Market looks to chunky calendar, with deals from California, Massport on tap

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The municipal bond market is looking to this week's $6.9 billion of new-issue volume for some much-needed relief from the summertime slump blues.

Topping the slate is the Trustees of the California State University’s (Aa2/AA-/NR) $544 million of revenue bonds. Barclays Capital is set to price the Series 2018A and taxable Series 2019B bonds on Thursday.

And two deals — the Massachusetts Port Authority’s (Aa2/AA/AA) $461 million offering and Charleston, S.C.’s (Aaa/AAA/NR) $135 million sale will be priced using Bloomberg’s BVAL AAA callable scale as its primary method of pricing.

Citigroup is set to price the Massachusetts Port Authority’s (Aa2/AA/AA) $461.215 million of Series 2019B revenue bonds not subject to the alternative minimum tax and Series 2019C AMT bonds on Wednesday. Proceeds will be used for Logan Airport and for port facilities. BofA Securities and Loop Capital Markets are co-managers on the deal, while PFM is the municipal advisor. Kaplan Kirsch Rockwell and Foley & Lardner are the bond counsel.

“The 16th busiest U.S. airport with just over 20 million enplanements last year, Logan Airport has had average enplanement growth of 5% over the past five years, with strong diversity across airlines since the busiest carrier, Jet Blue, accounts for only 28% of total enplanements,” Janney said in a Monday market comment.

Wells Fargo Securities is expected to price Charleston, S.C.’s (Aaa/AAA/NR) $135.23 million of Series 2019 waterworks and sewer system capital improvement revenue bonds on Wednesday. BofA and Rice Financial Products Co. are co-managers on the deal, while PFM is the municipal advisor. Haynsworth Sinkler Boyd is the bond counsel. Proceeds will be used to finance some capital improvements for the Charleston Water System.

In the competitive arena, San Jose, California, (Aa1/AA+/AA+) is selling $502.26 million of general obligation bonds in three offerings on Tuesday.

The sales consist of $173.4 million of Series 2019A-1 disaster preparedness, public safety and infrastructure GOs, $170.37 million of Series 2019B Taxable GOs and $158.49 million of Series 2019C refunding, Libraries, parks and public safety project GOs.

The financial advisor is Public Resources Advisory Group. The bond counsel is Jones Hall.

Primary market
Also on the negotiated slate this week is the Trustees of the California State University’s (Aa2/AA-/NR) $543.72 million of revenue bonds. Barclays Capital will price the Series 2018A and taxable Series 2019B bonds on Thursday.

Barclays is also ready to price the New York City Municipal Water Finance Authority’s (Aa1/AA+/AA+) $400 million of tax-exempt fixed-rate second general resolution revenue bonds on Wednesday after a one-day retail order period on Tuesday.

In the competitive arena, San Jose, California, (Aa1/AA+/AA+) is selling $502.26 million of general obligation bonds in three offerings on Tuesday.

The sales consist of $173.4 million of Series 2019A-1 disaster preparedness, public safety and infrastructure GOs, $170.37 million of Series 2019B Taxable GOs and $158.49 million of Series 2019C refunding, Libraries, parks and public safety project GOs. The financial advisor is Public Resources Advisory Group while the bond counsel is Jones Hall.

One trader said that he will be focused on the bigger competitive deals this week, while not massive. He noted that competitive new issues are usually fragmented into various portions, with the short end is usually bought by SMA buyers and the long end is generally retail and a few insurance companies.

"Demand for long 3s has trailed the demand for short 5s to such a degree that while the short end has seen a huge rally, the long end has been verily left behind," the trader said. "There is always more than enough around to satisfy the sparse demand that does exist. Where there has been a general struggle is in premium 3s, so a big supply of those (which you could see in a couple of these deals) might make things a little interesting. We’ll see."

He added that this process has caused 3s to get so cheap that there have been taxable AAA deals (such as the taxable Lincoln, Nebraska, deal a couple weeks back) that have actually come through tax-exempt deals with the same coupon, rating, and maturity. "It’s pretty nutty."

Lipper: More inflows into muni funds
For the 26th straight week, investors remained bullish on municipal bond funds, according to data from Refinitiv Lipper.

Those tax-exempt mutual funds which report flows weekly saw $1.221 billion of inflows in the week ended June 26 after inflows of $1.688 million in the previous week.
Exchange-traded muni funds reported inflows of $103.292 million after inflows of $232.389 million in the previous week. Ex-ETFs, muni funds saw inflows of $1.117 billion after inflows of $1.456 billion in the previous week.

The four-week moving average remained positive at $1.136 billion, after being in the green at $1.029 billion in the previous week.

Long-term muni bond funds had inflows of $781.308 million in the latest week after inflows of $1.492 billion in the previous week. Intermediate-term funds had inflows of $293.122 million after inflows of $166.746 million in the prior week.

National funds had inflows of $1.051 billion after inflows of $1.499 billion in the previous week. High-yield muni funds reported inflows of $317.217 million in the latest week, after inflows of $394.955 million the previous week.

On Wednesday, the Investment Company Institute reported long-term municipal bond funds and exchange-traded funds saw a combined inflow of $2.517 billion in the week ended June 26, while long-term muni funds alone saw an inflow of $2.215 billion and ETF muni funds saw an inflow of $302 million.

Secondary market
Munis were little changed in late trade on the MBIS benchmark scale, with yields rising by less than one basis point in the 10-maturing and falling by less than one basis point in the 30-year maturity. High-grades were weaker, with MBIS’ AAA scale showing yields rising one basis point in the 10-year maturity and by less than one basis point in the 30-year maturity.

On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10- and 30-year GOs remained unchanged at 1.62% and 2.29%, respectively.

The 10-year muni-to-Treasury ratio was calculated at 79.8% while the 30-year muni-to-Treasury ratio stood at 90.9%, according to MMD.

“The ICE Muni Yield curve is consistent with Friday’s levels,” ICE Data Services said in a Monday market comment. “Tobaccos and high-yield are quiet and unchanged today, as is Puerto Rico. The taxable side of the market is two basis points lower in the 10-year space and three basis points lower in the 30-year space.”

Treasuries were stronger as stocks traded lower. The Treasury three-month was yielding 2.228%, the two-year was yielding 1.876%, the five-year was yielding 1.836%, the 10-year was yielding 2.022% and the 30-year was yielding 2.513%.

Previous session's activity
The MSRB reported 15,424 trades Friday on volume of $2.60 billion. The 30-day average trade summary showed on a par amount basis of $11.91 million that customers bought $6.35 million, customers sold $3.59 million and interdealer trades totaled $1.97 million.

California, Texas and New York were most traded, with the Golden State taking 15.594%of the market, the Lone Star State taking 11.329% and the Empire State taking 10.653%.

The most actively traded security was the Washington State Series 2012A GO 5s of 2024, which traded three times on volume of $15.0 million.

Last week's actively traded issues
Revenue bonds made up 48.82% of total new issuance in the week ended July 5, down from 49.90% in the prior week, according to IHS Markit. General obligation bonds were 46.26%, up from 45.08%, while taxable bonds accounted for 4.92%, down from 5.02%.

Some of the most actively traded munis by type in the week were from New York, California and Illinois issuers.

In the GO bond sector, the New York City zeros of 2036 traded 20 times. In the revenue bond sector, the Los Angeles 5s of 2020 traded 136 times. In the taxable bond sector, the Illinois 5.1s of 2033 traded 22 times.
Treasury auctions discount rate bills
Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were higher, as the $36 billion of three-months incurred a 2.210% high rate, up from 2.145% the prior week, and the $36 billion of six-months incurred a 2.075% high rate, up from 2.040% the week before.

Coupon equivalents were 2.259% and 2.132%, respectively. The price for the 91s was 99.441361 and that for the 182s was 98.950972.

The median bid on the 91s was 2.165%. The low bid was 2.100%. Tenders at the high rate were allotted 46.94%. The bid-to-cover ratio was 2.59. The median bid for the 182s was 2.055%. The low bid was 2.030%. Tenders at the high rate were allotted 71.88%. The bid-to-cover ratio was 2.95.

Gary E. Siegel contributed to this report.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Ziad Saba at 212-803-6079 for more information.

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Primary bond market Secondary bond market Municipal bond funds Massachusetts Port Authority California State University Trustees State of California New York City Municipal Water Finance Authority State of New York State of Texas City of San Jose, CA State of Washington City of New York, NY City of Los Angeles, CA State of Illinois
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