The municipal market was mostly flat Monday amid somewhat light secondary trading activity and declining Treasury yields.
“We’re pretty quiet,” a trader in San Francisco said. “There’s a bit of an uptick in Treasuries today, and a lot of people in our market are just sitting on the sidelines for now. I’d say we’re just unchanged.”
The Municipal Market Data triple-A scale yielded 2.36% in 10 years Monday, matching Friday, while the 20-year scale also remained flat, at 3.36%. The scale for 30-year debt yielded 3.77%, even with Friday.
Monday’s triple-A muni scale in 10 years was at 94.8% of comparable Treasuries and 30-year munis were at 96.2%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 106.8% of the comparable London Interbank Offered Rate.
The Treasury market was mostly firmer Monday. The benchmark 10-year note finished at 2.49% after opening at 2.56%.
The 30-year bond finished at 3.93% after opening at 3.98%. The two-year note finished at 0.36% after also opening at 0.36%.
Volume will continue to level off from the highs of two weeks ago as $7.97 billion of municipal debt gets ready to sell this week, according to Ipreo LLC and The Bond Buyer.
That figure is higher than last week’s revised $6.10 billion — up from the $5.93 billion originally estimated — but not as significant as the $11.05 billion that sold in the week of Oct. 4, according to Thomson Reuters.
“It’s not the biggest calendar we’ve seen over the last month or so, but there will still be a good deal of interest in the new issues this week,” a trader in New York said. “Today, though, a lot of people were hanging back, waiting to see how we receive the supply as the week moves forward.”
This week, Mississippi leads the way in the primary with its $651 million taxable GO sale in the negotiated market — $371.7 million of which is structured as Series 2010F taxable, direct-pay Build America Bonds.
That portion of the deal — as well as a $45 million series of recovery zone economic development bonds — is being priced by Morgan Stanley on Thursday. The deal’s preliminary official statement indicates bullet maturities in 2034 and 2035 on the RZED bonds, and serial bonds 2023 to 2034 on the BAB portion as the tentative structures.
The largest deal of the week also includes $233.9 million of traditional taxable GO debt expected to be priced for retail investors on Wednesday by Bank of America Merrill Lynch and for institutions on Thursday.
The bonds are rated Aa2 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.
In the competitive market, the University of Massachusetts Building Authority will sell $568 million of debt Thursday.
The deal consists of $126.3 million of Series 2010-1 bonds maturing from 2011 to 2020, $438.25 million of Series 2010-2 taxable BABs maturing from 2021 to 2040, and $3 million of Series 2010-3 traditional taxable bonds maturing from 2011 to 2040.
The bonds are rated Aa2 by Moody’s, and AA by Fitch.
The New York Health and Hospitals Corp. will come to market with $512.6 million of Series 2010A health system revenue bonds, which will be priced for institutional investors by JPMorgan Tuesday after being offered to retail Monday.
The bonds mature in 2011 and from 2013 through 2025, with a split term maturity in 2030.
Yields during the retail order period range from 1.32% with a 2% coupon in 2013 to 4.26% with a 4.125% coupon in 2030. Bonds maturing in 2011 will be decided via sealed bid.
Bonds maturing from 2022 through 2024 and a portion of bonds maturing in 2030 were not offered during the retail order period.
The bonds, which are callable at par in 2020, are rated Aa3 by Moody’s and A-plus by Standard & Poor’s and Fitch.
Meanwhile, gilt-edged Delaware will sell nearly $300 million of GO debt, including $175.2 million of taxable BABs and qualified school construction bonds to help finance capital projects.
The transaction includes $40 million of tax-exempt debt for an advance refunding, but market conditions will dictate whether the state will issue the bonds.
JPMorgan will kick off one day of retail orders Tuesday for $123.4 million of tax-exempt Series 2010B bonds followed by institutional pricing on Wednesday. Delaware will then offer $115.7 million of Series 2010C BABs and $59.5 million of Series 2010D QSCBs via competitive bid on Thursday.
In a research note, Alan Schankel, director of fixed-income research at Janney Capital Markets, wrote there is sense of “wait-and-see caution” in the municipal market in the run-up to the Nov. 2 election and Nov. 3 meeting of the Federal Open Market Committee, despite the solid new-issue calendar.
“Presumably, with the election settled, discussion of BABs extension as well as legislation to extend Bush-era tax cuts will resume,” he wrote.
“Whether and how these issues are dealt with by a lame-duck Congress, or the new 112th Congress with its likely new political balance, remains to be seen. We expect a strong pace of BABs supply during the remainder of 2010, as issuers lock in the 35% interest rate subsidy which will be either reduced or eliminated.”
In economic data released Monday, industrial production fell 0.2% in September, while capacity utilization was 74.7% for the month. Economists surveyed by Thomson Reuters expected a 0.2% increase in industrial production and capacity utilization of 74.8%.
