see roughly $12.2 billion in issuance, with the State of California selling $2.2 billion in bonds, followed by Virginia Public Building Authority with $504.7 million and Johns Hopkins University with $470 million.

 

Issuers from New York has the most debt coming due with $3.7 billion, followed by California with $1.2 billion, and Texas with $1.03 billion. University of Texas has the largest amount of maturing debt coming due with $750 million.