August 1, 2017

Municipal bond retreated and rates increased on the heels of a weaker Treasury market. The U.S. House will review reclassifying municipal debt as a high quality liquid asset (HQLA), after the bill passed committee with bipartisan support. The HQLA determination is important for banks with more than $50 billion in assets, as this distinction allows muni holdings to be counted toward liquidity coverage ratio requirements. The 10 and 30 year MMD indices closed last week at 1.95% and 2.74%, up 5 bps on each scale from the prior week. As of Friday, the percent of municipals to treasuries was 85.15% for the 10 year maturity and 94.61% for the 30 year maturity. Current municipal-to-taxable ratios likely amplify the impact of any bearish Treasury market moves, because munis ratios today show muni bonds as "expensive" compared to historical levels. Treasury rates were also up with the 10 year treasury at 2.290% and the 30 year treasury at 2.896%, up 5.2 bps and 8.7 bps from the prior week.

The only single family issuer in the market the last week was the Connecticut Housing Finance Authority with two series of bonds, one of which used a traditional housing structure including a premium priced PAC. The multifamily issues in the market last few week included Maryland Department of Housing and Community Development, Syracuse Housing Authority (NY) and Colorado Housing and Finance Authority. Details for all of these transactions are included in this week's Roundup.

Economic news this week includes Pending Home Sales, Personal Income & Outlays, Construction Spending, MBA Purchase Applications, ADP Employment Change, Jobless Claims, Bloomberg Consumer Confidence, Factory Orders, Employment Situation, and International Trade. Municipal new issue supply will rebound from a slow last week of July, with approximately $7.5 billion in new deals priced for investors. This week the housing deals on the calendar include the following:

Newport News Redevelopment and Housing Authority, CA

Details for this and any other housing transactions along with market news will be included in next week's Roundup.