October Outpouring: Another $16.5B to Flood the Muni Market

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Municipal market participants will be busy again in the coming week, as new volume continues to slam into the market.

Volume for the week of Oct. 28 is forecast by Ipreo to rise to $16.50 billion, from a total of $14.84 billion in the past week, according to revised data from Thomson Reuters. The upcoming slate is composed of $13.71 billion of negotiated bond deals and $2.79 billion of competitive bond sales.

Primary Market

Volume for the week of Oct. 28 is forecast by Ipreo to go even higher to $16.50 billion, from a total of $14.84 billion in the past week, according to revised data from Thomson Reuters. The upcoming slate is composed of $13.71 billion of negotiated bond deals and $2.79 billion of competitive bond sales.

"The calendar is substantial and fund outflows have commenced with this week halting the 54 week inflow trend. But price moves the market and such will be the case for next week's calendar," said Gary Binkiewicz, senior vice president and head municipal bond analyst at R. Seelaus and Co.

If the estimate for the week plays out, the primary market will have received $31.34 billion in a two week span, more than the market saw in the month of July and just three billion less than September's volume.

The new volume would put the muni market at $54.53 billion for the month of October, making it the biggest month of the year and bringing the year-to-date total to $388.8 million, just $44.469 million away from the all-time record of $433.3 set back in 2010.

Bank of America Merrill Lynch is scheduled to run the books on the largest scheduled deal, New Jersey Transportation Trust Fund Authority's $2.768 billion of federal highway reimbursement revenue notes on Wednesday. The deal is rated A3 by Moody's Investors Service, A-plus by S&P Global Ratings and A-minus by Fitch Ratings.

The NJTTF deal is a Grant Anticipation Revenue Vehicle deal, rather than a typical NJTTF appropriation deal, which may make it an easier sell, according to one market source.

Citi is expected to run the books on Alaska's $2.35 billion of taxable pension obligation bonds on Wednesday, which are preliminarily structured to mature serially from 2018 through 2024 and include term bonds in 2026, 2031 and 2039. The deal is rated Aa3 by Moody's and AA by S&P and Fitch.

"The Alaska Pension Ob deal will be interesting to follow as it relates to the international appetite for the Bonds – which I think will be meaningful. We all know the credit issues and downgrades of late, but Alaska still remains a good credit," Binkiewicz said.

Barclays is scheduled to price the California Health Facilities Financing Authority's $675 million of revenue and refunding bonds for the Cedar-Sinai Medical Center on Wednesday. The deal is rated Aa3 by Moody's and AA-minus by Fitch.

The Maryland Department of Transportation is scheduled to sell a total of $692.985 million in two separate competitive sales on Wednesday. There will be a sale of $450 million of consolidated transportation bonds and then $242.985 million of consolidated transportation refunding bonds. Both deals are rated Aa1 by Moody's, triple-A by S&P and AA-plus by Fitch.

"I think the market will have little problem absorbing next week's flow," said Alan Schankel, managing director at Janney Capital Markets. "For one thing, a big chunk is the Alaska deal, which is taxable and so attracts a different investor."

Secondary Market

Top-shelf municipal bonds ended unchanged on Friday, as the yield on the 10-year benchmark muni general obligation was flat at 1.72% on Thursday, while the yield on the 30-year was buoyed at 2.54%, according to a final read of Municipal Market Data's triple-A scale.

U.S. Treasuries were mostly stronger at Friday's close. The yield on the two-year Treasury was steady at 0.82 from Thursday, the 10-year Treasury yield was lower at 1.73% from 1.75% and the yield on the 30-year Treasury bond decreased to 2.48% from 2.50%.

On Friday, the 10-year muni to Treasury ratio was calculated at 99.1% compared to 98.6% on Thursday, while the 30-year muni to Treasury ratio stood at 102.0% versus 101.7%, according to MMD.

Week's Most Actively Traded Issues

Some of the most actively traded issues by type in the week ended Oct. 21 were from Connecticut, New York and Pennsylvania, according to Markit.

In the GO bond sector, the Connecticut 3.375s of 2036 were traded 63 times. In the revenue bond sector, the New York Metropolitan Transportation Authority 3s of 2032 were traded 46 times. And in the taxable bond sector, the Commonwealth Financing Authority of Pennsylvania 4.144s of 2038 were traded 49 times.

Week's Most Actively Quoted Issues

Massachusetts, Missouri and Illinois issues were among the most actively quoted bonds in the week ended Oct. 21, according to Markit.

On the bid side, the Massachusetts Development Finance Agency revenue 5s of 2040 were quoted by 62 unique dealers. On the ask side, the St. Louis County Library District revenue 3s of 2046 were quoted by 346 unique dealers. And among two-sided quotes, the Illinois taxable 5.1s of 2033 were quoted by 19 unique dealers.

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