A day after muni yields soared 22 basis points on the long end, traders are ready for new issues to hit screens, but realize that market volatility may cause some of the deals not to come as planned. Yields were still on the rise this morning, according to traders.
Secondary Market
Munis were weaker, as the yield on the 10-year benchmark muni general obligation was as many as two basis points higher from 2.16% on Monday, while the yield on the 30-year increased from one to three basis points from 2.98%, according to a read of Municipal Market Data's triple-A scale.
On Monday, yields skyrocketed 22 basis points on both the 10-year and 30-year, as post-election jitters continued to hit munis hard.
The yield on the 10-year benchmark muni general obligation was 22 points higher to 2.16% from 1.94% on Thursday, while the yield on the 30-year increased 22 basis points to 2.98% from 2.76%, according to a final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated at 97.2% on Monday compared to 91.7% on Thursday, while the 30-year muni to Treasury ratio stood at 99.9% versus 94.3%, according to MMD.
Primary Market
This week's calendar consists of $8.9 billion of negotiated deals and $2.7 billion of competitive sales, which will start flowing into the market on Tuesday.
"The muni market could see cautious but decent demand for the new issues," said a New York trader. "They will be priced to sell, which will mean wider spreads, but my gut tells me buyers will be there at appropriately adjusted levels."
However, the volatility has already caused the Chicago Public Schools to postpone its scheduled deal, begging the question will more issuers do the same.
"Until the muni market can find some footing, underwriters will likely hold back pricing negotiated deals and it will be curious if major competitive sales will occur on Tuesday," said Randy Smolik, senior market analyst at MMD.
New issuance is scheduled to start rolling in on Tuesday. Topping the new issue calendar is the TSASC Inc.'s $1.02 billion tobacco settlement bond deal, as Jefferies is expected to price the New York deal for retail investors on Tuesday followed by the institutional pricing on Wednesday.
The issue will consist of $584.39 million of Fiscal 2017 Series A Senior bonds and $440 million of Fiscal 2017 Series B Subordinate bonds. Proceeds will primarily be used to refund TSASC's outstanding bonds.
TSASC is a local development corporation that issues debt secured by tobacco settlement revenues, which cigarette companies pay as part of the 1998 master settlement agreement with 46 states.
According to the preliminary official statement, S&P Global Ratings is expected to assign various ratings for different maturities in the issue, ranging from A and A-minus to BBB-plus for some of the senior bonds and BBB for some maturities of the subordinate bonds.
RBC Capital Markets is set to price the Los Angeles Department of Airports' $661.88 million of Series 2016B subordinate revenue bonds, subject to the alternative minimum tax, Series 2016C taxable senior refunding revenue bonds on Tuesday. The Series 2016B bonds are rated A1 by Moody's Investors Service and AA-minus by S&P and Fitch Ratings and the Series 2016C bonds are rated Aa3 by Moody's and AA by S&P and Fitch.
Bank of America Merrill Lynch is expected to price the Los Angeles County Metropolitan Transportation Authority's $515 million of Series 2016A Measure R senior sales tax revenue bonds on Tuesday. The deal is rated Aa1 by Moody's.
In the competitive arena, the Washington Suburban Sanitary District, Md., is selling $381.81 million of consolidated public improvement bonds of 2016, Second Series. The sale is rated triple-A by Moody's, S&P and Fitch.
The commonwealth of Massachusetts is set to sell $200 million of transportation fund revenue bonds for the rail enhancement and accelerated bridge programs. The deal is rated Aa1 by Moody's and AAA by S&P.
The Board of Trustees for the University of Alabama at Birmingham will be selling two issues totaling roughly $116.54 million. The general revenue bonds will be separated, with the larger deal being $93.73 million and the other deal should come in at $22.81 million. Both transactions are rated Aa2 by Moody's.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 41,850 trades on Monday on volume of $12.296 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $195.1 million to $15.41 billion on Tuesday. The total is comprised of $4.12 billion of competitive sales and $11.28 billion of negotiated deals.
