Municipal New Issuance: With the Memorial Day Holiday week, the negotiated calendar was exceptionally light with the total size being only $5.5 billion. The largest issue of the week was the $1.6 billion Metropolitan Washington DC Airports revenue bond financing. The next largest deal was only $321 million which was the Michigan State Housing Development Authority.

Municipal Secondary Trading: The Memorial Day shortened week saw a more modest volume of trading with approximately $18.9 billion in secondary trading for the week, of which 58% of the trades being clients buying. The bulk of the trading took place on Wednesday and Thursday. As with secondary trading, client bids-wanted were light as well as according to Bloomberg clients went bid wanted on around $1.75 billion in volume which was down from the previous weeks total of $2.23 billion.

Municipal Spread: For a holiday shortened week municipal bond market showed good performance yields on the Bloomberg 10-year benchmark falling by 3.1 basis point to 0.942%. Municipal bonds did outperform Treasuries for the week despite having a lighter level of activity. Municipal bonds maturing in 10 years are now yielding 60.46% of Treasuries compared to 60.96% a week ago, and nearing their all-time highs signaling that municipal bonds have become more expensive compared to Treasuries on a relative value basis. Although, there was very little movement in yields the municipal bond curve did flatten slightly as the gap between short-term and long-term bonds fell by 4.1 basis points to 1.444.

For the 13^th straight week investors have added to municipal-bond mutual funds adding about $997 million to those funds according to Refinitiv Lipper US Fund Flows data. This follows previous weeks inflows of $1.47 billion into to those same funds. Even as municipal bonds become more expensive than investors remain interested in the sector as new taxes are looming ever since the President Biden proposed increasing income taxes.

With municipal bonds being in high demand coupled with very low supply and lighter inventories from dealers it comes to no surprise that they have been able to some nice returns this past month. Bonds that maturing in 10-years have returned almost 5% in the month of May while Treasuries finished the month -1.1% in returns.

The negotiated calendar volume continues to very light this week, with a total size of being around $7.9 billion with the over half of the issuance coming from only 3 deals and 1 of those potentially using via the taxable markets. Kaiser Permanente may issue up to $2.65 billion in taxable bonds with Goldman Sachs being the lead manager. The next largest deal will the $1 billion County of Los Angeles Tax and Revenue Anticipation Notes. AmeriVet will be included in the syndicate for the upcoming $720 million Commonwealth of Massachusetts will be issuing revenue bonds which will include sustainability bonds. If you do not include the Kaiser Permanente issue since we do not know the exact size, we would still be far below the normal average weekly issuance we had back in 2020.