NEW YORK – The municipal market was weaker Monday amid fairly light secondary trading activity, ahead of a heavy slate of new issuance in the primary.
“I’d say we’re somewhere between three and five basis points weaker overall,” a trader in Los Angeles said. “There wasn’t a lot going on in the secondary though. Fairly light trading as we get ready for the onslaught of supply this week. That’s what everybody’s looking at right now. It’s all about the new issues.”
The Municipal Market Data triple-A scale yielded 2.48% in 10 years Monday, up five basis points from Friday’s 2.43%, while the 20-year scale edged up two basis point to 3.34%, up from Friday’s 3.32%. The scale for 30-year debt yielded 3.73%, one basis point higher than Friday’s 3.72%.
Monday’s triple-A muni scale in 10 years was at 96.4% of comparable Treasuries and 30-year munis were at 100.3%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 111.7% of the comparable London Interbank Offered Rate.
The Treasury market was mixed Monday. The benchmark 10-year note was quoted recently at 2.49% after opening at 2.51%.
The 30-year bond was quoted recently at 3.72% after opening at 3.71%. The two-year note was quoted recently at 0.42% after also opening at 0.42%.
The first full week of the fourth quarter gets under way with $13.13 billion of new, long-term volume, which is expected to continue to re-energize a thin and sleepy primary market, according to Ipreo LLC and The Bond Buyer.
The noticeably larger calendar - which includes at least four long-term deals of $1 billion or more - dwarfs the revised $9.85 billion that came to market last week, according to Thomson Reuters.
An additional $1 billion sale of tax and revenue anticipation notes from Pennsylvania is planned for pricing in the short-term competitive market on Tuesday.
The billion-dollar blitz is led by a $1.9 billion sale of revenue debt by the California Department of Water Resources, which is scheduled for negotiated pricing by senior manager Bank of America-Merrill Lynch. The bonds will go to retail Wednesday and be priced on Thursday. They are rated Aa3 by Moody's Investors Service, AA-minus by Standard & Poor's, and AA by Fitch Ratings, and are structured to mature serially from 2011 to 2019.
The New York State Dormitory Authority is gearing up to bring $1.36 billion of personal income tax revenue debt to market in a four-pronged deal being led by M.R. Beal & Co. that is pricing Tuesday. Series 2010E and F are both tax-exempt securities that were offered to retail investors beginning last Thursday and Friday during a two-day retail order period ahead of Monday's institutional orders.
Series 2010G and H are both taxable and planned for pricing on Tuesday - but only Series H is designated as Build America Bonds.
New York City, meanwhile, is on tap to sell two general obligation bond issues, one in the negotiated market and one in the competitive market. The larger negotiated issue totals $1.1 billion and consists of $650 million of taxable GO debt issued as BABs, as well as $500 million of tax-exempt GO debt. They are slated for pricing Thursday by Bank of America-Merrill and rated Aa2 by Moody's and AA by Standard & Poor's and Fitch.
The city will also sell $150 million of taxable GO debt in the competitive market Thursday, structured as serial bonds maturing from 2012 to 2019.
Pennsylvania is expected to contribute to the bond bonanza Tuesday with the sale of $1 billion of tax anticipation notes, followed Wednesday by $386.5 million of GO refunding bonds - both in the competitive market. The notes are being issued to provide cash flow to the commonwealth's general fund.
The refunding series is structured to mature from 2011 to 2023 and is being used to reduce debt-service payments on outstanding bonds from Second Series 2003, First and Second Series 2004, and First Series A 2007, which were issued at higher interest rates.
In the Midwest, Illinois' Metropolitan Pier and Exposition Authority is planning to price a $1.2 billion financing on behalf of the McCormick Place convention center project. The agency is a municipal corporation created by the Illinois General Assembly that owns and manages the McCormick Place complex, a Chicago-based venue that hosts conventions, fairs, trade shows, and expositions to strengthen the city's local economy.
The deal, which is being senior-managed and priced by Morgan Stanley, consists of three series of 2010 bonds. Series A is comprised of tax-exempt new-money bonds, Series B is tax-exempt refunding bonds, and Series C is taxable refunding bonds.
In other new-issue activity, the competitive market will see the arrival of nearly $1 billion of Georgia GO debt on Tuesday.
The Georgia transaction carries three triple-A ratings. It totals $974.9 million and consists of five series of bonds. The largest is $360.4 million of taxable, direct-pay BABs maturing from 2011 to 2030, followed by $321 million of GO tax-exempt refunding bonds structured to mature from 2012 to 2022.
Another $170.1 million will consist of tax-exempt GOs maturing from 2011 to 2020, while $94.6 million will include taxable, direct-pay recovery zone economic development bonds. The final series consists of $28.7 million of taxable, direct-pay qualified school construction bonds slated to mature in 2026 and 2027.
In economic data released Monday, factory orders fell 0.5% in August, after a 0.1% rise in July.
Pending home sales grew 4.3% to a reading of 82.3 in August from a revised 4.5% increase to 78.9 in July, originally reported as a 5.2% gain 79.4, according to an index released Monday by the National Association of Realtors.
Thomson Reuters’ poll of economists had predicted an 81.4 reading.
Visible Supply
The Bond Buyer’s 30-day visible supply fell $1.082 billion to $15.446 billion. The total is comprised of $3.563 billion of competitive bonds and $11.884 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 31,841 trades of 12,736 issues for volume of $11.24 billion. Most active was taxable Illinois Build America Bonds 6.725s of 2035 that traded 128 times at a high of 103.112 and a low of 99.750.
