Muni Traders Set for Second Wave of Issuance to Hit

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Municipal bond traders are set to see a second big wave of new issuance sweep over the market on Wednesday as muni yields inch up off their recent record lows.

Secondary Market

U.S. Treasuries were little changed in early trading. The yield on the two-year Treasury rose to 0.76% from 0.75% on Tuesday, while the 10-year Treasury yield was unchanged from 1.70% and the yield on the 30-year Treasury bond was flat at 2.50%.

Top quality municipal bonds finished weaker on Tuesday. The yield on 10-year benchmark muni general obligation rose two basis points to 1.49% from 1.47% on Monday, while the 30-year muni yield increased one basis points to 2.19% from 2.18%, according to the final read of Municipal Market Data's triple-A scale.

The 10-year muni to Treasury ratio was calculated at 87.8% on Tuesday compared to 88.0% on Monday, while the 30-year muni to Treasury ratio stood at 87.7% versus 88.3%, according to MMD.

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 39,339 trades on Tuesday on volume of $10.05 billion.

Primary Market

Morgan Stanley is set to price the New York Metropolitan Transportation Authority's $543.66 million of Series 2016B transportation revenue refunding bonds for institutions on Wednesday after a one-day retail order period.

The issue was priced for retail to yield from 0.96% with 3.5% and 5% coupons in a split 2019 maturity to 2.46% with a 5% coupon in 2037.

The deal is rated A1 by Moody's Investors Service, AA-minus by S&P Global Ratings, A by Fitch Ratings and AA-plus by Kroll Bond Rating Agency.

Wells Fargo Securities is expected to price the University of California Regents' $513.99 million of taxable and tax-exempt limited project revenue bonds. The deal is rated Aa3 by Moody's and AA-minus by S&P and Fitch

Citigroup is expected to price the Imperial Irrigation District, Calif.'s $223 million of taxable and tax-exempt electric system refunding revenue bonds. The deal is rated A by S&P.

Raymond James is expected to price the Arlington Independent School District, Texas' $184.49 million of unlimited tax school building bonds and tax refunding bonds and taxable bonds. The deal is backed by the Permanent School Fund guarantee program and rated triple-A by Moody's and S&P.

Jefferies is set to price the Ohio Water Development Authority's $150 million of Series 2016B water development revenue bonds. The deal is expected to be rated triple-A by Moody's and S&P.

Citi is expected to price the Orlando Utilities Commission's $144 million of utility system revenue refunding bonds subject to the alternative minimum tax. The deal is rated Aa2 by Moody's and AA by S&P and Fitch.

Bank of America Merrill Lynch is set to price the state of Michigan's $128 million of GO school loan refunding Series 2016A taxable and Series 2016B tax-exempt bonds. The deal is rated Aa1 by Moody's, AA-minus by S&P and AA by Fitch.

In the competitive arena, the state of Alaska is selling $128.3 million of Series 2016B unlimited tax general obligation bonds. The deal is rated Aa1 by Moody's and AA-plus by S&P and Fitch.

Since 2006, Alaska has issued about $1.9 billion of debt, with the largest issuance occurring in 2006 when it sold $412.7 million of securities. In 2016, the Last Frontier State has already issued more than $400 million of bonds including this sale, making this year the state's biggest issuance year since 2006.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $1.55 billion to $11.50 billion on Wednesday. The total is comprised of $3.53 billion of competitive sales and $7.96 billion of negotiated deals.

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