Skip to main content

Weekly Muni Snapshot | 9 November 2020

Municipal New Issuance: Last week’s negotiated calendar was one of the smallest we have seen since this past March when the Coronavirus pandemic wreaked havoc on the municipal market and markets in general. Many Issuers decided to postpone pricing any issues until after the election was over as the municipal market can be very volatile during major elections. There was roughly $988.6 million in negotiated issuance for the week with the largest being the $130 million Maine Turnpike Authority.

Municipal Secondary Trading: The first week of November saw a decrease in secondary trading as many traders decided to wait until after the presidential election to be actively engaged. For the week we saw roughly $25.3 billion in trading volume down from $42.5 billion the week prior, with the majority of the trading coming from dealers selling to buy-side clients. Customer’s bids-wanted were also down for the week with $2.16 billion in bids-wanted compared to $4.15 billion the prior week.

Municipal Spread: Municipal bond spreads for the week tightened the most we have seen in the past few months as the 2-year Bloomberg benchmark fell by 2.3 basis points to 0.175, the 10-year Bloomberg benchmark fell by 11.7 basis points to 0.8.24% and the 30- year Bloomberg benchmark fell by 14.7 basis points to 1.638. With the drop in yields we did see the municipal curve flatten by 10.8 basis points to 148 basis points last week. With this rally in municipal bonds we did see ratios tighten verses treasuries as they are now yielding 100.24% of treasuries compared to 107.54% the week prior.

For the first time in five weeks investors withdrew from municipal bond funds as roughly $954 million were redeemed from the week ending Wednesday, which broke a four-week stretch of inflows and the second time in 20 weeks we saw outflows.

With the Presidential election finally behind us we can finally start talking about funding stimulus for states and municipalities although it will most likely come in 2021 as the lame duck officials will be hesitant to get a deal done as well as the incoming elected officials are going to want to have their input on the new stimulus package. With the Democrats unable to take control all the three branches of the government we should see a more modest level of aid for the States and Local governments in the next aid package. Back in September both parties proposed their provisions with the Democrats originally putting $875 billion of aid to states and local governments. In their recent proposal they proposed roughly $2.2 trillion in aid with $436 billion going to states and local governments, but will most likely need to lower their expectations in order to get their deal passed. It is expected that in order to get passed the deal will need to be around $1.5 trillion with the need to be passed by December 11th but expectations are that it will be passed in the beginning of 2021, and another round of stimulus passing again in 2021.

Municipal Supply. The second week of November will see a substantial increase in negotiated issuance from the previous week as many issuers decided to wait until the election was over. We are expected to see roughly $2.6 billion in negotiated issuance. The largest deals for the week will be the $424.3 million State of Louisiana Gasoline and Fuels Tax Second Lien Revenue Refunding Bonds and the $300 million California Earthquake Authority will be issuing in taxable bonds, AmeriVet will be a co-manager on the issue. The State of North Dakota Housing Finance Agency will be issuing $125 million in tax-exempt bonds as well.