NEW YORK – The municipal market was mostly flat Monday amid somewhat light secondary trading activity and declining Treasury yields.
“We’re pretty quiet,” a trader in San Francisco said. “There’s a bit of an uptick in Treasuries today, and a lot of people in our market are just sitting on the sidelines for now. I’d say we’re just unchanged.”
The Municipal Market Data’s triple-A scale yielded 2.36% in 10 years Monday, matching Friday, while the 20-year scale also remained flat, at 3.36%. The scale for 30-year debt yielded 3.77%, even with Friday.
Monday’s triple-A muni scale in 10 years was at 94.8% of comparable Treasuries and 30-year munis were at 96.2%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 106.8% of the comparable London Interbank Offered Rate.
The Treasury market was mostly firmer Monday. The benchmark 10-year note was quoted recently at 2.49% after opening at 2.56%.
The 30-year bond was quoted recently at 3.93% after opening at 3.98%. The two-year note was quoted recently at 0.36% after also opening at 0.36%.
Volume will continue to level off from the highs of two weeks ago as $7.97 billion of municipal debt gets ready to sell this week, according to Ipreo LLC and The Bond Buyer.
That figure is higher than last week's revised $6.10 billion - up from the $5.93 billion originally estimated - but not as significant as the $11.05 billion that sold in the week of Oct. 4, according to Thomson Reuters.
“It’s not the biggest calendar we’ve seen over the last month or so, but there will still be a good deal of interest in the new issues this week,” a trader in New York said. “Today, though, a lot of people were hanging back, waiting to see how we receive the supply as the week moves forward.”
This week, Mississippi is hoping to gain some attention with its approximately $651 million of taxable GO debt in the negotiated market - $371.69 million of which is structured as Series 2010-F taxable, direct-pay BABs.
That portion of the deal - as well as a $45 million series of recovery zone economic development bonds - is being priced by Morgan Stanley on Thursday. The deal's preliminary official statement indicates bullet maturities in 2034 and 2035 on the RZED bonds, and serial bonds 2023 to 2034 on the BAB portion as the tentative structures.
The largest deal of the week also includes $233.9 million of traditional taxable GO debt expected to be priced for retail investors on Wednesday by Bank of America Merrill Lynch and for institutions on Thursday. The financing has obtained ratings of Aa2 from Moody's Investors Service, AA from Standard & Poor's, and AA-plus from Fitch Ratings.
An undetermined amount of tax-exempt bonds could also be included as Series 2010 G, depending on market conditions, according to state officials.
The Northeast, meanwhile, will see a flurry of activity, beginning with a three-pronged senior bond financing from the University of Massachusetts Building Authority totaling $568 million and planned for pricing in the competitive market on Thursday.
The deal consists of $126.3 million of Series 2010-1 bonds maturing from 2011 to 2020; $438.25 million of Series 2010-2 taxable BABs maturing from 2021 to 2040; and $3.02 million of Series 2010-3 traditional taxable bonds maturing from 2011 to 2040. The bonds are rated Aa2 by Moody's, and AA by Fitch.
The New York Health and Hospitals Corp. will also come to market with $512.6 million of Series 2010 A health system revenue bonds, which will be priced by JPMorgan Tuesday after being offered to retail investors Monday.
The bonds mature in 2011 and from 2013 through 2025, with a split term maturity in 2030. Yields during the retail order period range from 1.32% with a 2% coupon in 2013 to 4.26% with a 4.125% coupon in 2030. Bonds maturing in 2011 will be decided via sealed bid. Bonds maturing from 2022 through 2024 and a portion of bonds maturing in 2030 were not offered during the retail order period.
The bonds, which are callable at par in 2020, are rated Aa3 by Moody’s and A-plus by both Standard & Poor’s and Fitch.
New York's Triborough Bridge and Tunnel Authority is gearing up to issue $346.9 million of senior general revenue bonds - $66.5 million of which will be sold as Series 2010 A-1 maturing serially from 2011 to 2020, and $280.4 million of which are structured as taxable BABs in Series 2010A-2 structured to mature serially from 2021 to 2040.
The District of Columbia Water and Sewer Authority will issue $300 million of public utility subordinate-lien revenue bonds that are structured as BABs. Senior-managed by JPMorgan, the bonds are expected to be priced on Wednesday and rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch.
Switching gears to Texas, a $409 million revenue refunding is on tap from the Lower Colorado River Authority on Thursday, following a retail order period planned for Wednesday by senior-manager Goldman, Sachs & Co.
The two-pronged deal, which consists of Series 2010 A and B, is secured by a gross revenue pledge and is expected to be rated A1 by Moody's, A by Standard & Poor's, and A-plus by Fitch.
The Alameda County, Calif., Joint Powers Authority will add to the negotiated activity when it sells $320 million of recently upgraded lease revenue bonds on Tuesday to finance multiple capital projects.
Barclays Capital will price the two-pronged bond offering, which is rated A1 by Moody's, AA by Standard & Poor's, and was upgraded to AA-minus from A-plus earlier this month by Fitch due in part to financial strength in the face of ongoing economic, federal, and state pressures, a large, diverse economy, and a low to moderate debt burden, among other factors, according to an Oct. 6 Fitch report.
The bonds, which mature serially from 2036 to 2045, are backed by Alameda County's lease rental payments to the authority, subject to annual appropriation by the county, and will finance some of the costs associated with the Alameda County Medical Center Highland Hospital rebuilding project.
Also, gilt-edged Delaware will sell nearly $300 million of GO debt, including $175.2 million of taxable BABs and qualified school construction bonds to help finance capital projects.
The transaction includes $40 million of tax-exempt debt for an advance refunding, but market conditions will dictate whether the state will issue those bonds.
JPMorgan will kick off one day of retail orders Tuesday for $123.4 million of tax-exempt Series 2010B bonds followed by institutional pricing on Wednesday. The state will then offer $115.7 million of Series 2010C BABs and $59.5 million of Series 2010D QSCBs via competitive bid on Thursday.
In economic data released Monday, industrial production dropped 0.2% in September, the first decline in 15 months.
Industrial capacity utilization was 74.7% for the month, down from an upwardly revised 74.8% in August, originally reported as 74.7%.
Economists expected industrial production would rise 0.2% and that capacity utilization would be 74.8%, according to the median estimate from Thomson Reuters.
Visible Supply
The Bond Buyer’s 30-day visible supply rose $789.8 million to $13.297 billion. The total is comprised of $4.550 billion of competitive bonds and $8.747 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,426 trades of 13,807 issues for volume of $13.76 billion. Most active was taxable New York 5.817s of 2031 that traded 493 times at a high of 103.750 and a low of 97.400.
