As Hefty Supply Slate Looms, Munis End Flat

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Top-rated municipal bonds finished unchanged on Monday, traders said, ahead of another huge issuance week with about $16.5 billion of volume ready to pass through the supply pipeline.

 

Secondary Market

The yield on the 10-year benchmark muni general obligation on Monday was flat from 1.72% on Friday, while the yield on the 30-year was unchanged at 2.54%, according to a read of Municipal Market Data's triple-A scale.

U.S. Treasuries were weaker on Monday. The yield on the two-year rose to 0.84% from 0.82% on Friday, the 10-year Treasury yield gained to 1.76% from 1.73% and the yield on the 30-year Treasury bond increased to 2.52% from 2.48%.

The 10-year muni to Treasury ratio was calculated at 97.7% on Monday compared to 99.1% on Friday, while the 30-year muni to Treasury ratio stood at 101.0% versus 102.0%, according to MMD.

 

Prior Week's Actively Traded Issues

Revenue bonds comprised 57.99% of new issuance in the week ended Oct. 21, up from 57.85% in the previous week, according to Markit. General obligation bonds comprised 36.60% of total issuance, down from 36.63%, while taxable bonds made up 5.41%, down from 5.52%.

Some of the most actively traded issues by type were from Connecticut, New York and Pennsylvania. In the GO bond sector, the Connecticut 3.375s of 2036 were traded 63 times. In the revenue bond sector, the New York Metropolitan Transportation Authority 3s of 2032 were traded 46 times. And in the taxable bond sector, the Commonwealth Financing Authority of Pennsylvania 4.144s of 2038 were traded 49 times.

 

Previous Week's Top Underwriters

The top negotiated and competitive underwriters of last week included Citigroup, Bank of America Merrill Lynch, Morgan Stanley, Wells Fargo Securities and RBC Capital Markets, according to Thomson Reuters data. In the week of Oct. 16-Oct. 22, Citi underwrote $3.38 billion, BAML $2.83 billion, Morgan Stanley $2.01 billion, Wells Fargo $1.74 billion and RBC $1.29 billion.

 

Primary Market

Volume for the week is estimated $16.5 billion, with the upcoming slate composed of $13.71 billion of negotiated deals and $2.79 billion of competitive sales.

Most of the issuance is set to price on Wednesday, with five negotiated deals larger than $200 million and five competitive sales of greater than $100 million on the slate.

Action gets started on Tuesday when Bank of America Merrill Lynch is expected to price a $429 million deal for a Piedmont Healthcare project in Georgia.

The sale consists of the Fulton County Development Authority's $195.54 million of Series 2016A revenue bonds, the Hospital Authority of Clarke County's $185.15 million of Series 2016A revenue anticipation certificates and the Hospital Authority of Fayette County's $48.74 million of Series 2016A revenue anticipation certificates.

The deal is rated Aa3 by Moody's Investors Service and AA-minus by S&P Global Ratings.

Wells Fargo Securities is expected to price the Virginia Transportation Board's $317.13 million of federal transportation grant anticipation notes on Tuesday. The deal is rated AA-plus by Fitch Ratings.

RBC Capital Markets is on the docket to price Butler County, Ohio's $210 million of Series 2016 hospital facilities revenue bonds for UC Health on Tuesday. The deal is rated A2 by Moody's and A by S&P.

Citigroup is expected to price the Salem Hospital Facilities Authority, Ore.'s $195 million of Series 2016A revenue refunding bonds for Salem Health projects. The deal is rated A-plus by S&P and Fitch.

In the competitive arena on Tuesday, the city and county of Denver, Colo., will be selling $115 million of Series 2016 $429 million deal for the Piedmont Healthcare Inc. project. The deal is Aa1 by Moody's, triple-A by S&P and Fitch Ratings.

The issuer last sold comparable bonds competitively on Jan. 11. 2012, when JPMorgan Securities won $50.43 million of Series 2012 $429 million deal for the Piedmont Healthcare Inc. project with a true interest cost of 2.26%.

 

Janney Sees October Issuance Surge

Janney said that municipal new issue volume is on track to set records with October looking to be the busiest month ever and 2016 shaping up to be the highest volume year.

The firm sees a continued surge in issuance, dominated by refundings, in the run up to the Dec. 14 meeting of the Federal Open Market Committee.

"The annual volume record of $433 billion, set in 2010, stimulated by [Bond America Bonds] infused supply, is likely to be surpassed this year," Alan Schankel, Janney Managing Director, wrote in a market comment on Monday. "If the final week's calendar remains unchanged, October is on track to exceed $50 billion in volume, a level topped only once, in June 2008."

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