Muni Market Ready for $6.4B of New Supply

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Municipal bond traders are set for the week's new issue calendar, which totals about $6.42 billion.

Upcoming bond volume is divided up into $5.66 billion of negotiated deals and $758.1 million of competitive sales.

Secondary Market

U.S. Treasuries were stronger on Monday. The yield on the two-year Treasury slipped to 0.83% from 0.84% on Friday, the 10-year Treasury yield fell to 1.59% from 1.63% and the yield on the 30-year Treasury bond decreased to 2.25% from 2.29%.

Top-shelf municipal bonds finished steady to weaker on Friday. The yield on the 10-year benchmark muni general obligation rose one basis point to 1.42% from 1.41% on Thursday, while the yield on the 30-year fell was steady from 2.12%, according to the final read of Municipal Market Data's triple-A scale.

The 10-year muni to Treasury ratio was calculated at 87.0% on Friday compared to 89.8% on Thursday, while the 30-year muni to Treasury ratio stood at 92.4% versus 93.8%, according to MMD.

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 30,872 trades on Friday on volume of $10.21 billion.

Prior Week's Actively Traded Issues

Revenue bonds comprised 50.02% of new issuance in the week ended Aug. 26, down from 51.04% in the previous week, according to Markit. General obligation bonds comprised 36.98% of total issuance, down from 40.04%, while taxable bonds made up 12.50%, up from 8.92%.

Some of the most actively traded issues by type were from Arizona, California and Illinois issuers, In the GO bond sector, the Phoenix 5s of 2026 were traded 32 times. In the revenue bond sector, the California HFFA 3s of 2047 were traded 77 times. And in the taxable bond sector, the Illinois 5.1s of 2033 were traded 41 times.

Previous Week's Top Underwriters

The top negotiated and competitive underwriters of last week included Citigroup, Bank of America Merrill Lynch, Goldman Sachs, JPMorgan Securities and Barclays Capital Markets, according to Thomson Reuters data. In the week of Aug. 21-Aug. 27, Citi underwrote $1.2 billion, BAML $1.1 billion, Goldman $853 million, JPMorgan $727 million and Barclays $695 million.

Primary Market

One deal in particular will be the talk of the market this week – California's $2.7 billion of general obligation bonds. The deal marks the second time this year that the Golden State has issued bonds near that amount.

JPMorgan Securities is expected to price the state of California's $2.7 billion of various purpose GO bonds on Tuesday, following a one-day retail order period.

The majority of the offering is going to be refundings, with $615 million of new money. The deal is expected to mature serially from 2017 through 2037 and include a term in 2046.

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

Barclays is scheduled to run the books on the next largest deal, $542.125 million of senior airport revenue refunding non-alternative minimum tax and subordinate airport revenue refunding non-AMT bonds for the Minneapolis-St. Paul Metropolitan Airports Commission on Wednesday.

The senior bonds are rated AA-minus by both S&P and Fitch, while the subordinate bonds are rated A-plus by S&P and Fitch.

Bank of America Merrill Lynch is on the docket to price the Illinois Finance Authority's $500 million of state clean water initiative revolving revenue bonds on Tuesday.

The deal is rated triple-A by S&P and Fitch.

The largest competitive deal of the week will come from the state of Louisiana, $169 million of GO bonds selling Tuesday.

The deal is rated Aa3 by Moody's, AA by S&P and AA-minus by Fitch.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar increased $302.1 million to $12.34 billion on Monday. The total is comprised of $3.46 billion of competitive sales and $8.88 billion of negotiated deals.

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