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Weekly Muni Snapshot | October 4, 2021

October 4th, 2021

Municipal New Issuance: Negotiated issuance for the week totaled to about $9.8 billion for the week with about a third of the issuance coming from two deals. The largest of the two being the $1.8 billion Golden State Tobacco Taxable Revenue bonds which was well over subscribed during the order period and subsequently tightened dramatically even as yields rose significantly for the week. The next largest deal of the week was the $1.3 billion State of Hawaii General Obligation taxable issue which also so robust demand, as both deals were the focus of the new issue calendar.

Municipal Secondary Trading: Secondary trading picked up for the totaled to $26.9 billion for the week with 58% of the total trading was dealers selling to customers. With yields climbing for the seconds straight week many saw this as an opportunity to purchase bonds. As with secondary trading, we did see clients put up more bonds up for the bid this week with customers putting up approximately $3.1 billion up for the bid compared to the previous week of $2.8 billion.

Municipal Spread: Municipal bonds finally had the selloff that many have been waiting for as the 10-year notes rose by 13 basis points to 1.13% for the week. This was the first time we saw the 10-year above 1% since April 12th, 2021. With the big sell off in municipal bonds this week they unfortunately lagged Treasuries as the 10-year ratio is now yielding 77.22% compared to 69.16% as week ago but still better than a month ago when the ratio was at 72.3%. With the rise in rates, we did see the municipal bond curve steepen to 155 basis points a steepening of about 8 basis points.

For the 30th straight week municipal-bond mutual fund saw inflows, with this week totaling to about $408 million according to Refinitiv Lipper US Fund Flows data. This follows the previous weeks $1.55 billion jump as well as one of the smallest inflows we have seen in the 30 weeks of inflows as we have been averaging around $1.25 of weekly inflows. High-yield funds lost about $103 million marking the first outflow since March 2021 which could be a sign to come of some outflows coming soon.

For most of the year municipal bonds have enjoyed robust returns but all that changed by the end of September and the third quarter. Municipal bonds posted a -.72% for September with most of the loss coming from in the last few weeks but still have a year-to-date return of .79%. The losses are mainly due to the Federal Reserve’s comments on the timing and duration of a taper and the timing which is expected in 2022. High-yield municipals did do slightly better than with a return of -.65% for the month but still have a year-to-date return of 6.5% as speculative projects/credit are a focal point for tax-exempt investors.

Municipal Supply: The negotiated calendar will have an expected volume of $9.3 billion which is down from the prior week of $9.8 billion as supply finally picks up. This week we will have two issues that will be above $1 billion which will be the $1.47 billion Alabama Federal Aid Highway Finance Authority Taxable Special Obligation Revenue bonds. The second largest deal of the week will be the $1 billion San Diego Unified School District who will be issuing green bonds. AmeriVet will also be a Co-manager on the $312 million School District of Philadelphia General Obligation Bonds which will have a green bond included in the issue.