Skip to main content

Weekly Muni Snapshot | July 19, 2021

Municipal New Issuance: The second full week of July saw a large new issue calendar as investors have been hoping for more supply as demand has been greater than the level of issuance so far this year.  Supply for the week totaled $8.6 billion with the largest deal being the $800 million City of Chicago Met Pier & Exposition Authority Illinois Revenue Bonds proceeds of which will be used for the McCormick Place Expansion Project. The next largest deal which AmeriVet was part of the syndicate was the $582 million New York City Transitional Finance Authority which went well as bond yields, were lowered slightly from their initial pricing. In the taxable municipal market, The University of Virginia issued $300 million of long taxable refunding bonds which was strongly supported by investors.


Municipal Secondary Trading: Secondary trading for the week saw a solid increase in trading volume of approximately $21.46 billion for the week. The previous two weeks volume was  in the $19 billion range as the need for liquidity was down due to the strong level of new cash and reinvestment dollars looking to be put to work. According to Bloomberg customers put up roughly $2.2 billion up for the bid which Is up from the prior week where customer bids-wanted were $1.31 billion.

Municipal Spread: As we returned to a full week of trading, municipal bonds yield levels remained relatively unchanged with the Bloomberg benchmark 10 year falling by 0.6 basis points to 0.859%. With the small movement in municipal bonds, they underperformed Treasuries as they are now yielding 66.38% compared to 63.55% a week ago.  With the very small movement in yields the municipal bond curve did steepen slightly to the 129 basis points a change of only 1.8 basis points.

For the 19th straight week, we continued to see investors adding new cash to municipal-bond mutual funds. This week investors added about $2.24 billion for the week ended Wednesday according to Refinitive Lipper US Fund. This follows the previous week of $2.29 billion, continuing the trend that we been seeing all year. One thing that we have noticed this year is that investors have been adding more to high-yield funds as many have been searching for more yield. The imbalance of supply and demand has stretched valuations and pricing to at or near record lows additional price appreciation projected for the 2nd half of the year may be difficult to achieve.

Municipal bonds have experienced lofty valuations this year as many states and local governments are using a portion of the $350 billion in stimulus dollars provided through the American Rescue plan as well as a nice rebound in tax revenues to work on infrastructure programs and improve their balance sheets for cost associated to the pandemic. For example, in the first three months the State of New York collected $4.8 billion more in tax revenue than expected which has helped with budget planning for 2022. Another example of improving finances is the State of Illinois, which saw its credit ratings improve and bond pricing levels jump over 4% in March 2020 but now have fallen back towards its pre-pandemic levels. Illinois as well as the city of Chicago has been greatly helped by the Federal government stimulus to a point where many have become a bit cautious in purchasing any more due to its unfunded pension and their limited ability to raise revenues due its already high state and local sales tax.

Municipal Supply: Supply for the week will be lower than the week prior with an expected negotiated volume of $7.1 billion compared to total volume of around $8.6 billion. The four largest deals of the week will be the $838 million Salt Lake City International Airport revenue bonds, the Oregon Educational Districts which will issue $660 million, followed by the City and County of Honolulu which is issuing $ 577 million in taxable and tax-exempt bonds proceeds of which will used for the Honolulu Rail Transit project. Los Angeles County will be issuing revenue bonds to the sum of $507 million through the Transportation Authority. The supple should pick up in the coming weeks as requests for CUSIPs for new municipals has increased 14% in June from the previous month.