Several large municipal bond deals hit the market on Wednesday as the Los Angles Schools and Utah Transit sold bonds while New York City held a second day of orders for retail investors.
Buyside sources said retail investors were scratching their heads and playing a guessing game with the muni market and hoping to get some clarity from the release of the Federal Reserve minutes, the uncertainty from rising rates, and a general lack of supply.
“Right now they are waiting for the Fed and watching the Treasury market and the auctions, but there is a lot of apprehension,” a New York trader said at noon.
Ipreo estimates this week’s muni volume at $5.8 billion, comprised of $4.5 billion of negotiated deals and $1.3 billion of competitive sales.
Bank of America Merrill Lynch priced the Los Angeles School District’s $1.35 billion of general obligation tax-exempt bonds for institutions on Wednesday after holding a one-day retail order period.
Since 2008, the school district has sold about $12 billion of bonds with the most issuance occurring in 2009 when it sold $2.92 billion of debt. The LAUSD did not come to market in 2013.
Wells Fargo Securities priced the Utah Transit Authority’s $198.73 million of Series 2018 sales tax revenue bonds and subordinated sales tax revenue refunding bonds.
Jefferies held a second retail order period on New York City’s $700 million of tax-exempt fixed-rate general obligation bonds and remarketed $193.62 million of the city’s GO bonds. The city will price both deals for institutions on Thursday.
While the second day of the retail order period for the $700 million NYC GO deal was underway, the trader said, the deal was not receiving the typical response from investors. “I’m hearing it’s doing OK, but usually these things are a blow out,” he explained.
The final maturity in the retail scale was offered at a 3.50% coupon to yield 3.60%.
Investors, he said, were cloudy on investment decisions and are waiting on the sidelines for better guidance.
“Without the new issuance, these people don’t know what to do,” he said. “We aren’t used to this not seeing issuance.”
“If [retail buyers] can hold out and procrastinate they will do it,” he continued. “They don’t like mysteries,” especially the uncertainty of higher rates, he added.
Additionally, the city will competitively auction on Thursday $250 million of taxable fixed-rate bonds in two separate offerings consisting of $188.11 million and $61.89 million GOs.
In the competitive arena on Wednesday, Wake County sold $191.49 million of Series 2018A GO public improvement bonds.
Citigroup won the issue with a true interest cost of 2.8662%.
Bond Buyer 30-day visible supply at $8.56B
The Bond Buyer's 30-day visible supply calendar increased $1.42 billion to $8.56 billion on Wednesday. The total is comprised of $2.56 billion of competitive sales and $6.00 billion of negotiated deals.
Previous session's activity
The Municipal Securities Rulemaking Board reported 42,999 trades on Tuesday on volume of $9.10 billion.
California, Texas and New York were the states with the most trades, with the Golden State taking 12.962% of the market, the Empire State taking 11.618%, and the Lone Star State taking 11.403%.
Treasury sells re-opened 2-year FRNs
The Treasury Department Wednesday auctioned $15 billion of one-year 11-month floating rate notes with a high discount margin of 0.016%, at a zero spread, a price of 99.968842. The bid-to-cover ratio was 2.75.
Tenders at the high margin were allotted 53.72%. The median discount margin was zero. The low discount margin was negative 0.020%.
The index determination date is Feb. 12 and the index determination rate is 1.570%.
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 Vanessa Kim at 212-803-8474 for more information.