Municipal market participants are preparing for nearly $12 billion in issuance in the coming week to help meet demand that hasn't wavered as issuance slowed in July.
Primary Market
Total volume for the week of Aug. 5 is estimated by Ipreo at $11.9 billion, after a revised total of $5.7 billion was sold in the past week, according to Thomson Reuters data. The calendar consists $8.6 billion of negotiated deals and $3.3 billion of competitive sales.
This is the highest estimated volume since the week of June 6, which was estimated to come in at $12.7 billion.
"The market has been waiting a long time for this [much volume in a given week] and we will see how it goes," said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management. "After a very slow July, we could see issuance volume pick back up this month and this first week of the month is a good start to that."
Heckman said that in July, the bond market saw an almost 2/1 ratio of bonds being called to new issues, which has created a lot of pent up demand.
"As always, if the deals are priced properly, I would expect the deals to do well and if the bigger names are priced properly, I would expect them to be oversubscribed by a good amount. The demand for munis has been very strong and has not wavered and it has been a while since we had the volume to come anywhere close to matching the demand."
New York City will lead the issuance surge, as the Big Apple plans to hit the market with three deals totaling $1.1 billion. Goldman, Sachs is expected to price the Big Apple's general obligation fiscal 2017 series A-1 and 1 bonds on Tuesday, following two-day retail order period on June 29 and Aug. 1. It is anticipated that the series A-1 bonds will be for $800 million and the series 1 bonds will be for $55.6 million. The deal is rated Aa2 by Moody's Investors Service and AA by S&P Global Ratings and Fitch Ratings.
The city that never sleeps will also issue two competitive sales of taxable GO bonds on Tuesday totaling $250 million.
The state of Minnesota will sell five separate competitive sales totaling almost $788 million on Tuesday. The Land of 10,000 Lakes is expected to sell $7.5 million of GO taxable state various purpose bonds, $215 million of GO state trunk highway bonds, $264.25 million of GO state various purpose bonds and $301.195 million of GO state various purpose refunding bonds. All of the deals are rated Aa1 by Moody's and AA-plus by S&P.
Miami-Dade County is scheduled to hit the market with two negotiated deals totaling $742 million on Wednesday, following a one day retail order period and indications of interest on Tuesday. Bank of America Merrill Lynch will run the books on both deals, the first being $377 million of aviation revenue refunding taxable bonds and the other being $365 million of aviation revenue refunding, non-alternative minimum tax bonds. The deal is rated A by S&P and Fitch.
The state of Wisconsin will be back in the market, fresh off selling $371 million in the past week, as the badger state will be once again looking to take advantage of low interest rates and refinance old debt. This time around, Stifel will be the lead manager on the $598.13 million of general fund annual appropriation refunding bonds, scheduled to price on Tuesday. The deal is rated Aa3 by Moody's and AA-minus by S&P and Fitch.
The state of Connecticut is expected to sell two competitive sales on Wednesday totaling $500 million. The Constitution State is planning to sell $250 million of GO bonds and another $250 million of taxable GO bonds. The deal is Aa3 by Moody's and AA-minus by S&P and Fitch.
Kroll Bond Rating Agency also rates Connecticut and on July 20 announced that it downgraded the states GO debt to AA-minus from AA, citing the states dwindling reserves.
Secondary Market
Top-rated municipal bonds finished steady to stronger on Friday, according to traders. The yield on the 10-year benchmark muni general obligation dropped one basis point to 1.40% from 1.41% on Thursday, while the yield on the 30-year muni was steady at 2.12%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were stronger on Friday after the release of a weaker than expected advance GDP report for the second quarter. GDP rose 1.2% last quarter, lower than the 2.4% gain forecast by economists.
The yield on the two-year Treasury dropped to 0.66% from 0.71% on Thursday, as the 10-year Treasury yield declined to 1.46% from 1.51% and the yield on the 30-year Treasury bond decreased to 2.19% from 2.23%.
The 10-year muni to Treasury ratio was calculated at 91.2% on Friday compared to 93.3% on Thursday, while the 30-year muni to Treasury ratio stood at 94.9% versus 95.1%, according to MMD.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended July 29 were from Nebraska and California issuers, according to
In the GO bond sector, the Sarpy County School District, Neb., 3s of 2039 were traded 27 times. In the revenue bond sector, the California 4s of 2041 were traded 81 times. And in the taxable bond sector, the California 7.55s of 2039 were traded 25 times.
Week's Most Actively Quoted Issues
California and Texas issues were among the most actively quoted names in the week ended July 29, according to Markit.
On the bid side, the California taxable 7.35s of 2039 were quoted by 10 unique dealers. On the ask side, the Texas GO 5s of 2044 were quoted by 16 unique dealers. And among two-sided quotes, the California taxable 7.55s of 2039 were quoted by 12 unique dealers.
Lipper: Muni Bond Funds See Inflows
For the 43rd straight week, municipal bond funds reported inflows, according to Lipper data released on Thursday. The weekly reporters saw $782.940 million of inflows in the week ended July 27, after inflows of $1.014 billion in the previous week, Lipper said.
The four-week moving average remained positive at $939.178 billion after being in the green at $922.446 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds experienced inflows, gaining $658.429 million in the latest week after inflows of $671.101 million in the previous week. Intermediate-term funds had inflows of $23.786 million after inflows of $254.709 million in the prior week.
National funds had inflows of $634.324 million on top of inflows of $882.469 million in the previous week. High-yield muni funds reported inflows of $206.715 million in the latest reporting week, after inflows of $281.660 million the previous week.
Exchange traded funds saw inflows of $166.130 million, after inflows of $192.991 million in the previous week.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $631.6 million to $16.88 billion on Monday. The total is comprised of $5.43 billion of competitive sales and $11.45 billion of negotiated deals.
