Muni Market Set for More Supply

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Municipal bond traders are set to see some of the week's biggest deals sell in the competitive arena on Wednesday.

Secondary Market

U.S. Treasuries were narrowly mixed on Wednesday. The yield on the two-year Treasury was unchanged from 0.75% on Tuesday, the 10-year Treasury yield fell to 1.54% from 1.55% and the yield on the 30-year Treasury bond was flat from 2.23%.

Top-rated municipal bonds finished unchanged on Tuesday. The yield on the 10-year benchmark muni general obligation was unchanged from 1.40% on Monday, while the yield on the 30-year muni was steady from 2.11%, according to the final read of Municipal Market Data's triple-A scale.

On Tuesday, the 10-year muni to Treasury ratio was calculated at 90.3% compared to 91.1% on Monday, while the 30-year muni to Treasury ratio stood at 94.6% versus 94.4%, according to MMD.

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 35,814 trades on Tuesday on volume of $11.61 billion.

Primary Market

Competitive sales dominate this week's calendar, but are packed into the two-day timeframe of Wednesday and Thursday.

Topping the competitive calendar is the state of Massachusetts, which is coming to market with over $2 billion of bonds and notes.

The Bay State will competitively sell $1.5 billion of revenue anticipation notes in three separate offerings on Wednesday and about $835 million of general obligation bonds on Thursday in two separate sales.

The note deals are rated MIG1 by Moody's Investors Service, SP1-plus by S&P Global Ratings and F1-plus by Fitch Ratings while the bond deals are rated Aa1 by Moody's and AA-plus by S&P and Fitch.

Since 2006, the state has sold about $39.76 of notes and bonds, with the largest issuance occurring in 2014 when it sold about $4.89 billion of securities. With the sales this week, it puts 2016 issuance at $4.97 billion. The state saw the lowest issuance in 2008, when it issued $2.29 billion.

Portland, Ore., will competitively sell $321 million of first and second lien sewer system revenue refunding bonds in two separate sales on Wednesday. The first lien bonds are rated Aa2 by Moody's and AA by S&P while the second lien bonds are rated Aa3 by Moody's and AA-minus by S&P.

JPMorgan Securities is expected to price the Maryland Department of Housing and Community Development's Community Development Administration's $328.29 million of Series 2016A taxable residential revenue bonds on Wednesday. The deal is rated Aa2 by Moody's and AA by Fitch.

Siebert Branford Shank is set to price Dallas County, Texas' $170 million of Series 2016 combination tax and parking garage certificates of obligation on Wednesday. The deal is rated triple-A by Moody's and S&P.

Bank of America Merrill Lynch is expected to price the Eastern Muni Water District, Calif.'s $131.52 million of water and wastewater revenue bonds on Wednesday. The deal is rated AA by S&P and AA-plus by Fitch.

Goldman Sachs is set to price the Illinois Finance Agency's $115.92 million of Series 2016A revenue refunding bonds for DePaul University. The deal is rated Aa2 by Moody's and A by S&P and Fitch.

Citigroup is expected to price the Florida Housing Corp.'s $100 million of taxable homeowner mortgage revenue bonds on Wednesday.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $1.86 billion to $12.25 billion on Wednesday. The total is comprised of $4.82 billion of competitive sales and $7.43 billion of negotiated deals.

Kroll Rates N.Y. MTA $1B Hudson Yards Bonds Sale

Kroll Bond Rating Agency said it assigned an A-minus rating to the New York Metropolitan Transportation Authority's $1.06 billion of Hudson Rail Yards Series 2016A trust obligations. The rating outlook is stable.

Kroll said its rating evaluation of the long-term credit quality of the transaction focused on a legal framework [AA-minus], the nature of property tax/assessment revenue base [BBB-minus], economic base and demographics [AA-plus], revenue analysis [BBB], and debt Service coverage and bond structure [A-plus].

"The KBRA rating category reflects the significant risk associated with the scale and complexity of the construction and development in the project area as well as elements of uncertainty in the timing of construction and the ultimate value of developments," Kroll said in a release. "This is partially offset by a flexible amortization schedule and a pledge of all revenues received under the ground leases to pay down the Series 2016A obligations."

The MTA is tentatively planning to sell the obligations in mid-September, with the proceeds of the sale going to finance existing approved trust and commuter projects and to pay other financing costs associated with the monetization of the Hudson Rail Yard ground leases.

Last month, the MTA board authorized the bond offering to monetize a portion of the 99-year lease payments from Hudson Rail Yards commercial and residential development. The MTA will offer the obligations under a trust agreement with Wells Fargo Bank as custodian.

The MTA is one of the largest municipal issuers with nearly $37 billion of debt.

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