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Muni Monthly for July 2022
Patrick Luby - Senior Municipals Strategist
John Ceffalio - Senior Municipals Analyst
Sam Berzok - Municipals Analyst
EXECUTIVE SUMMARY
- The Muni Index closed lower in June, posting a total return of -1.9%. The Muni High Yield Index got crushed, returning -2.5%; the Broad Taxable Muni Index also closed lower, earning -0.5%.
- The investment grade credit indices all widened in June, as did most of the sector indices.
- The market probably would have fared even worse if not for the $51 bn of maturing and called bond principal that was returned to investors in June.
- New Issue Supply totaled $33 bn in June, down 5% from May and down 32% from May 2021. YTD volume is down 11%. We have lowered our estimate for this year’s total new issue volume to $395 bn.
- Thanks to the deceleration in issuance and the increase in redemptions, net supply in June was -$18 bn, the lowest total since July 2018. We estimate that net supply for July will be -$13 bn.
- Yields have risen, spreads have widened and the pace of redemption flows will be slowing down in the coming months. What does that portend for the market in the second half of the year?
The YTW of the ICE Muni Index closed at 3.28% at the end of June, 33 bp higher than where it was on May 31 (2.95%). YTD the YTW is up by 216 bp! (It closed at 1.12% on December 31, 2021.)
The price return for the ICE Muni Index was positive in each of the last three years, but from 2011 though 2021, the average return as been -0.49%. Only March has had a lower average monthly price return (-0.75%).
During that time, July’s price return has averaged +0.25%, August’s has been slightly negative (-0.02%).
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