Weekly Muni Commentary
October 7th, 2024 | Q4
Daily Avg. Offering Line Items
Daily Avg. Notional Offered
CUSIPs Offered on TWD
Dealers Offering on TWD
Buy/Sell Ratio Trend
Bid Wanted Flow
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Happy Monday!
Tradeweb Direct wrapped up Q3 with a strong September where municipal trading outpaced the broader market, driven by strong retail demand. MSRB Average Daily Volumes (ADV) closed flat year-over-year in September, while Tradeweb Direct saw an approximate 8% increase in ADV over the same period. The growth was largely fueled by robust retail demand, with retail municipal trading volumes increasing roughly 10% in September and 15% overall for Q3 compared to last year. Fund flows have followed the broader trend, with municipal mutual funds recording $1.87B in inflows last week, setting a new high for 2024, according to LSEG Lipper. This marks the 14th consecutive week of inflows, signaling sustained appetite for investors.
The broader fixed income market swiftly reacted to Friday’s strong jobs data, pushing yields higher across the curve. The 10y edged closer to 4%, with notable increases in the 2y, 5y, and 10y yields of 36bp, 30bp, and 22bp week-over-week, respectively. Municipals, however, lagged the larger move in treasuries which led to a softening in ratios as investors stepped back to evaluate the ongoing rate environment. Friday’s Nonfarm Payroll report revealed 254,000 new jobs added in September - well above the consensus estimate of 150,000. The strong job growth suggests labor markets may be stronger than initially expected after last month’s “surprise” 50bp rate cut by the Federal Reserve. Following the jobs report, expectations for November’s Fed meeting have shifted dramatically. As of Friday, CME futures indicated a 97% probability of a 25bp rate cut in the upcoming November Fed Meeting, a sharp increase from the 46% probability the week prior. CPI and PPI inflation data looms for the week ahead.
The beginning of Q4 on Tuesday led to a natural uptick in trading activity among Tradeweb’s retail and institutional segments as investors looked to put new money to work in the market. The retail muni/buy sell ratio hit a multi-month high of 3.3, with institutional increasing to 1.3 (vs 2.5 and 0.7 the week prior, respectively). This coincides with a drastic decrease in BW items and volume across all of Tradeweb’s dealer, institutional, and retail businesses. The new issue calendar for the week ahead is approximately $9B, led by: Connecticut GO ($560mm), NYC GO (txbl, $1.4B), Philadelphia PA Children’s Hospital ($550mm), Clark County NV School District ($400mm), and TN Nashville & Davidson ($785mm).
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Proportion of muni buys vs. sells by client type on the TWD platform.
For the avoidance of doubt, a ratio < 1 indicates net selling activity.
Relative number of bid wanted requests sent to the TWD platform by client type, indexed to the first month in the time series.
Number of municipal inventory line items available on the TWD platform daily by liquidity provider type.
Municipal notional (000s) offered on the TWD platform daily by liquidity provider type.
Number of unique municipal CUSIPs offered daily on the TWD platform daily.
Number of unique liquidity providers offering municipals daily.
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