Municipal market update

Demand held up through the heaviest new-issue week of the year, roughly $17.4 billion of tax-exempt supply, as August principal and interest payments and another week of fund inflows went to work in both the primary and secondary markets. New issues were repriced with meaningful bumps across the board, and secondary trading kept a positive bias each afternoon. With municipals gaining more than Treasuries inside 15 years, municipal-to-Treasury ratios became richer on the week, ending near 70% in 10 years and 85% in 30 years.

The July employment report was the week's headline event. Nonfarm payrolls fell 23,000 against expectations of an 80,000 gain, with private payrolls adding just 30,000 and government payrolls shedding 53,000. The unemployment rate ticked down to 4.1%.

Energy remained a swing factor. Oil fell more than 5% early in the week on optimism for a diplomatic resolution in the Middle East, sending equities to record highs and Treasuries 5 to 7 basis points stronger. That optimism faded by midweek and crude reversed roughly 3% higher on Thursday, taking Treasuries and stocks with it. With shipping routes through the Strait of Hormuz still unsettled, energy prices remain a live input to the inflation outlook.

Municipal technicals strengthened further. Lipper reported inflows of $1.3 billion for the week ending August 5, up from $761 million the prior week, and high-yield municipal funds switched to inflows of $530.3 million after outflows of $300 million. The SIFMA Municipal Swap Index reset to 1.71%. Looking ahead, next week's tax-exempt calendar drops to $11.77 billion from $17.4 billion, though it remains above the year-to-date weekly average of $10.365 billion.

Cabrera will serve as Senior Manager on Schertz-Cibolo-Universal City Independent School District’s $100.0 million Variable Rate Unlimited Tax School Building Bonds, as Co-Senior Manager on the County of Cook’s $246.2 million General Obligation Refunding Bonds, and as Co-Manager on the City of Atlanta’s $1.1 billion Airport General Revenue Bonds (AMT / Non-AMT) (Green Bonds) and the Los Angeles County Sanitation Districts Financing Authority’s $448.3 million Revenue Bonds (Joint Outfall System). The three largest transactions of this week include the following:

• $$1.5 billion California Health Facilities Financing Authority Revenue Bonds (Sutter Health) (Fixed Mode)

• $1.1 billion City of Atlanta Airport General Revenue Bonds (AMT / Non-AMT) (Green Bonds)

• $552 million Miami-Dade County