Municipal Markets Weekly: Global Markets Strategy

研报英文原文证据摘录

Municipal Markets Weekly: Global Markets Strategy

curve is currently the richest portion within

the market based on year-to-date rate change and relative value vs. taxable fixed income.

The 10s/20s and 10s/30s curves are 2.1-2.2 sigma flatter than one-year averages.

• Next week’s massive calendar is expected to come in around ~$17.2bn tax-exempt (5th

highest on record), which, combined with the post-FOMC rise in rates, should likely

create a buyers’ market even as strong reinvestment capital arrives ($32bn over 1H

August marks the 2nd highest two-week stretch of the year).

• Together with elevated secondary trading, this should create opportunities to move the

needle on portfolio composition and pare weaker structures or declining credits.

• The market size of the prepay sector is now $125bn, with YTD supply ($26.6bn) rank-

ing it as the 2nd largest sector by volume. The sector now constitutes 5.9% of the entire

benchmark index (LMBITR). This weight grows to 11.3%, 10.8%, and 27.8%, respec-

tively, within Bloomberg 1-10 year Index, CA-only Index, and Intermediate CA

Index, respectively.

• Energy prepay sector trade volume spiked as tax loss harvesting rose in July. Howev-

er, we haven’t seen prepayment spreads widen, in contrast to the increase in corporate

bond spreads.

• At its peak, the spread difference between insurance-backed prepays and bank-

backed prepays reached 57bps. Spreads across prepays backed by banks, insur-

ance companies, and industrial companies have all tightened recently, with the dif-

ference now at 43bps.

• This week’s prepay sector trade count, across trade denominations, is about double the

full-year 2025 average. We also see evidence of growing SMA participation in the

near tripling of volume in trade size of $200k or less vs.