October 18, 2021

Municipal New Issuance: With the holiday shortened week it comes to no surprise that the negotiated calendar was very light with the total of just over $5 billion for the week. With the light calendar last week, we only saw two issuer issue bonds totaling over $300 million. The Texas Water Development Board sold $386 million in tax-exempt bonds. Indiana Finance Authority also issued this week to the sum of $383 million which included both Tax-exempt bonds as well as taxable bonds. AmeriVet was also in one deal for the week which was the $125 million New York City Development Corp taxable issue which saw their bonds tighten from their original pricing as demand was high for taxable housing bonds.

Municipal Secondary Trading: Secondary trading totaled to just under $21 billion for the week with 55% of the trades was dealers selling to clients. Trading volume was down for the week was due to holiday shortened week. According to Bloomberg customers put up roughly $2.85 billion for the bid which was slightly below the prior week of $2.86 billion.

Municipal Spread: Municipal bonds remained unchanged with benchmark 10-year notes remaining at 1.17%. While municipal bonds remaining unchanged, they did continue to lag Treasuries with the municipal’s bonds maturing in 10-years are now yielding 74.42% of Treasuries compared to 73% a week ago. With yields rising the municipal bond curve did steepen for the week with it steepening by only 0.3 basis points to 157 basis points. It will be interesting to see what spreads will do since there is about $10.6 billion of new municipal sales scheduled so far for next month and about $24.6 billion investors are expected to receive from debt that is going to be paid off.

For the 32^nd consecutive week Investors have added to municipal-bond mutual funds with last week adding $461 million and increase from the prior week where we saw investors adding just $37 million. This comes to a little surprise to many traders as they were expecting to see some outflows this week as yields have been steadily climbing in the past few months. The one contrarian that we saw high-yield funds seeing a gain of $45 million, the previous week they saw outflows totaling $460 million.

Secondary trading has been a problem for municipal bonds in 2021, even as supply for 2021 is on pace to break last years record number of over $430 billion, trading has all but dried up. So far trading activity has tumbled by 34% for the year to about $1.3 trillion which is a 22 year low according to Bloomberg. On average we are use to seeing a daily volume of about $8.9 billion each day since 2001 but for 2021 we are averaging around $5.8 billion. The lack of activity is likely due to the constant inflow of cash into the municipal markets along with new bond deals and yields at their all-time lows. With the stiff competition for bonds many are now buying and holding until maturity.

Municipal Supply: After a holiday shortened week the negotiated calendar will pick up with an expected volume of about $9.4 b billion with the largest deal of the week being the Central Puget Sound Regional Transit Authority which will be issuing $874 million in refunding green bonds. The OhioHealth Obligated Group is planning on selling $600 million in taxable bonds using a corporate CUSIP this week. Hudson Yards Infrastructure Corporation will also be selling green bonds with an expected size of around $451 million. AmeriVet will be in one deal this week as a co-manager on the $250 million California Earthquake Authority note deal. AmeriVet will also be in two others issues this week as a which will be the$148 million Massachusetts Housing Finance Agency and the $83 million Colorado Housing and Finance Authority.