Denver airs hit the screens
Action in the primary market kicked off Tuesday as several big deals were offered to municipal bond buyers.
Almost $12 billion of volume hits the market this week, and retail and institutions were snapping up the new deals as they hit the screens, according to some market participants. Municipal sources continued to be elated that volume this week is approaching $12 billion, with some diverse structures and financings that have been in short supply lately.
"This week will be instructive because it is the biggest challenge for the muni market in the post-tax reform environment," George Friedlander of Court Street Group Research said. He said it could take a couple of days to see how the deals are priced and received, and will be "useful" to see how the mammoth $2 billion city and county of Denver AMT bonds price on spread to non-AMT bonds in the current environment.
Meanwhile, others agreed the boost in volume is feeding the healthy demand — even if that appetite is insatiable and more supply is needed.
"It is nice to finally see an uptick in supply after things have been so light coming off of the record issuance we saw at the end of 2017," Shaun Burgess, portfolio manager and analyst at Cumberland Advisors, said. "The calendar is somewhat concentrated though so I don’t think this is the broad relief the market was looking for." However, Burgess said the deals his firm has been involved in have been well received and "are getting oversubscribed, which speaks to the demand side."
Bank of America Merrill Lynch priced the city and county of Denver’s $2.281 billion of airport system subordinate revenue bonds on Tuesday.
The offering consists of $2.205 billion of Series 2018A bonds subject to the alternative minimum tax and $76.1 million of Series 2018B non-AMT bonds. Proceeds of the sale will be used to refund certain revenue bonds.
The deal is rated A2 by Moody’s Investors Service, A by S&P Global Ratings and A-plus by Fitch Ratings. All three ratings agencies assign stable outlooks to the credit.
Since 2008, the city and county of Denver has issued over $9 billion of bonds, with the most issuance prior to this year coming in 2008 when it sold $1.45 billion. It sold the least amount in 2014 when it issued $16 million.
Jefferies priced the Golden State Tobacco Securitization Corp.’s $710.91 million of Series 2018A-2 tobacco settlement asset-backed turbo bonds. The deal is unrated.
Siebert Cisneros Shank & Co. priced Connecticut’s $639.135 million of Series 2018E and Series 2018F tax-exempt general obligation bonds for retail on Tuesday the ahead of the institutional pricing on Wednesday.
The deal is rated A1 by Moody’s, A by S&P, A-plus by Fitch and AA-minus by Kroll Bond Rating Agency.
JPMorgan Securities is expected to price Miami-Dade County’s $716.55 million of aviation revenue refunding bonds for retail ahead of the institutional pricing on Wednesday.
The offering consists of Series 2018A AMT bonds, Series 2018B non-AMT bonds and Series 2018C taxable bonds.
The deal is rated A by S&P and Fitch and AA-minus by Kroll.
Piper Jaffray is expected to price the Denton Independent School District, Texas’ $397.55 million of Series 2018 unlimited tax school building bonds on Tuesday.
The deal, backed by the Permanent School Fund guarantee program, is rated AAA by S&P and Fitch.
RBC Capital Markets is expected to price the New York City Municipal Water Finance Authority’s $270 million of Fiscal 2019 Series AA water and sewer second general resolution revenue bonds for retail investors ahead of the institutional pricing on Wednesday.
The deal is rated Aa1 by Moody’s and AA-plus by S&P and Fitch.
Click here for the state retail pricing
Bond Buyer 30-day visible supply at $16.65B
The Bond Buyer's 30-day visible supply calendar increased $338.6 million to $16.65 billion for Tuesday. The total is comprised of $2.82 billion of competitive sales and $13.83 billion of negotiated deals.
Municipal bonds were little changed on Tuesday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields fell less than a basis point in the two- to 12-year maturities while yields rose less than a basis point in the one-year, 14- to 20-year and 23- to 30-year maturities and remained unchanged in the 13-year and 21- and 22-year maturities.
High-grade munis were mostly weaker, with yields calculated on MBIS’ AAA scale falling less than a basis point in the two- to eight-year and 17- to 24-year maturities while yields rose as much as two basis points in the one-year, nine- to 16-year and 25- to 30-year maturities.
Municipals were steady on Municipal Market Data’s AAA benchmark scale, which showed the yield on both the 10-year muni general obligation and on the 30-year muni maturity remaining unchanged. Intermediate maturities were as much as one basis point higher.
“Tax-exempt trading was off to another slow and mixed start on Tuesday, although it did appear pockets of weakness were beginning to develop in spots,” said MMD muni research analyst Greg Saulnier. “Meanwhile, U.S. equities were posting modest gains as Turkey tensions eased while softer-than-expected import/export data helped Treasuries to pare earlier losses.”
Treasury bonds were firm as stock prices traded higher.
On Monday, the 10-year muni-to-Treasury ratio was calculated at 85.2% while the 30-year muni-to-Treasury ratio stood at 99.9%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.
Previous session's activity
The Municipal Securities Rulemaking Board reported 36,478 trades on Monday on volume of $8.31 billion.
California, New York and Texas were the municipalities with the most trades, with Golden State taking 13.001% of the market, the Empire State taking 10.978%, and the Lone Star State taking 10.722%.
Treasury auctions bills
The Treasury Department Tuesday auctioned $26 billion of 364-day bills at a 2.365% high yield, a price of 97.608722.
The coupon equivalent was 2.442%. The bid-to-cover ratio was 3.21.
Tenders at the high rate were allotted 99.07%. The median yield was 2.350%. The low yield was 2.320%.
Treasury also auctioned $70 billion of four-week bills at a 1.910% high yield, a price of 99.851444.
The coupon equivalent was 1.939%. The bid-to-cover ratio was 2.66.
Tenders at the high rate were allotted 61.41%. The median rate was 1.885%. The low rate was 1.850%.
Gary Siegel contributed to this report.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Ziad Saba at 212-803-6079 for more information.