The municipal bond market was expected to see almost $8 billion in new issuance this week, but will see $350 million less as New Jersey announced late Friday it has postponed its competitive sale to May 1.
Before the deal was delayed, $7.39 billion in issuance was expected, up from last week’s revised $6.07 billion. In the negotiated market, $5.13 billion is expected to be priced, up from last week’s revised $5.09 billion. On the competitive calendar, $2.26 billion should be auctioned, up from last week’s revised $975 million.
The New Jersey sale was initially scheduled for Tuesday. A spokesman said the state had just issued two big deals — $877 million of New Jersey Transportation Trust Fund Authority and about $300 million of New Jersey Healthcare Financing Authority — and wanted to give the market time to digest those deals. The competitive calendar Tuesday also looked crowded, the spokesman said.
Traders said the postponed deal gave the market some breathing room and delaying the sale would probably help the state. “New Jersey has issued almost $1.8 billion of bonds between three recent deals,” a New York trader said. “It is just a lot of paper at one time from one state. So I don’t think it’s unusual to postpone GOs in light of recent issuance.”
He added part of the concern could be softer bonds in the secondary. “You don’t want to be in a situation where you have trouble getting the deal done. The market needs a breather before they bring the deal out and it’s not the worst thing.”
Monday was otherwise a typical quiet start to the week. “The market is dead quiet,” a Boston trader said. “The phones rang more on Friday when we were in lock-down because of the manhunt. I am not kidding.”
Others agreed. “It’s pretty quiet,” a second New York trader said. “Same Monday stuff.”
Other traders said the market was steady. “The market is kind of quiet,” another New York trader said. He added munis were trading flat.
Monday Wells Fargo priced for retail $400 million of California State Public Works Board lease revenue bonds for the Judicial Council of California, the Yuba City Courthouse and lease revenue refunding bonds for the Department of State Hospitals, Coalinga. The bonds are rated A2 by Moody’s Investors Service, A-minus by Standard & Poor’s, and BBB-plus by Fitch Ratings. Pricing details were not yet available. Institutional pricing is expected Tuesday.
In the secondary market, trades compiled by data provider Markit showed firming.
Yields on New Jersey Tobacco Settlement Financing Corp. 5s of 2041 and Municipal Electric Authority of Georgia 5s of 2021 fell three basis points each to 5.83% and 1.85%, respectively.
Yields on Los Angeles Community College District 5s of 2020 and New Jersey Economic Development Authority 5s of 2030 fell two basis points each to 0.50% and 3.22%, respectively.
Yields on New York City Municipal Water Finance Authority 4s of 2047 slid one basis point to 3.67%.
Municipal bond scales ended steady to one basis point firmer on Monday.
Yields on the Municipal Market Data triple-A GO scale ended flat. The 10-year was steady at 1.70% for the fourth session and the 30-year closed unchanged at 2.90% for the second trading session. The two-year closed steady at 0.29% for the 12th session.
Throughout the first few weeks of April, muni yields have plummeted. The 10-year MMD yield has fallen 21 basis points from 1.91% on March 28 to 1.70% on April 22. The 30-year MMD yield has also dropped a whopping 19 basis points to 2.90% from 3.09% at the end of March. The two-year yield fell two basis points from 0.31%.
Monday, yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale ended flat to one basis point lower. The 10-year yield fell one basis point to 1.76%. The 30-year closed flat at 3.02% for the third session and the two-year was flat at 0.32% for the 12th session.
Throughout the month, the 10-year MMA yield has plunged 20 basis points to 1.76% on April 22 from 1.96% on March 28. The 30-year yield has also dropped 17 basis points to 3.02% from 3.19% at the end of March. The two-year yield slid one basis point from 0.33%.
Treasuries ended steady to one basis point stronger Monday. The two-year and 30-year yields were steady at 0.23% and 2.88%, respectively. The benchmark 10-year yield fell one basis point to 1.70%.
The drop in yields over the course of the month has allowed munis to outperform Treasuries. Since the beginning of April, the five-year muni-to-Treasury ratio fell to 107.2% from 109.2% and the 10-year ratio fell to 100% from 102.7% The 30-year ratio also slid to 100.7% from 100.3%.