The muni primary saw a flood of issuance on Tuesday, with the majority of it being from Texas issuers including one deal that got majorly upsized.
Primary market
Grand Parkway Transportation Corporation, Texas (A2/NR/A+/NR) pumped in $2.313 billion of tax-exempt and taxable bonds into the primary on Tuesday, more than doubling the taxable portion.
Bank of America Securities priced $1.514 billion of first tier toll revenue refunding taxable bonds series 2020A and the subordinate tier toll revenue refunding taxable bonds series 2020B. The first tier bonds carry ratings of A2 by Moody’s Investors Service, while the taxable subordinate bonds are rated Aa1 by Moody’s and AA by Fitch. The taxable portion was originally scheduled to be $697.395 million.
One New York trader said that this deal is a perfect example to sum up the current market.
"It's all about those taxables," he said. "It is almost as if our market was not called the muni market but the taxable muni market."
Goldman ran the books on the first tier toll revenue refunding tax-exempt series 2020C portion for $799.025 million of system first tier toll revenue refunding bonds.
“The deal ended up doing great, as it was oversubscribed for by three to four times,” said a Texas trader. “It looked very attractive to me.”
Wells Fargo priced Utah’s (Aaa/AAA/AAA/NR) $449.145 million of GO bonds.
Barclays priced the Economic Development Authority of Roanoke, Virginia’s (Aa3/AA-/ / ) $289.670 of hospital revenue bonds.
Citi priced Iowa Finance Authority’s (Aaa/AAA/AAA/ ) $203.460 million of state revolving fund revenue green bonds.
Citi also priced El Paso, Texas’ ( /AA/AA/ ) $198.790 million of GO refunding and improvement bonds and combination tax and revenue certificates of obligation.
Ramirez & Co., priced Del Valle Independent School District, Texas’ ( /AAA/ / ) $108.020 million of unlimited tax school building bonds.
“Feb. 15 is a big redemption date for Texas, So all the paper that came into today saw strong demand,” the Texas trader said. “Right now not much around in the secondary.”
The discussion on taxable bonds and their effects on the municipal market will continue at The Bond Buyer's
Secondary market
Munis were slightly weaker on Tuesday on the MBIS benchmark scale, with yields rising by one basis point in the 10-year and by less than one basis point in the 30-year maturity. High-grades were also slightly weaker with yields on MBIS AAA scale increasing no more than one basis point in both the 10- and 30-year maturity.
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10-year GO and 30-year GO were unchanged from 1.18% and 1.83%, respectively.
The 10-year muni-to-Treasury ratio was calculated at 74.4% while the 30-year muni-to-Treasury ratio stood at 89.3%, according to MMD.
“Bonds and stocks are in the same fog of uncertainty and investors are following the playbook used during prior flights to quality,” said Gary Pzegeo, head of fixed income at CIBC Private Wealth management. “Fixed income markets have reacted by lowering yields for higher-quality bonds and raising the odds of further Fed easing in the coming months.”
He added that futures for Fed Funds imply 1.5 rate cuts by the end of the year and the 10-year / 2-year Treasury yield curve has flattened to 17 basis points from 35 basis points at the beginning of the year. He also noted that corporate debt has seen wider credit spreads in sympathy with equity market weakness since the mid-January high and interest rate volatility markets are well off the lows from the same time period.
“Markets were more pessimistic last summer when the outlook for a trade agreement was grim,” Pzegeo said. “Neither risk, trade nor virus, is something markets are accustomed to analyzing. Markets appear to be taking greater comfort this time around and the amplitude of the market response is less pronounced. Expectations for an easier Fed is common to both periods, but the current offset includes more positive survey data and favorable earnings.”
Stocks were mixed with one of the three major indexes in the green and Treasury yields were on the rise.
The Dow Jones Industrial Average was down about 0.18%, the S&P 500 Index gained 0.17% and the Nasdaq fell about 0.03%.
The 3-month Treasury was yielding 1.577%, the Treasury two-year was yielding 1.415%, the five-year was yielding 1.406%, the 10-year was yielding 1.589% and the 30-year was yielding 2.047%.
Previous session's activity
The MSRB reported 30,834 trades Monday on volume of $7.33 billion. The 30-day average trade summary showed on a par amount basis of $11.19 million that customers bought $5.64 million, customers sold $3.68 million and interdealer trades totaled $1.87 million.
California, Puerto Rico and Texas were most traded, with the Golden State taking 16.59% of the market, Puerto Rico taking 14.383% and the Lone Star State taking 11.948%.
The most actively traded security was the Puerto Rico Commonwealth GO, 8s of 2035, which traded 91 times on volume of $256.465 million.
Gary E. 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.
