The municipal bond market is set to see some large deals hit the screens on Tuesday, led by a high-yield deal from a Brooklyn, N.Y., issuer.
Secondary Market
U.S. Treasuries were narrowly mixed on Tuesday. The yield on the two-year Treasury rose to 0.73% from 0.72% on Monday, the 10-year Treasury yield dropped to 1.54% from 1.55% and the yield on the 30-year Treasury bond decreased to 2.26% from 2.28%.
Top-quality municipal bonds finished flat on Monday. The yield on the 10-year benchmark muni general obligation was steady from 1.40% on Friday, while the yield on the 30-year muni was unchanged from 2.13%, according to the final read of Municipal Market Data's triple-A scale.
On Monday, the 10-year muni to Treasury ratio was calculated at 90.45% compared to 92.5% on Friday, while the 30-year muni to Treasury ratio stood at 93.6% versus 95.3%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 30,045 trades on Monday on volume of $9.67 billion.
Primary Market
The week's new issue supply slate is composed of $3.65 billion of negotiated deals and $1.65 billion of competitive sales, with much of the volume set to start coming to market on Tuesday.
Goldman Sachs is set to price the Brooklyn Area Local Development Corp.'s $481.97 million of Series 2016A tax-exempt and Series 2016B taxable bonds backed by payments in lieu of taxes. The PILOTs will refund outstanding bonds from a 2009 issue.
The bonds are rated Baa3 by Moody's Investors Service and BBB-minus by S&P Global Ratings.
Also on Tuesday, Morgan Stanley is expected to price the New Jersey Healthcare Facilities Financing Authority's $243.38 million of Series 2016 revenue bonds for the St. Joseph's Healthcare System Obligated Group.
Since 2006, the authority has sold $7.13 billion of securities, with the largest issuance coming in 2008 when it offered $1.22 billion. That was the only time in the past 10 years the HFFA has issued more than $1 billion of bonds in one year. During that time frame, the lowest issuance occurred in 2012, when it sold $173 million.
Barclays Capital is set to price the Port of Tacoma, Wash.'s three series of bonds totaling $259.38 million. The deal consists of $150.66 million of Series 2016A non-AMT revenue refunding and Series 2016B AMT revenue and refunding bonds, rated Aa2 by Moody's and AA-minus by S&P. Barclays will also price the port's $108.72 million of Series 2016A non-AMT limited tax general obligation refunding bonds, rated Aa2 by Moody's and AA by S&P.
Ziegler is expected to price the Washington State Housing Finance Commission's $132.55 million of Series 2016 A&B non-profit housing revenue and refunding bonds for the Presbyterian Retirement Communities Northwest Project. The deal is rated BB-plus by Fitch Ratings.
Raymond James is expected to price New Haven, Conn.'s $117.57 million of Series 2016A GOs. The deal is rated Baa1 by Moody's and A-minus by S&P and Fitch.
Goldman is set to price the Irvine Ranch Water District, Calif.'s $117.51 million of Series 2016 certificates of participation. The deal is rated ripple-A by S&P and Fitch.
And Raymond James is expected to price Memphis, Tenn.'s $110 million of water, gas and electric system revenue bonds.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $1.66 billion to $11.57 billion on Tuesday. The total is comprised of $4.22 billion of competitive sales and $7.35 billion of negotiated deals.
Ramirez Remains Bullish on Munis
Ramirez remains bullish on the municipal bond market "with now better ratios and still fair -- but still rich -- sector valuations on a one year basis," Peter Block, Managing Director at Samuel A. Ramirez & Co., says in a weekly market commentary.
"We think investors can earn an average of 63 basis points in rolldown return in the sweet spot of the curve – six-years to 15-years -- at this time, which when added to carry (assuming 5% coupon), is substantially similar to longer bonds return, but without additional risk," Block wrote on Monday. "Roll returns in this part of the curve have consistently been the most favorable on a risk-adjusted basis over the past year."
