Market participants predict this week's increased issuance will be quickly bought-up.
Issuance this week is expected to total $7.5 billion, the largest amount scheduled since $11.4 during the week that ended March 14, when $3.5 billion of Puerto Rico general obligation bonds and $1.8 billion of California GOs came to market. This week's issuance is $5.4 billion more than the $2.1 billion that came last week when the market was only open four days due to the holiday, according to data provided by Ipreo and The Bond Buyer.
"My instinct is that the additional supply this week will be gobbled up without a problem," a trader in New York said.
Volume fell 26% in the first quarter from a year earlier to $62.5 billion. Weekly issuance has generally hovered between $3 billion and $4 billion.
"Following weeks of low supply, the municipal market is poised for some action," Alan Schankel, managing director at Janney Capital Markets, said in a report released on Monday.
While the trader in New York said that supply will be up this week, he does not think supply will remain high in the oncoming months.
"After April, then there is May, June, and July where a lot of bonds reach maturity, and when a lot of bonds are called," he said. "Bonds will be hard to find, but demand will be strong. I think supply will be tight for the next six months."
There are no deals over $100 million slated to enter either the negotiated or competitive market Monday.
Wells Fargo Securities will bring $750 million of general obligation bonds to market Thursday for the state of Illinois, the largest negotiated deal of the week. The bonds will mature serially from 2015 to 2039 and are rated A3 by Moody's Investor Services and A-minus by both Standard and Poor's and Fitch Ratings.
The state of California will issue a two-part deal totaling $750 million of general obligation bonds on Tuesday, the largest competitive deal of the week. The deal consists of $575 million of tax-exempt GOs and $175 million of taxable GOs. The issue is rated A1 by Moody's, and A by both S&P and Fitch.
Monday's muni yields have not yet been posted by Municipal Market Data.
Treasuries were mixed Monday morning, as the 30-year yield climbed three basis points to 3.49% and the 10-year benchmark jumped two basis points to 2.71%. The two-year notes slipped one basis point to 0.41%.
