Muni Market Awaits New Issue Supply

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The municipal bond market will be awaiting the sale of several large deals in the primary on Tuesday as traders keep an eye on volatile bond yields.

Secondary Market

Treasury prices were lower on Tuesday, with the yield on the two-year Treasury note rising to 0.67% from 0.65% on Monday, while the 10-year yield rose to 2.25% from 2.23% and the 30-year yield increased to 2.96% from 2.94%.

Market trading was cautious as the Federal Open Market Committee meets to discuss monetary policy on Tuesday and Wednesday, with an announcement on interest rates set for Wednesday afternoon, although the thinking is no rate increase this time, but most likely at the next meeting in six weeks.

The yield on the 10-year benchmark muni general obligation on Monday fell two basis points to 2.18% from 2.20% on Friday, while the yield on the 30-year GO was off three basis points to 3.12% from 3.15%, according to the final read of Municipal Market Data's triple-A scale.

The 10-year muni to Treasury ratio was calculated on Monday at 95.8% versus 95.1% on Friday, while the 30-year muni to Treasury ratio stood at 105.0% compared to 105.3%, according to MMD.

Primary Market

Siebert Brandford Shank is set to price New York City's $750 million of Fiscal 2016 Series A&B general obligation bonds for retail investors.

Retail orders will be taken on Tuesday and Wednesday ahead of the institutional pricing on Thursday. The issue is rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.

In the competitive arena, the Virginia College Building Authority is selling $290 million of Series 2015D educational facilities revenue bonds under the 21st Century College and Equipment Program. The issue is rated Aa1 by Moody's and AA-plus by Fitch.

The last time the authority competitively sold comparable bonds was on May 1, 2014, when Bank of America Merrill Lynch won $27.99 million of Series 2014B educational facilities revenue refunding bonds with a TIC of 1.70%.

Also on Tuesday, Fort Worth, Texas, is selling $256 million of bonds in two separate sales, consisting of $128.39 million of Series 2015A general purpose refunding and improvement bonds and $127.63 million of Series 2015A water and sewer system revenue refunding and improvement bonds.

The general purpose bonds are rated Aa1 by Moody's and AA-plus by S&P and Fitch and the water bonds are rated Aa1 by Moody's and AA by S&P and Fitch.

The last time the city competitively sold comparable securities was on Aug. 14, 2012, when Robert W. Baird won $85.79 million of Series 2012 combination tax and revenue certificates of obligation with a TIC of 2.65% and on Sept. 14, 2010, when the city sold $45.87 million of Series 2010C water and sewer system revenue bonds to Wells Fargo Securities with a TIC of 3.35%.

In the negotiated sector, Citigroup is expected to price San Antonio, Texas' $379 million of tax-exempt general improvement and refunding combination tax and revenue certificates of obligation.

On Monday, Citi priced the $43.94 million taxable part of the San Antonio deal. The bonds were priced at par to yield from 0.88% in 2017 to 4.162% in 2035. The issue was rated triple-A by Moody's, S&P and Fitch.

Since 1995, the city of San Antonio has issued roughly $18.35 billion of debt. The years of 2010 and 2012 saw the most issuance with $1.55 billion and $2.06 billion, respectively. The Alamo city issued just $125 million and $86 million in 1995 and 1999, respectively.

MSRB Previous Session's Activity

The Municipal Securities Rulemaking Board reported 32,910 trades on Monday on volume of $5.349 billion.

The most active bond, based on the number of trades, was the Harris County, Texas, Cultural Education Facilities Finance Corp.'s Series 2015 Houston Methodist Hospital revenue bond 4s of 2045, which traded 105 times at an average price of 99.105, an average yield of 4.026%. The bonds were initially priced at 96.417 to yield 4.21%.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar increased $165.1 million to $11.91 billion on Tuesday. The total is comprised of $4.44 billion competitive sales and $7.48 billion of negotiated deals.

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