Muni market set for wild week

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The municipal bond market is in for another action-packed week, with above-average issuance as COVID-19 continues to spread rapidly.

“While this week's expected value of $9.1 billion appears to be dramatically lower than last week's supply, it is still 15% above the year-to-date weekly average of $7.9 billion,” said Patrick Luby, senior municipal strategist at CreditSights. “Our updated estimate of March 1st redemptions is $10.7 billion, of which $1.4 billion are taxable. Redemptions are now expected to total $22.9 billion in March and $300.3 billion for the full year.”

Most of the week’s issuance will take place later in the week, on Wednesday and Thursday.

RBC Capital Markets is expected to price New York City’s (Aa1/AA/AA/NR) $860 million of tax-exempt general obligation bonds on Wednesday after a two-day retail order period.

The Big Apple is also selling $500 million of taxable GOs in the competitive market, also on Wednesday.

Staying in the competitive arena, Maryland (Aaa/AAA/AAA/ ) and its top-tier ratings is scheduled to sell a total of $779.27 million of GO and taxable GO bonds in four separate sales.

BB&T Capital Markets is slated to price New Hope Cultural Education Facilities Finance Corp., Texas’ (NR/NR/NR/ ) $668.95 million of senior living revenue tax-exempt and taxable bonds on Wednesday.

“The primary will continue to be its usual self, but the big wild card is this virus,” said one New York trader. “Who knows what will happen and where yields will go and how fast.”

Secondary market
Munis were mixed on Monday on the MBIS benchmark scale, with yields falling less than one basis point in the 10- and rising by no more than a basis point in the 30-year maturity. High-grades were stronger, with yields on MBIS' AAA scale decreasing by five basis points in the 10-year maturity and by one basis point in the 30-year maturity.

On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10-year muni and the 30-year muni were unchanged from a historic lows of 0.93% and 1.52%.

The 10-year muni-to-Treasury ratio was calculated at 86.4% while the 30-year muni-to-Treasury ratio stood at 92.9%, according to MMD.

Stocks bounced after the worst week since the financial crisis and Treausry yields were lower still.

The Dow Jones Industrial Average was up about 2.71%, the S&P 500 index was higher by 2.19% and the Nasdaq gained roughly 2.11% late in the session Friday.

The three-month Treasury was yielding 1.185%, the Treasury two-year was yielding 0.824%, the five-year was yielding 0.872%, the 10-year was yielding 1.096% and the 30-year was yielding 1.658%.

Last week’s actively traded issues
According to IHS Markit, revenue bonds made up 50.49% of total new issuance in the week ended Feb. 28, up from 50.20% in the prior week. General obligation bonds were 43.90%, down from 44.34%, while taxable bonds accounted for 5.61%, up from 5.46%.

Some of the most actively traded munis by type in the week ended Feb. 28 were from New York, Ohio and Texas issuers, according to IHS Markit.

In the GO bond sector, the New York City zeros of 2042 traded 31 times. In the revenue bond sector, the Kentucky Public Energy Authority, 4s of 2050 traded 43 times. In the taxable bond sector, the Buckeye Tobacco Settlement Financing Authority, 5s of 2055 traded 320 times.
Puerto Rico, Virginia and Illinois bonds were among the most actively quoted in the week ended Feb. 28.

On the bid side, the Puerto Rico Sales Tax Financing Corp., revenue, 4.75s of 2053 were quoted by 28 unique dealers. On the ask side, the Fairfax County Industrial Development Corp., Virginia, revenue, 4s of 2048 were quoted by 182 dealers. Among two-sided quotes, the State of Illinois, taxable, 5.1s of 2033 were quoted by 11 dealers.

Previous session's activity
The MSRB reported 34,711 trades Friday on volume of $15.177 billion. The 30-day average trade summary showed on a par amount basis of $12.68 million that customers bought $6.46 million, customers sold $4.12 million and interdealer trades totaled $2.09 million.

California, Texas and New York were most traded, with the Golden State taking 15.518% of the market, the Lone Star State taking 12.143% and the Empire State taking 10.959.

The most actively traded security was the Buckeye Tobacco Settlement Financing Authority’s senior refunding bonds 2020 B-2 CL 2, 5s of 2055, which traded 46 times on volume of $183.875 million.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation

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