Investor focus turned solely to the $3 billion new-issue slate, as secondary trading took a back seat to digesting the massive New York Thruway, San Francisco and North Carolina competitive loans while negotiated deals saw big bumps in repricings.
A pull-back in the U.S. Treasury rally had levels back up out longer by as much as six basis points while equities rebounded from Monday's huge sell-off.
Municipal-to-UST ratios sat at 67% for the 10-year and the 30-year was at 71%, according to Refinitiv MMD. ICE Data Services had the 10-year muni-to-Treasury ratio at 68% and the 30-year at 71%.
Competitive loans saw strong bids and negotiated deals were repriced to lower yields while competitive deals saw yields coming in through triple-A benchmarks. The lack of any meaningful trading Tuesday, though, held levels steady on benchmark yields.
In the competitive market Tuesday, the New York State Thruway Authority (/AA+/AA+/) sold $1.913 billion of tax-exempt personal income tax bonds and $54.275 million of taxable PITs. Bonds inside 10 years were especially tight to triple-A benchmarks with the five-year a basis point above Refinitiv MMD's yield.
BofA Securities won $430.395 million of exempt personal income tax bonds with bonds in 2023-2025 all away. Bonds in 2023 with a 5% coupon yield 0.08%, 5s of 2026 at 0.40%, 5s of 2031 at 0.90%, noncall.
BofA also won $242.35 million of long PITs with 4% coupons and sub-2% yields, with 4s of 2057 at 1.90%, 4s of 2058 at 1.93% and 4s of 2059 at 1.95%, callable 3/15/2031.
J.P. Morgan Securities LLC won $442 million of long PITs with short coupons — 4s of 2044 at 1.68%, 4s of 2046 at 1.74% and 3s of 2051 at 2.05%, callable 3/15/2031.
UBS Securities won $451.86 million of PITs with 5s of 2035 at 0.99%, 4s of 2036 at 1.31%, 4s of 2041 at 1.51%, 4s of 2043 at 2.58%, callable 3/15/2031.
Goldman, Sachs & Co. LLC won $345.63 million of long-dated PITs, 4s of 2052 at 1.82% and 4s of 2056 at 1.87%, callable 3/15/2031.
Wells Fargo Securities won the $54.2 million taxable tranche maturing in 2032 at 1.67% par, callable in 3/15/2031.
San Francisco City and County (Aaa/AAA/AA+/) sold $195 million of general obligation bonds to Stifel with a 6/15/2029 call. Bonds in 2022 with a 4% coupon yield 0.06%, 5s of 2026 at 0.33%, 4s of 2031 at 0.76%, 4s of 2036 at 1.05%, 4s of 2041 at 1.23% and 4s of 2046 at 1.40%.
San Francisco also sold $179.1 million of tax-exempt transportation and road improvement bonds, earthquake safety and emergency response 2020 tax-exempt bonds to Citigroup Global Markets Inc. with 5s of 2023 at 0.08%, 5s of 2024 at 0.10%, 4s of 2030 at 0.70%, 4s of 2036 at 1.00%, 4s of 2042 at 1.26% and 4s of 2046 at 1.38%, callable 6/15/2029.
North Carolina (Aa1/AA+/AA+/) sold $132 million of limited obligation refunding bonds to BofA with 5s of 2022 at 0.07%, 5s of 2024 at 0.165%, 5s of 2031 at 0.82% and 5s of 2032 at 0.91%, noncall.
Siebert Williams Shank & Co., LLC. priced and repriced for the Pennsylvania Turnpike Commission (A3/A/A-/A+) $396.8 million of turnpike subordinate revenue bonds with large bumps. Bonds in 2025 with a 5% coupon yield 0.43% (-12), 5s of 2026 at 0.54% (-12), 5s of 2031 at 1.15% (-8), 4s of 2036 at 1.54% (-11), 4s of 2041 at 1.71% (-8), 4s of 2046 at 1.87% (-7), 4s of 2051 at 1.93% (-6) and 3s of 2051 at 2.18% (-6).
Goldman Sachs priced $164.73 million of certificates of participation for Charlotte, North Carolina (Aa1/AA+/AA+/). Bonds in 2022 with a 5% coupon yield 0.08%, 5s of 2026 at 0.44%, 5s of 2031 at 0.94%, 3s of 2036 at 1.63%, 3s of 2041 at 1.85% and 3s of 2048 at 2.03%.
Secondary trading and scales
Trading was light. Arlington County, Virginia, 5s of 2022 traded at 0.06%. New York UDC 5s of 2022 at 0.06%-0.05%.
New York City Transitional Finance Authority 5s of 2025 traded at 0.34% versus 0.48%-0.37% Monday. New York City water 5s of 2026 at 0.32%.
California 5s of 2029 at 0.75%. Michigan 5s of 2030 at 0.81%. Oregon 5s of 2030 at 0.78%. Austin, Texas, 5s of 2030 at 0.86%.
Fairfax County, Virginia, 4s of 2036 at 1.12%-1.11%.
According to Refinitiv MMD, yields were steady across the curve: 0.06% in 2022 and 0.10% in 2023. The yield on the 10-year was at 0.81% while the yield on the 30-year was at 1.32%.
The ICE municipal yield curve showed bonds also steady: 0.06% in 2022 and 0.10% in 2023. The 10-year maturity at 0.84% and the 30-year yield at 1.33%.
The IHS Markit municipal analytics curve showed a steady curve: 0.07% and 0.10% in 2022 and 2023, with the 10-year at 0.81%, and the 30-year yield at 1.32%.
Bloomberg BVAL also saw levels steady at 0.07% in 2022 and 0.09% in 2023 while the 10-year fell two to 0.82% and the 30-year was down three to 1.32%.
Treasuries pared back some of Monday's gains and equities regained most of Monday's losses. The 10-year Treasury was yielding 1.208% and the 30-year Treasury was yielding 1.866% near the close. The Dow Jones Industrial Average gained 642 points or 1.89%, the S&P 500 rose 1.82% while the Nasdaq gained 2.29%.
COVID and the economy
With the Delta variant of COVID-19 sparking increases in infections in all 50 states in the past two weeks, it shouldn’t derail the economy, according to David Kelly, chief global strategist at JPMorgan Funds.
Since the vaccines “appear to be very effective at preventing severe illness from even the Delta variant,” and the most vulnerable are the most vaccinated age group, he said, “the general transition to a reopened economy will likely continue.”
As a result, expect “further gains in output and employment, stubbornly high inflation and strong corporate profits,” he said. Those outcomes will allow the Federal Reserve to taper bond purchases “at the end of the year,” Kelly said.
In data released Tuesday, housing starts jumped 6.3% to a seasonally adjusted annual rate of 1.643 million in June from 1.546 million in May. Building permits declined 5.1% to a seasonally adjusted annual rate of 1.598 million from 1.683 million a month earlier.
Economists polled by IFR Markets expected 1.597 million starts and 1.700 million permits.
"The recent weakening of single-family and multifamily permits is due to higher material costs, which have pushed new home prices higher since the end of last year," said National Association of Home Builders Chief Economist Robert Dietz. "This is a challenge for a housing market that needs additional inventory."
Yelena Maleyev, economist at Grant Thornton, said, “low mortgage rates are not enough to offset the significant home price increases since the start of the pandemic.”
Consumers are not confident that now is the time to buy a home, she said, as “the intense competition to find a home has discouraged many first-time buyers.”
And while supply has been increasing recently, “it is still not enough to meet demand.”
Mark Vitner, senior economist at Wells Fargo Securities, agreed. “Supply chain concerns continue to bedevil home builders, but shortages are beginning to ease somewhat, and price increases, most famously for lumber, have begun to moderate.”
Any concern about the decline in permits, he said, should be quelled by the fact “permits through the first six months of this year total 865,500 units, which is a full 10% more than starts.”
Separately, the Federal Reserve Bank of Philadelphia’s July Nonmanufacturing Business Outlook Survey, suggested continued expansion in the region’s services sector.
The regional business activity index slipped to 53.1 in July from 59.6 in June, while at the company level, the activity index dropped to 44.8 from 56.7. The full-time employment index soared to 24.8 from 4.3, while the prices paid gained to 54.8 from 49.0 and prices received rose to 29.5 from 28.9.
“Nearly 36% of the firms reported increases (up from 20% last month),” according to the report. In special questions, just over half of the respondents said wages rose over the past three months and 44% saying they will raise wages more than previously planned, with 25% saying the increases would come sooner than planned.
Primary market to come
The Oregon Education District (Aa2/AA//) is set to price on Thursday $660.4 million of full faith and credit pension obligations, Series 2021A. Piper Sandler & Co.
The City and County of Honolulu (Aa1//AA+/) is set to price $577.69 million of general obligation bonds, $154.4 million and $33.45 million of Series A and B tax-exempts, $20 million of Series C taxables, and $36.29 million and $333.45 million of Series D and E Honolulu Rail Transit Project exempts. BofA Securities.
The City and County of Honolulu (Aa1//AA+/) is also set to price on Wednesday $147.29 million of tax-exempt forward refunding general obligation bonds. BofA Securities.
The Los Angeles County Metropolitan Transportation Authority (Aa1/AAA//) is set to price on Wednesday $506.74 million of Measure R senior sales tax revenue bonds. BofA Securities.
The Ochsner LSU Health System of North Louisiana (/BBB//) is set to price $300 million of taxable corporate CUSIP bonds, serial 2031. Citigroup Global Markets Inc.
The Harris County Flood Control District, Texas, (Aaa//AAA/) is set to price on Wednesday $275 million of improvement refunding bonds. Loop Capital Markets.
The Chabot-Las Positas Community College District, California (Aa2/AA//) is set to price on Wednesday $272.1 million of refunding revenue bonds. Morgan Stanley & Co. LLC.
The Chabot-Las Positas Community College District, California (Aa2/AA//) is also set to price $200 million of tax-exempt election of 2016 general obligation bonds. Morgan Stanley & Co. LLC.
The Austin Independent School District, Texas, (Aaa///) (Permanent School Fund Guarantee) is set to price on Wednesday $220.375 million of unlimited tax school building and refunding bonds, serials 2022-2041. Raymond James & Associates, Inc.
The City of Charlotte, North Carolina, (Aa1/AA+/AA+/) is set to price $164.18 million of transit projects refunding certificates of participation. Goldman Sachs & Co. LLC.
The State of New York Mortgage Agency (Aa1///) is set to price $130.545 million of homeowner mortgage revenue social bonds, variable rate bonds, Series 234 (Non-AMT), Series 236 (AMT), Series 238 (federally taxable) refunding bonds. Siebert Williams Shank & Co., LLC.
The Florida Housing Finance Corp. (Aaa///) is set to price on Wednesday $125 million of homeowner mortgage revenue non-AMT social bonds, serials 2023-2033, terms 2036, 2041, 2046, 2052, 2052. RBC Capital Markets,
On Wednesday, Rochester, New York, will sell $132.35 million of bond anticipation notes (8/3/2022) at 11 a.m.
