Municipal bond buyers are looking ahead to the kickoff of the week's $4.57 billion primary market calendar, which is dominated by a big competitive sale from Pennsylvania on Wednesday and two large negotiated deals from a New York issuer on Thursday.
Secondary Market
U.S. Treasuries were narrowly mixed on Wednesday. The yield on the two-year Treasury was flat from 0.87% on Tuesday, while the 10-year Treasury yield dropped to 1.81% from 1.84% and the yield on the 30-year Treasury bond decreased to 2.61% from 2.63%.
Top-rated municipal bonds ended steady in quiet activity on Tuesday. The yield on 10-year benchmark muni general obligation on Tuesday was unchanged from 1.66% on Thursday, while the 30-year muni yield was flat at 2.45%, according to the final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated at 90.6% on Tuesday compared to 90.5% on Friday, while the 30-year muni to Treasury ratio stood at 93.2% versus 92.8%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 33,547 trades on Tuesday on volume of $6.54 billion.
Primary Market
On Wednesday, Pennsylvania will competitively sell $990.55 million of unlimited tax general obligation bonds consisting of $355 million of First Series of 2016 bonds and $635.55 million of First Refunding Series of 2016 bonds.
Public Financial Management is the financial advisor on the sale and Ballard Spahr is bond counsel.
The Keystone State sold two competitive offerings in 2015 totaling over $2 billion. On May 27, Bank of America Merrill Lynch won $1.24 billion of Series of 2015 GOs with a true interest cost of 3.59%. On Feb. 3, BAML won $1 billion of First Series of 2015 GOs with a TIC of 2.99%.
Since 2006, the state has sold about $15 billion of debt, with the most issuance occurring in 2010 when it issued $2.69 billion and the least issuance coming in 2008 when it sold $705.2 million.
The bonds are rated Aa3 by Moody's Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.
Also on Wednesday, Goldman Sachs is set to price the Illinois Finance Authority's $134.24 million of revenue refunding bonds for the Northwest Community hospital. The deal is rated A2 by Moody's and A-plus by S&P.
RBC Capital Markets is expected to price Pima County, Ariz.'s $125.53 million of GO refunding bonds on Wednesday. The deal is rated AA-minus by S&P and Fitch.
Morgan Stanley is set to price the Dauphin County General Authority, Pa.'s $100 million of Series 2016A health system revenue bonds for the Pinnacle Health System on Wednesday.
On Thursday, the Dormitory Authority of the State of New York is coming to market with two separate negotiated deals totaling over $836 million.
Morgan Stanley will price DASNY's $589.98 million of Series 2016A tax-exempt revenue bonds for New York University while Wells Fargo Securities will price DANY's $246.38 million of Series 2016B taxable revenue bonds for New York University.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $1.99 billion to $12.25 billion on Wednesday. The total is comprised of $7.55 billion of competitive sales and $4.70 billion of negotiated deals.
Ramirez: Manageable Supply for the Week
"We think the new issue supply, at $4.7 billion, or 54% of the 12 week moving average, is manageable, led by $836 million NYU revs and $990 million Pa. GO deal, selling competitively. We think Pa. should come cheaper," Ramirez & Co. Managing Director Peter Block wrote in a research note released on Tuesday.
Ramirez continues to see net negative issuance for the year.
"We forecast gross supply at $378 billion in 2016 and continued negative net issuance. Gross supply through April 2016 was $120.38 billion, while net supply was $12.30 billion. We see net muni market supply at -$16.31 billion over the next 30 days, a reversal of the year-to-date trend."
Block highlighted several states that would see shrinking supply.
"Of the 10 states with the most outstanding debt, New York stands to shrink the most (1.5%), followed by New Jersey (1.3%), and Ohio (1.0%)," Block wrote. "Conversely, Washington is set to expand the most (1.1%), followed by Texas (0.3%).
