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Munichain Market Perspective #11

By Matthew Gerstenfeld
Market Perspective
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New issue supply is slated to rise sharply this week, with the majority of negotiated volume flowing from the state of Massachusetts. Boosted issuance over the week signifies a higher degree of confidence among issuers and underwriters seeking to price new issue offerings across a turbulent primary landscape.

Retail and institutional investors continue to cautiously deploy capital across various credits given the sudden shifts in rates and economic developments. Last week’s Nonfarm payroll report posted a gain of +372k jobs for the month of June with the national unemployment rate unchanged at 3.6%. Despite the strong labor report, participants anticipate further rate hikes on behalf of the Fed to ease costs for goods and services nationwide.

US treasuries bear flattened over the course of last week’s session with the 5YR tenor widening by +31 basis points to 3.13%, settling slightly above the 10YR which shifted to 3.09%. Muni benchmarks outperformed the trajectory of treasuries, tightening by 5-12 basis points with the greatest bump noted in the intermediate range of the curve.

Muni/UST ratios adjusted to last week’s polar rate activity with the 10YR and 30YR ratio hovering at 81% and 92% respectively, marking a significant shift in levels compared to the week prior. Looking ahead, market players will be directing attention towards greater issuer demand to price deals and strategically minimize borrowing rates during the summer season.


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