Wisconsin sold the biggest deal of the week on Tuesday as wary investors were laying low on the first day of the Federal Open Market Committee meeting.
“The tone continues to be cautious ahead of the Fed and data this week -- despite having a small calendar,” a Southeast trader said.
The two day Fed meeting has a lot to do with the lighter volume, which is expected to be approximately $3.2 billion this week, plunging from $6.3 billion last week. The end of the third quarter is also contributing to the slower activity, the trader said.
“It’s a slow drift,” he said. “Overall volumes are down and there’s a lot of swapping between dealer to dealer, and customer to dealer.”
Normal market operations should resume next week for the official start of the fourth quarte. Until then, market tone remains skittish and sparse.
“The overall environment is very cautious and that’s sidelining a lot of players and decreasing volume of trading,” the trader said. “Until the Fed is out of the way and the data is out of the way this week, customers are being reserved.”
ICE Data Services said in a late Tuesday market comment said muni bond yields were drifting higher as market participants positioned themselves ahead of the release of the Fed decision tomorrow afternoon. "Investment-grade paper is one to two basis points higher, with the bigger move out in the back end of the curve," ICE said. "High yield is generally two basis points higher all along the curve. Taxable yields are two to three basis points higher. In Puerto Rico, bond prices are, for the most part, higher, but by small amounts.”
The arrival of October should bring strong demand for fall reinvestments, according to the Southeast trader.
“October is a relatively reasonable reinvestment period, and we’ll have an opportunity to capture some investment dollars,” he said.
Next week’s calendar is expected to be moderate and manageable, “but it will at least be enough to show some leadership,” and likely offer the availability of 4% coupon structures on new issues.
“The demand from retail is starting to improve as you see 4% out long at a discount,” he said. “It’s not robust by any stretch of the imagination, but it’s a bright spot.”
Primary market
In the competitive arena on Tuesday,
Barclays Capital Markets won the bonds with a true interest cost of 3.8127%.
Proceeds of the sale will be used for various governmental purposes.
Municipals officials are the financial advisors while Foley & Lardner is the bond counsel.
Since 2008 the Badger State has sold roughly $20 billion of securities, with the most occurring in 2017 when it sold $3.5 billion and the least in 2010 when it sold $1.5 billion.
Greensboro, N.C., sold $145.76 million of GO public improvement bonds.
Wells Fargo Securities won the $135.36 million of Series 2018B tax-exempts with a TIC of 3.1558%. Wells also won the $10.4 million of Series 2018A taxables with a TIC of 2.8053%.
Proceeds of the sale will be used to redeem certain outstanding BANs of the Issuer and to finance various capital improvements.
The financial advisors are DEC Associates with the Local Government Commission; the bond counsel is Womble Bond.
In the short-term competitive sector, Milwaukee sold $180 million of Series 2018M10 school revenue anticipation notes.
Morgan Stanley won the RANs with a TIC of 1.962%
The financial advisor is PFM Financial Advisors and the bond counsel are Katten Muchin and Hurtado Zimmerman.
The Palm Beach County School District sold $115 million of Series 2018 tax anticipation notes.
Morgan Stanley won the TANs with a TIC of 1.9992%
The financial advisor is PFM Financial Advisors; the bond counsel is Greenberg Traurig.
In the negotiated sector, Raymond James & Associates priced the New Orleans Aviation Board’s $109.835 million of special facilities revenue bonds and refunding bonds.
Tuesday's bond sales
Wisconsin
Florida
North Carolina
Louisiana
Bond Buyer 30-day visible supply at $5.52B
The Bond Buyer's 30-day visible supply calendar increased $67.3 million to $5.52 billion for Tuesday. The total is comprised of $1.99 billion of competitive sales and $3.53 billion of negotiated deals.
Secondary market
Municipal bonds were weaker on Tuesday, according to a late read of the MBIS benchmark scale. Benchmark muni yields rose as much as one basis point in the one- to 30-year maturities.
High-grade munis were also weaker, with yields calculated on MBIS' AAA scale rising as much as one basis point across the curve.
And municipals were weaker on Municipal Market Data’s AAA benchmark scale, which showed the yield on the 10-year muni general obligation rising one basis point while the yield on 30-year muni maturity gained two basis points.
Treasury bonds were weaker as stock prices traded mixed.
On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 87.4% while the 30-year muni-to-Treasury ratio stood at 101.1%, 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 38,290 trades on Monday on volume of $7.61 billion.
California, Texas New York were the municipalities with the most trades, with Golden State taking 15.808% of the market, the Lone Star State taking 10.096% and the Empire State taking 9.66%.
Treasury sells $40B 4-week bills
The Treasury Department on Tuesday auctioned $40 billion of four-week bills at a 2.080% high yield, a price of 99.838222.
The coupon equivalent was 2.112%. The bid-to-cover ratio was 3.05.
Tenders at the high rate were allotted 31.96%. The median rate was 2.045%. The low rate was 2.000%.
The bills are dated Sept. 27 and due Oct. 25.
Treasury auctions $17B 2-year FRNs
The Treasury Department on Tuesday auctioned $17 billion of two-year floating rate notes at a 0.050% high margin, a price of 99.986524. The bid-to-cover ratio was 3.06.
Tenders at the high were allotted 33.98%. The median was 0.040% and the low was 0.020%.
The notes are dated Sept. 28 and due July 1, 2020.
Treasury sells $38B 5-year notes
The Treasury Department on Tuesday auctioned $38 billion of five-year notes at a 2.997% high yield, a price of 99.437571. The bid-to-cover ratio was 2.39.
Tenders at the high rate were allotted 44.70%. The median rate was 2.996%. The low rate was 2.880%.
The bills are dated Oct. 1 and due Sept. 30, 2023.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.
