Muni Minute: Limited Supply & Strong Demand Sum Up the Primary

In the latest installment of Muni Minute we take a look at how recent events have come together that should create strong demand for municipals, which has not been lacking lately. It also helps that investors will get a nice variety of offerings in the scheduled calendar this week.

VOICE OVER: Even though muni primary volume will stand at a lackluster $4.5 billion this week, demand is expected to be strong for a variety of reasons. First, having the FOMC meeting over is good as it takes some of the uncertainty out of the market and the expected rate hike was well received. Secondly, the dealer inventories are pretty light and there's still cash on the sidelines so it should bode well for demand, according to a market source. "The Fed's outlook on inflation holding at 2% should also be a steadying influence for muni buyers and reinvestment will keep it involved," said another market source.

The fact that the calendar is a good mix from different regions, sectors and credits also helps. It's not always the case that the largest deal in terms of dollar amount is the deal on everyone's mind, but that looks to be the case this week. The New York State Environmental Facilities Corporation is scheduled to sell $594 million of top-rated state clean water and drinking water revolving fund revenue bonds. I'm Aaron Weitzman and this has been your Muni Minute.