Municipal New Issuance: The negotiated and competitive new issue calendars for the week totaled $8.8 billion in supply with majority of the issuance coming from a handful of issues. AmeriVet was part of the syndicates for 2 of the largest issuers for the week which were the $1.2 billion Triborough Bridge and Tunnel Authority issued debt for the MTA Bridge and Tunnel Payroll Mobility Tax program. These series of debt consisted of taxable and tax-exempt bonds proceeds which will be used to make significant improvements to the MTA system. In addition, the State of Connecticut issued $1 billion of Special Tax Obligation revenue bonds for transportation improvements in the state. The State of California issued $1.1 billion of General Obligation bonds this week with a forward settlement date of September 2021. Many borrowers have used the forward delivery technique to allow them the opportunity to use tax exempt debt to refund outstanding debt. AmeriVet was also part of the $250 million New York City Housing Development Corp.

Municipal Secondary Trading: Secondary trading for the week totaled approximately $26.6 billion in volume, down from the prior week of $42.6 billion. Secondary trading was down for the week due partly to investors being focused on the new issue calendar being that it was one of the larger weeks of new issues this year. According to Bloomberg, customer bids-wanted totaled roughly $2.8 billion for the week just slightly above last week’s level of $2.7 billion.

Municipal Spread: Municipal bond yields remained relatively static as the Bloomberg benchmark 10-year only rose by .2 basis point to 0.925%. Although we saw very little movement in the shorter end of the curve, we did see the municipal bond curve flatten by 0.2 basis points to 153 basis points due to the 30-year yield falling to 1.613%. Given the modest improvement in municipal bond yields we did see Treasuries outperform municipals as ratios in 10-years rose to 59.486% of Treasuries up from a week ago of 58.34%.

For the seventh straight week municipal bond funds saw positive inflows as many investors continue to flock to tax-exempt securities as they are expecting to see higher taxes with President Biden’s new tax plan. According to Refinitiv Lipper US Fund Flows data those mutual funds saw inflows of $1.89 billion for the week ending Wednesday as the market remains on pace for a record amount of inflows for the year.

This past week, President Biden’s administration is considering raising tax rates on capital gains to 40% for high income earners as well as increasing the marginal tax rate to 39.6% up from 37%. If this proposal gains more traction, we expect to see an additional demand for tax-exempt municipal bonds which will result in valuations even higher than what they are already are. Given the current levels of rates at the moment we should expect to see the 30-year part of the curve to see most improvement with the after-tax muni rate of 2.67% at a 39.6% tax rate we should see muni yields to improve over Treasuries by 42 basis points which is an 11-basis point improvement from a current tax rate of 37%.

Municipal Supply: The negotiated calendar for final week of May will only total $4.2 billion, which is one of the smallest calendars we have had this year. The largest deal for the week will be the $1.58 billion New Jersey State Transportation Trust Fund Authority which will consist of refunding bonds with some bonds consisting of forward delivery. This deal is significant because this deal covers over one third of the issuance for the week and many investors will be focusing on this deal. The next largest deal which AmeriVet will be part of the syndicate will be the $354 million Massachusetts Clean Water Trust which will consist of the state’s revolving fund and are designated as Green and Sustainability bonds. The State of Oregon will be issuing $234 million in general obligation bonds for higher education. The 30-day forward calendar continues to look remain very light with 30-day visible of only $9.9 billion scheduled so far. Many potential issuers are possibly waiting to see how much more tax revenues, they stand to collect from President Biden’s $2.3 billion infrastructure plan before they decide to issue new debt.