New volume will shrink to just under $1 billion in the primary market this week for the arrival of the third quarter and July 1 reinvestment season. Several deals continue to be on hold afterlast week’s roller coaster ride -- even though the municipal market has since regained about half of the nearly 60 basis points it gave up during the turbulence.
Traders expressed relief on Friday as the benchmark general obligation scale in 2043 ended at a TK%, according to Municipal Market Data, and they looked forward to this week’s breather as issuance is expected to fall to an estimated $991 million, according to Ipreo LLC and The Bond Buyer.
“Next week should be slow with the holiday; doubt it moves much in either direction,” said Scott Braser, a municipal bond trader at Oberweis Securities in Lisle, Il.
A $332 million Metropolitan Transportation Authority revenue sale, the largest long-term deal planned for this week, is to be offered to retail investors Monday and institutions on Tuesday. A $120.5 million GO refunding from the Mount San Antonio Community College District is the second-biggest.
The largest deal short-term deal is a competitive, $500 million Colorado tax and revenue anticipation note offering Monday. Such short-term deals are omited from Ipreo and The Bond Buyer’s estimated weekly volume.
Rick Cahill, managing director at Herbert J. Sims & Co. said with many market participants on vacation, the combination of low volume and the arrival of billions of dollars in July coupons should lead to a steady market next week.
Others said it remains to be seen whether investors returning from the holiday will reinvest their July proceeds given the losses many of them will see on their June investment statements.
“I think munis are attractive, but the sentiment is that rates are rising,” said Dave Manges, municipal trading manager at BNY Mellon Capital Markets. “Whether they have risen enough to bring new money in is tough to know.
Manges said next week’s trading will be a “non-event” given the lack deal volume, which compares to a revised $6.10 billion of issuance last week, according to Thomson Reuters. Yields rose to 4.13% on June 24 from 3.58% on June 19, while municipal to Treasury yield ratios catapulted to over 100% for the first time in over two years, analysts said. Braser said retail investors slowly started resurfacing last Tuesday. After that the market began building strength and yields rallied some 30 basis points from highs earlier in the week, according to MMD.
