Municipal bond yields held steady Monday as investors braced themselves for nearly $9 billion of issuance this week.
"The market is extremely quiet today," a trader based in New York said. "There's a lot of focus on the new issue calendar with positive cash flow."
According to the Municipal Market Advisor's 5% triple-A scale, muni yields were steady across the curve with the two-year note at 0.33%, the 10-year benchmark at 2.31% and the 30-year yield at 3.52%.
Munis followed treasuries as the New York trader said that there's a tight range in the treasury market with little to no trading activity.
Treasuries were unchanged across the curve on Monday from Friday's market close, with the 30-year yield at 3.45%, the 10-year benchmark at 2.62%, and the two-year note at 0.46%.
"It's a Monday and most of the new deals are issued from Tuesday to Thursday," the trader said.
The $1.2 billion four-part New York State Dormitory Authority's rare competitive revenue bond sale scheduled for Tuesday will spark a brawl between underwriters, traders said.
DASNY's well-known name, they said, and the size of the deal forces underwriters to participate in the auction.
"There is a significant amount of risk for underwriters who do not show up for that deal, because most [DASNY] deals come negotiated," a trader in Florida said. "The bidding will be aggressive."
The deal will come in sections of $387.9 million, $385.72 million, $354.1 million and $86.2 million.
"Everyone is trying to sell before the week of the fourth of July," the New York trader said. "This is the biggest competitive deal of the week. Of course there's going to be a fight and of course it's going to be aggressive.
The bonds earned a triple-A from Standard & Poor's and a AA-plus from Fitch Ratings.
"The fact that it's coming competitive will be a little different: historically a lot of the DASNY's bigger deals have come negotiated," a trader in Chicago said. "This will test the market."
DASNY on May 13 issued $198.6 million school district revenue bond financing program revenue bonds. That deal, which also came in four parts, with the biggest section reaching $153.88 million, was priced by RBC Capital Markets at yields ranging from 0.42% with a 2% coupon in 2016 to 4.10% with a 4% coupon in 2043.
"[RBC] has a shot at maintaining and being in part of the management group, but there will be a fight between the top five underwriting groups," the trader in New York said.
A $1 billion four-part Washington State competitive general obligation bond sale is expected to come to market on Wednesday.
"We'll be looking at Washington because it's such a large deal, but I don't know if its benchmark deal," a New York trader said.
The deal received an Aa1 rating from Moody's Investors Service and AA-plus by both Standard & Poor's and Fitch Ratings.
Total potential volume for this week is projected at $8.90 billion, according to Ipreo and The Bond Buyer.
Though issuance has picked up a bit in the past few weeks, "year-to-date municipal market issuance is 25% lower than last year's at $115 through the end of May," according to data from Thomson Reuters. Last year the year-to-date total was $153 billion.
A total of $344 billion of bonds were sold in the primary market last year. Janney Montgomery predicts new issuance for this year to be lighter, coming in between $250 billion and $275 billion.
JPMorgan Securities priced $220.6 million of Beaver County, Pa., Industrial Development Authority pollution control revenue refunding bonds. The $164 million bonds were priced at par with a 3.50% coupon maturing in 2035. The $56.6 million non-alternative minimum tax bonds were priced at par with a 3.50% coupon in 2041. The deal is rated Baa3 by Moody's and BBB-minus by S&P.
Ramirez & Co. will bring $1.4 billion of Los Angeles County tax and revenue anticipation notes to the market on Thursday, the largest deal of the week. The deal received a MIG 1 rating from Moody's, SP-1-plus from S&P and F1-plus from Fitch.
Other large deals in the negotiated market this week include $631 million of triple-A rated Texas Public Finance Authority refunding general obligation bonds and $500 million of double A-plus rated GOs from the commonwealth of Massachusetts.
Secondary market trading showed mostly strengthening, according to data provider Markit.
The Texas Transportation Commission revenue bonds with a 5% coupon maturing in 2041 fell one basis point to 4.04%, and the Florida Hurricane Catastrophe Fund Financing Corporation revenue bonds with a 2.995% coupon in 2020 slipped one basis point to 2.97%.
The Metropolitan Transit Authority of New York and New Jersey revenue bonds with a 5% coupon in 2023 slid one basis point to 2.80%, and the New York City Municipal Water Financing Authority water and sewer system revenue bonds with a 5% coupon in 2034 lost one basis point to 3.51%.
