Market Set for $8.9B Slate in Holiday-Shortened Week

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Municipal bond traders on Tuesday will be looking at a short-holiday week of sales jammed into a three-day window. Almost $9 billion of new issues are slated for sale in this new week, which is starting after the market was closed on Monday for the Rev. Martin Luther King, Jr. holiday.

 

Secondary Market

U.S. Treasuries were stronger on Tuesday. The yield on the two-year Treasury dropped to 1.15% from 1.19% on Friday, while the 10-year Treasury yield decreased to 2.35% from 2.38%, and the yield on the 30-year Treasury bond declined to 2.92% from 2.98%.

Top shelf municipal bonds finished weaker on Friday. The 10-year benchmark muni general obligation yield rose one basis point to 2.16% from 2.15% on Thursday, while the yield on the 30-year GO increased three basis points to 2.91% from 2.88%, according to the final read of Municipal Market Data's triple-A scale.

On Friday, the 10-year muni to Treasury ratio was calculated at 90.4% compared to 91.2% on Thursday, while the 30-year muni to Treasury ratio stood at 97.4%, versus 97.5%, according to MMD.

 

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 37,195 trades on Friday on volume of $11.06 billion.

 

Prior Week's Actively Traded Issues

Revenue bonds comprised 58.64% of new issuance in the week ended Jan. 13, down from 58.8703% in the previous week, according to Markit. General obligation bonds comprised 36.07% of total issuance, down from 36.15%, while taxable bonds made up 5.29%, up from 4.98%.

Some of the most actively traded issues by type in the week were from Texas, California and Pennsylvania.

In the GO bond sector, the Ysleta ISD, Texas, 5s of 2046 were traded 30 times. In the revenue bond sector, the Los Angeles Department of Airport 5s of 2041 were traded 55 times. And in the taxable bond sector, the University of Pittsburgh 3.646s of 2036 were traded 32 times.

 

Previous Week's Top Underwriters

The top negotiated and competitive underwriters of last week included Goldman Sachs, Bank of America Merrill Lynch, Citigroup, RBC Capital Markets and Jefferies, according to Thomson Reuters data.

In the week of Jan. 8 to Jan. 14, Goldman underwrote $1.78 billion, BAML $1.47 billion, Citi $1.40 billion, RBC $1.06 billion and Jefferies $706.8 million.

 

Primary Market

Ipreo estimates volume for the week at $8.9 billion, up from a revised $8.2 billion of supply in the prior week, according to updated figures from Thomson Reuters. The calendar is composed of about $7.4 billion of negotiated deals and around $1.5 billion of competitive sales.

Goldman Sachs is expected to price the city of Chicago's $1.16 billion of taxable and tax-exempt general obligation bonds.

The underwriter said the sale will be on Wednesday or Thursday, noting that the taxable part and tax-exempts will come on separate days.

The deal is rated BBB-plus by S&P Global Ratings and Kroll Bond Rating Agency and BBB-minus by Fitch Ratings.

Institutional players will be looking at yield and balancing it with risk while retail will likely remain on the sidelines.

Michael Pietronico of Miller Tabak Asset Management said retail investors may shy away from the loan due to its much publicized financial difficulties.

"The demand will be adequate to get the Chicago GO deal done as we suspect institutional demand will be the main driver," he said.

It's rare that broker-dealers have approval for distribution of a high-yield credit like Chicago to retail investors.

"For anyone looking for yield, absolutely, I can see a variety of buyers," a Chicago trader said, "but at the end of the day Illinois is not a good retail state to begin with."

On Thursday, Barclays Capital is scheduled to price the Texas Transportation Commission's $800 million of state GO mobility fund refunding bonds. The deal is rated triple-A by Moody's, S&P and Fitch.

RBC Capital Markets is slated to price the Los Angeles Department of Water and Power's $500 million of power system revenue bonds on Thursday, following a one-day retail order period. The deal is rated Aa2 by Moody's and AA-minus by S&P and Fitch.

In the competitive arena, the University of Houston Board of Regents will sell two offerings totaling $356.705 million on Thursday. There will be a taxable portion for $11.635 million and a $345.07 million tax exempt part. The deals are rated Aa2 by Moody's and AA by S&P.

 

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar increased $581.6 million to $14.28 billion on Tuesday. The total is comprised of $3.65 billion of competitive sales and $10.63 billion of negotiated deals.

 

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