The municipal bond market is set to kick off the week with two large deals coming from New York issuers on Monday.
Traders will be watching both the primary and secondary as the Federal Reserve gathers in Washington, D.C., for a two-day mid-week monetary policy meeting.
Secondary Market
Treasuries were narrowly mixed on Monday. The yield on the two-year Treasury was unchanged from 0.96% on Friday, while the 10-year Treasury yield fell to 1.96% from 1.98% and the 30-year Treasury bond yield decreased to 2.73% from 2.75%.
On Friday, top-rated munis finished mixed. The yield on the 10-year benchmark muni general obligation rose one basis point to 1.89% from 1.88% on Thursday, while the 30-year muni yield was flat from 2.86%, according to the final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated on Friday at 95.7% compared to 97.7% on Thursday, while the 30-year muni to Treasury ratio stood at 104.1% versus 106.1%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 34,108 trades on Friday on volume of $9.32 billion.
The Prior Week's Most Actively Traded Issues
Revenue bonds comprised 52.64% of new issuance in the week ended March 11, up from 52.30% in the previous week, according to Markit. General obligation bonds comprised 39.57% of total issuance, down from 40.31%, while taxable bonds made up 7.79%, up from 7.39%,
Some of the most actively traded issues by type in the week were in California and Ohio. In the GO bond sector, the California 5s of 2045 traded 143 times. In the revenue bond sector, the Los Angeles County Public Works Financing Authority 4s of 2040 traded 80 times. And in the taxable bond sector, the Ohio State University 3.798s of 2046 traded 30 times, Markit said.
Primary Market
This week’s calendar totals $7.27 billion, consisting of $5.78 billion of negotiated deals and $1.49 billion of competitive sales.
On Monday, the New York City Transitional Finance Authority’s $750 million of building aid revenue bonds, Fiscal 2016 Series S-1 are expected to be priced for institutions after a two-day retail order period was held last week.
Ramirez & Co. priced the issue for retail on Friday to yield from 0.98% with a 3% coupon in 2019 to 3.21% with a 4% coupon in 2036; a 2045 maturity was priced as 4s to yield 3.45%. No orders were taken in the 2029-2030, 2032, 2034-2035, 2040 or 2043 maturities. The 2017 and 2018 maturities were offered as sealed bids.
On Thursday, Ramirez priced the issue for retail to yield from 0.96% with a 3% coupon in 2019 to 3.21% with a 4% coupon in 2036; a 2045 maturity was priced as 4s to yield 3.45%. No orders were taken in the 2028-2030, 2032, 2034-2035, 2040 or 2044 maturities. The 2017 and 2018 maturities were offered as sealed bids.
The bonds are rated Aa2 by Moody’s Investors Service and AA Standard & Poor’s and Fitch Ratings.
Also on Monday, Wells Fargo Securities set expected to price the Westchester County Local Development Corp., N.Y.’s $284.26 million of revenue bonds for the Westchester Medical Center Obligated group. The deal is rated Baa2 by Moody’s and BBB by S&P.
The largest deal of the week will be coming from the Nashville and Davidson County Health and Educational Facilities, Tenn. JPMorgan Securities is set to price $780 million of revenue bonds for the Vanderbilt University Medical Center in a deal that consists of $530 million tax-exempts and $250 million of taxables. The bonds are rated A3 by Moody’s.
Ramirez is set to price Connecticut’s $550 million of general obligation bonds on Wednesday. The deal is rated Aa2 by Moody’s and AA by S&P, Fitch and Kroll Bond Rating Agency.
The competitive calendar is pretty light, with only two issuers coming to market with sales of over $100 million.
The state of Hawaii will offer two separate sales totaling $525 million on Tuesday. The Aloha State will start off with $500 million of GOs and then follow it up with $25 million of taxable GOs. This will mark the first time in more than a quarter century that Hawaii will sell a competitive bond issue. Both sales are rated Aa2 by Moody’s and AA by S&P and Fitch.
Howard County, Md., will be selling three separate sales totaling $172.25 million, also on Tuesday. The largest of the three deals is a $135.97 million offering of GO consolidated public improvement project refunding bonds. All three issues are rated triple-A by Moody’s, S&P and Fitch.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $1.04 billion to $10.65 billion on Monday. The total is comprised of $2.60 billion of competitive sales and $8.05 billion of negotiated deals.
Will the Fed Bust a Move This Week?
No question, the Federal Open Market Committee wants to raise rates. But with the European Central Bank lowering rates and the potential impact of that move on the already-rising dollar, it’s unclear when they’ll get their wish. This meeting is out, but there is a chance the Fed could have an opportunity in June. Look for Janet Yellen to leave that possibility open during her press conference after the meeting. And, with a new dot plot being released Wednesday, we’ll get a clearer view whether the Fed still expects three to four rate hikes this year. Of course, it may be only wishful thinking since the Fed…despite its best intentions has been unable to raise rates yet this year.
Kyle Glazier and Gary Siegel contributed to this report
