All of the muni market issuance for the week hit on Tuesday, before the Thanksgiving break mutes action for the remaining three days.
"The bankers wanted to get the deals done with earlier, so they could hit the road," said one New York trader. "The deals got done, but not at blowout levels like we have been accustomed to seeing."
The trader said that he chalked up lower subscriptions on Tuesday's deals to two reasons.
"First off, there are less people around due to the holiday as everyone wants to start their break a little early," he said. "Secondly, there will be at least $15 billion in new deals coming next week and plenty of cash on hand. so I would imagine they are saving deployment for next week, when there are going to be a crazy amount of options to choose from."
Primary market
Citigroup priced the Main Street Natural Gas Inc.’s (A3/NAF/NAF/NAF) $631.97 million of Series 2019C gas supply revenue bonds on Tuesday.
Goldman Sachs priced the National Finance Authority of New Hampshire’s (Aaa/VMIG1/NR/NR/NR) $314.06 million of Series 2019 exempt facilities revenue refunding bonds for the Emerald Renewable Diesel LLC project.
The non-callable deal is due June 1, 2049 and has a mandatory tender date of Aug. 31, 2020. Proceeds will refund the Port of Port Arthur Navigation District of Jefferson County, Texas’ $315 million of Series 2018 exempt facilities revenue bonds for the Emerald Renewable Diesel LLC project.
RBC Capital markets priced the Board of Trustees of Michigan State University’s (Aa2/AA/NR/NR) $148.315 million of Series 2019C general revenue refunding bonds. Proceeds will refund certain outstanding debt of the issuer.
In the competitive arena, New York’s Triborough Bridge and Tunnel Authority (Aa3/AA-/AA-/AA) sold $200 million of Series 2019C general revenue bonds, which were won by Bank of America Securities with a true interest cost of 3.0238%. Proceeds will fund the MTA’s capital program to finance bridge and tunnel projects.
Since 2009, the NY TBTA has sold roughly $9.99 billion of securities with the highest issuance year coming in 2017 when it sold $1.92 billion. The lowest volume year occurred in 2010 when it sold $347 million.
In the short term sector, Hudson County, New Jersey sold $182.121 million of bond anticipation notes. The BANs were won by JPMorgan with a net interest cost of 1.1727%.
There are currently 21 deals on the calendar for the week of Dec. 2. Some of the larger expected deals are: New Jersey Transportation Trust Fund's $2.3 billion; Metro Washington Airport Authority's $1.3 billion; Michigan Finance Authority's $1.1 billion; Met Pier and Expo Center, Chicago's $923 million; The Metropolitan Nashville Airport Authority's $807.7 million; San Diego County Regional Transportation Commission's $600 million; West Virginia's $600 million; New York City Municipal Water Finance Authority's $537 million; New York Housing Finance Agency's $444 million; The Los Angeles Department of Airport's $402 million; Texas A&M Board of Regents' $351.9 million; And Dallas Independent School District's $315 million.
Forecasting opportunities ahead
Selling pressure is expected to mark the next few weeks in the municipal market, given that the Federal Reserve Board is expected to stand pat between now and year-end and investors now appear to be less concerned that a recession is imminent and more worried they will miss out on opportunities in the stock market, a New Jersey muni manager said.
“We would anticipate additional selling pressure in fixed income as a shorter-term shift from bonds to stocks continues to take place,” said Bill Walsh, president of Hennion & Walsh in Parsippany, N.J. ”High demand for tax-free income and tax-equivalent yield amid a relatively limited supply of tax free bonds should allow munis to continue to perform well between now and year-end, adding to an already solid year of performance for municipal bonds and municipal bond closed-end funds."
On the economic front, the lack of uncertainty as it relates to any additional Fed action this year, along with the continued strength of the U.S. consumer, should allow the stock market to finish the year on a positive note.
“One area that could derail that outcome is a breakdown in U.S./China trade discussions and renewed tariffs consideration,” he said. “Should this breakdown occur, the shorter-term shift from bonds to stocks that is currently taking place could reverse causing stock prices to slide and bond prices to increase and, in turn, yields to decrease."
Secondary market
Munis were stronger on the MBIS benchmark scale, with yields falling by less than one basis point in the both the 10-year and 30-year maturities. High-grades were weaker, with yields on MBIS AAA scale rising by no more than one basis point in the 10-year maturity and by a basis point in the 30-year maturity.
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on the 10-year GO was lower by three basis points to 1.47% and the 30-year dropped three basis points to 2.06%.
The 10-year muni-to-Treasury ratio was calculated at 84.6% while the 30-year muni-to-Treasury ratio stood at 94.7%, according to MMD.
Stocks soared as the U.S. and China are working through agreements for phase one of a trade deal. The Dow Jones Industrial Average was up about 0.15% as the S&P 500 Index rose 0.11% while the Nasdaq gained almost 0.20%.
The Treasury three-month was yielding 1.596%, the two-year was yielding 1.575%, the five-year was yielding 1.601%, the 10-year was yielding 1.741% and the 30-year was yielding 2.178%.
Previous session's activity
The MSRB reported 32,505 trades Monday on volume of $10.07 billion. The 30-day average trade summary showed on a par amount basis of $11.11 million that customers bought $6.12 million, customers sold $3 million and interdealer trades totaled $1.99 million.
California, New York and Texas were most traded, with the Golden State taking 14.485% of the market, the Empire State taking 10.979% and the Lone Star State taking 10.496%.
The most actively traded security was the Pennsylvania Turnpike Commission taxable first subordinate revenue refunding 3.779s of 2042, which traded 17 times on volume of $77.5 million.
Treasury to sell $45B 4-week bills
The Treasury Department said it will sell $45 billion of four-week discount bills Wednesday. There are currently $40.022 billion of four-week bills outstanding.
Treasury also said it will sell $35 billion of eight-week bills Wednesday.
Treasury also announced it will sell $15 billion 16-day cash management bills on Wednesday.
Treasury auctions
The Treasury Department Tuesday auctioned $41 billion of five-year notes, with a 1.50% coupon, a 1.587% high yield, a price of 99.583769.
The bid-to-cover ratio was 2.50.
Tenders at the high yield were allotted 64.49%. All competitive tenders at lower yields were accepted in full.
The median yield was 1.540%. The low yield was 1.485%.
Treasury also auctioned $18 billion of one-year 11-month floating rate notes with a high discount margin of 0.240%, at a 0.300% spread, a price of 100.114271.
The bid-to-cover ratio was 2.50.
Tenders at the high margin were allotted 38.91%.
The median discount margin was 0.205%. The low discount margin was 0.170%.
The index determination date is Nov. 18 and the index determination rate is 1.540%.
Christine Albano and 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.
