Supply in the municipal market will remain fairly steady heading into the official end of summer as a manageable slate of new issuance - anchored by a $750 million Texas transportation offering - prepares to enter the market in the upcoming holiday-shortened week.
According to Ipreo LLC and The Bond Buyer, municipalities will sell an estimated $3.70 billion of total new volume, compared to the revised $3.32 billion that was priced in the past week as reported by Thomson Reuters.
Traders and underwriters were already getting into a holiday mode on Thursday, as no major deals were priced, and on Friday were focusing on the planned early close for the bond markets, followed by the three-day Labor Day weekend.
"It doesn't surprise me that volume will continue to be on the low side next week with a holiday jammed in," said a New York trader on Friday afternoon.
He said while the upcoming week's slate is skimpy, issuance for later in September is expected to be "fairly decent" and could impact the municipal market with some weakness.
In addition, he said Friday's U.S. employment report for August, which indicated that nonfarm payrolls posted a 173,000 gain and up-revisions to prior months totaled a 44,000 increase, gave further expectation and market support for an interest rate hike by the Federal Reserve Board at its September 17 policy meeting.
"The idea that there might be a rate hike is more possible now with today's data," he said.
The market showed signs of heading into a holiday mode as early as Thursday's close when the yield on the 10-year benchmark municipal general obligation bond ended steady at 2.19%, while the yield on the 30-year GO was one basis point stronger at 3.13%, according to Municipal Market Data's final triple-A scale.
Upcoming negotiated volume is estimated at $3.13 billion in the week ahead, down from a revised $2.38 billion in the past week.
Volume in the competitive market will decline to $575.1 million in the coming week, after a revised $940.8 million entered the market in the past week.
The North Texas Tollway Authority will garner most of the attention after Monday's holiday as Barclays Capital plans to price the $750 million revenue refunding - the week's largest offering -- on Thursday with an all-serial structure. Moody's Investors Service lifted the senior-lien rating to A1 from A2 Aug. 27, while Standard & Poor's raised its rating to A from A-minus Aug. 28, both with stable outlooks.
The Texas toll deal is one of two larger Texas deals making an appearance in the coming week.
The New York trader said the deal should be well received given its name recognition as a frequent and well known issuer.
He noted that the $1 billion of New York State Dormitory Authority general purpose state personal income tax revenue bonds priced by JPMorgan Securities on Tuesday were trading up in the secondary market on Friday afternoon.
At the official pricing, bonds yielded from 0.50% with a 3% coupon in 2017 to 3.70% with a 3.50% coupon in 2037.
Besides the Texas tollway financing, other deals pricing in the coming week include a four-pronged deal from Austin, Tex., totaling $317.25 million and slated for pricing by Jefferies & Co. on Wednesday with a serial structure.
In the short-term market, meanwhile, a $500 million sale of bond anticipation notes from the New York Metropolitan Transportation Authority is expected to be priced competitively on Sept. 9.
