Weekly Muni Snapshot | September 13, 2021
Municipal New Issuance: With the Labor Day holiday on Monday as well as the Jewish New Year coming early in the week the negotiated calendar for the week totaled approximately $4.8 billion in volume. Many issuers decided to hold off on any issuance this week until market participants we’re more fully engaged in the market. The largest deal of the week was the $1.0 billion California Community Choice Finance Authority Clean Energy Project Revenue bonds which issued in green revenue bonds. The next largest deal of the week was the $818 million Hampton Roads Transportation Accountability Commission revenue bonds. AmeriVet was part of one issue for the week the $89 million Massachusetts Finance Agency revenue bonds which saw solid investor demand and allowed underwriters to tighten certain maturities by a few basis points as demand was high for the 5% coupon structure.
Municipal Secondary Trading: Secondary trading for the week was light with a total volume of $16 billion. Trading was down due in part to the Labor Day holiday. Since trading was down, were the level of customers bids-wanted. According to Bloomberg customers put out roughly $1.8 billion for the bid. We anticipate secondary trading picking up in the coming weeks as new issue supply increases as issuers and underwriters ramp up activity as we move into the last quarter of the year.
Municipal Spread: Municipal bond yields remained unchanged for the week with the Bloomberg 10-year benchmark yield staying at 0.948% which is virtually unchanged from a month ago. With zero movement in yields municipal bonds did outperform Treasuries this week and bonds maturing in 10 years are now yielding 70.74% of Treasuries. Last week the ratio was 71.07% and a month ago it was 66.91%. With the increase in longer dated maturity yields the yield curve steepen slightly by 1.3 basis points to 149 basis points a steepening of 6.8 basis points from one month ago.
Even with a shortened week, investors continued to pour money into municipal bond mutual funds adding $1.1 billion into those funds according to Refinitive Lipper US Fund Flows Data. This marks the 27th straight weeks of inflows bringing the year-to-date total well over $60 billion. One note that we have been discussing over the past few weeks is the level of interest in high yield funds. This week those funds only saw $145 million of inflows, and this could partially be due to some high yield funds closing their funds to new investors.
As we enter the fourth quarter of 2021, AAA rated municipal bonds performance for the past month has been essentially unchanged with municipal bonds maturing in 10 years increasing by only 1.2 basis points while U.S Treasuries increased by 7.3 basis points. Longer dated municipals increased by 1.7 basis points while their treasury counterpart increased by 7 basis points. Comparing yield levels from a year ago yields the Bloomberg AAA index (LMA3TR) have been relatively unchanged just declining by 6 basis points compared to the Bloomberg High Yield index (LMHYTR) which saw a decline of 159 basis points. This change may indicate that many investors continue to look for yield and are less sensitive to credit ratings as they look for additional yield. Investor attitudes could all change if we experience more stress on municipal credits due to the Delta variant and the risks of an additional economic slowdown.
Municipal Supply: The negotiated calendar will see a pick-up in volume with roughly $9.2 billion in expected issuance, with the largest deal being just over $2 billion. AmeriVet will be part of 2 syndicates for the week including the $2.1 billion State of California General Obligation refunding bonds. In addition, AmeriVet will be in the syndicate for the $633 million New York City Municipal Water Finance Authority issue. Other deals of note for the week include the $737 million Long Island Power Authority Electric System Revenue bonds which will have tax-exempt as well as taxable bonds and the State of Illinois will issue revenue bonds with a total size of $400 million.