Muni Update

February 16, 2021


In this week’s Municipal Market Update, we highlight the following:


Municipal Market Recap

Municipal prices started the week steady across the curve. On Tuesday municipal price strengthened across the curve, driving one- and two-year yields to record lows, as investors clamored for paper even with historically rich valuations hanging overhead. On Wednesday municipal prices were mixed, as the front-end was steady, while prices on bonds maturing 10 years and longer strengthened. On Thursday and Friday municipal prices were steady across the curve.

The  projected level of new-issue offerings for the holiday-shortened trading week are $5.67B and coupled with general market (GM) offerings in the secondary market should provide market participants with some opportunities to fill their needs, especially as strong demand continues due to redemption activity, projected to be $28.0B in total for February, and overall solid inflows into funds also contribute to demand outpacing supply. For the latest reporting period, investors in municipal bond funds put cash into funds for the a 14th week in a row, as evidenced by the latest tax-exempt weekly reporting funds data showing that funds experienced inflows of $2.64B in the latest week, after experiencing inflows of $1.58B the week prior.

Last week the yields on the two-, 10-, and 30-year maturities on the MMD Triple-A Scale were unchanged from Thursday to Friday and they ended the week at 0.08%, 0.69%, and 1.34%, respectively. Overall, week-over-week the yield on the two-year general obligation (GO) bond fell two basis points (bps), while the yields on the 10- and 30-year GO bonds each fell four bps.

Last week the yields on the two, 10-, and 30-year maturities on the MMA Triple-A Scale were unchanged from Thursday to Friday and they ended the week at 0.24%, 1.04%, and 1.57%, respectively. Overall, week-over-week the yields on the two- and 10- year GO bonds each fell two bps, while the yield on the 30-year GO bond fell four bps.


New-Issue Volume is Forecasted to be Around $5.67B for the Week

Total new-issue offerings for the holiday-shortened trading week per IHS Markit Ipreo are estimated to be $5.67B. This week’s projected bond issuance is comprised of $4.26B in negotiated deals and $1.41B in competitive sales. Leading the way this week will be the Regional Transportation District of Colorado’s two deals. The first is a $519.0MM offering of taxable sales tax revenue refunding bonds (FasTracks Project) climate bond certified green bonds on Thursday. Also, on Thursday there will be a $298.0MM offering of tax-exempt sales tax revenue refunding bonds (FasTracks Project) climate bond certified green bonds. The deals are rated Aa2 by Moody’s Investors Service (Moody’s), AA- by Standard and Poor’s Global Ratings (S&P), and AA by Fitch Ratings (Fitch).

On Tuesday Tucson, Arizona is set to price $658.0MM of taxable certificates of participation (COPs). The deal is rated A1 by Moody’s and AA- by S&P and A+ by Fitch.

On Wednesday the State of Wisconsin is set to price $295.0MM of taxable GO refunding bonds. The deal is rated Aa1 by Moody’s, AA by S&P and AA+ by Fitch. Other notable deals scheduled for Wednesday include the Gahanna-Jefferson City School District, Ohio, which plans to offer $205.6MM of Franklin County, Ohio, school facilities construction and improvement unlimited tax GO bonds, expected to be insured by Assured Guaranty. The Pennsylvania Housing Finance Agency is set to price $157.9MM of single-family mortgage AMT and non-AMT revenue bonds. The Clear Creek Independent School District, Texas, is set to price $108.7MM of unlimited tax school building bonds. The Unified School District No. 233, Johnson County, Kansas, is set to price $89.7MM of taxable general obligation refunding bonds, rated AA by S&P.

On Thursday the San Diego Unified School District plans to price $113.7MM of dedicated unlimited ad valorem property tax GO refunding bonds. The deal is rated Aa2 by Moody’s and Triple-A by S&P and Fitch. Also, on Thursday and staying in California the Sierra Joint Community College District, Placer, El Dorado and Sacramento Counties California, is set to price $970.0MM of GO bonds on Thursday. The deal is rated Aa1 by Moody’s and AA by S&P. Finally, the San Mateo Union High School District, California, plans to offer $96.2MM of GO bonds. The deal is rated Aaa by Moody’s.


Municipal Bond Funds Posted Inflows for an 14th Week in a Row

Investors in municipal bond put cash into funds for a 14th week in a row, as tax-exempt weekly reporting funds experienced inflows of $2.64B in the latest week, after experiencing inflows of $1.58B the week prior. Excluding exchange-traded funds, conventional municipal-bond funds took in the second-highest weekly amount of cash at $2.27B.


Demand in the Bank Qualified (BQ) Market Remains Strong

BQ participants continue to be focused on both BQ and general market (GM) new-issue offerings to fill their needs, as well as GM secondary market offerings, as BQ secondary market offerings are just about non-existent. This significant demand is being driven in large part to investors having to replace rolloffs due to continued strong redemption activity. Larger BQ participants (in particular C-Corps), continue to find attractive opportunities, both in size and structure in general market paper maturing in 15-years and longer, due in part to the lower tax rates from tax reform, attractive spreads, and lower costs of funds currently.

We encourage participants to continue to utilize extension swaps, to pick up more yield with little to no drop-off in credit quality, as well as to continue to review their portfolio’s and look to sell odd lots, replace distressed credits and sell lower coupons (e.g. 2%) with long finals to alleviate price volatility in the portfolio.  Week-over-week, BQ spreads were mixed, as the spread on the one-year maturity was unchanged, while the spreads on the two, three, five, 10-, 15-, and 30-year maturities all tightened, with largest tightening occurring in the 10-year maturity, 11 bps.


Daily Overview of the General Market for the Week Ending February 12th 

Last Monday municipals prices were steady, as the first of the trading week’s $8.23B in new-issue long-term debt was offered. On the day, the yields on the two-, 10-, and 30-year GO bonds were unchanged, according to the final read of the MMD Triple-A Scale.

Prices on U.S. Treasurys were mixed on Monday, as U.S. Stock prices rose for the session, as investors remained optimist over another round of fiscal stimulus out of Washington. The Dow finished up 238 points, or 0.8%, while the S&P was up 0.7% and the NASDAQ was up 1.0%. On the day, the yield on the two-year maturity rose two bps, while the yield on the 10-year maturity was unchanged and the yield on the 30-year maturity fell one bp. The 10-year municipal-to-Treasury ratio was unchanged on Monday from last Friday’s level of 61.3%, while the 30-year municipal-to-Treasury bumped up to 70.4% on Monday from Last Friday’s level of 70.1%.

Last Tuesday municipals prices strengthened across the curve, as several new-issue offerings came to market including two competitive offerings of various purpose GO’s from the State of Washington, totaling $518.0MM, and two competitive offerings of motor vehicle fuel tax and vehicle-related fees GOs also  from the State of Washington, totaling $344.3MM. On the day, the yields on the two-, 10-, and 30- year GO bonds each fell two bps, according to the final read of the MMD Triple-A Scale.

Prices on U.S. Treasurys were mixed on Tuesday, as were U.S. stock prices, with the S&P 500 and Dow ending a six-session winning streak while the NASDAQ powered to a record high. The Dow finished down 10 points, or less than 0.1%, while the S&P was also down 0.1% and the NASDAQ was up 0.1%. On the day, the yield on the two-year maturity was unchanged, while the yields on the 10- and 30-year maturities each fell one bp. The 10-year municipal-to-Treasury ratio fell to 60.2% on Tuesday from Monday’s level of 61.3%, while the 30-year municipal-to-Treasury fell to 69.7% on Tuesday from Monday’s level of 70.4%.

Last Wednesday municipals prices were mixed, as a handful of new deals were priced including the repricing of the $507.8MM Queens Baseball Stadium Project PILOT refunding bonds for the New York City Industrial Development Agency, which resulted in as much as 17 bps swing lower in yield from a preliminary pricing wire. On the day, the yield on the two-year GO bond was unchanged, while the yields on the 10- and 30-year GO bonds each fell by two bps, according to the final read of the MMD Triple-A Scale.

Prices on U.S. Treasurys were also mixed on Wednesday, as were U.S. stock prices. The Dow finished up 62 points or 0.2%, while the S&P was barely down at under 0.1% and the NASDAQ was down 0.3%. On the day, the two-year maturity was unchanged, while the yields on the 10- and 30-year maturities each fell three bps. The 10-year municipal-to-Treasury ratio slipped to 60.0% on Wednesday from Tuesday’s level of 60.2%, while the 30-year municipal-to-Treasury ratio just bumped up to 69.8% on Wednesday from Tuesday’s level of 69.7%.

Last Thursday municipals prices were steady, as the last of the week’s new-issue offerings came to market including the Maryland University System’s offerings of  $230.0MM of auxiliary facility and tuition tax-exempt refunding revenue bonds and the $108.0MM offering auxiliary facility and tuition taxable refunding revenue bonds. On the day, the yields on the two-, 10-, and 30-year GO bonds were unchanged, according to the final read of the MMD Triple-A Scale.

U.S. Treasury prices were mixed on Thursday, as were prices on U.S. Stocks for the session. The Dow was barely down at 0.02% or 7 points, while the S&P was up 0.2% and the NASDAQ was up 0.4%. On the day, the yield on the two-year maturity was unchanged, while the yield on the 10-year maturity rose one bp and the yield on the 30-year maturity rose two bps. The 10-year municipal-to-Treasury ratio fell to 59.5% on Thursday from Wednesday’s level of 60.0%, while the 30-year municipal-to-Treasury ratio fell to 69.1% on Thursday from Wednesday’s level of 69.8%.

Last Friday municipal prices were steady, as market participants started looking ahead to the $5.67B in expected new-issue offerings next week. On the day, the yields on the two-, 10-, and 30-year GO bonds were unchanged, according to the final read of the MMD Triple-A Scale.

U.S. Treasury prices were mixed on Friday, as U.S. stocks prices rose for the session. The Dow finished up 28 points, or 0.1%, while the S&P was up 0.5% and the NASDAQ was also up 0.5%. On the day, the yield on the two-year maturity was unchanged, while the yield on the 10-year maturity rose four bps and the yield on the 30-year maturity rose seven bps. The 10-year municipal-to-Treasury ratio fell to 57.5% on Friday from Thursday’s level of 59.5%, while the 30-year municipal-to-Treasury fell to 66.7% on Friday from Thursday’s level of 69.1%.





Dennis Porcaro

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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