Municipal bond traders are preparing for the start of a new week, which will see a manageable new issue slate of about $5.7 billion and the possibility of new record low muni rates.
The market will also be keeping watch on the Federal Reserve. The Federal Open Market Committee is set to gather in Washington on Tuesday and Wednesday to decide the course of monetary policy. Most observers think the Fed will not be making any move to raise interest rates at the conclusion of this meeting.
Secondary Market
U.S. Treasuries were narrowly mixed on Monday. The yield on the two-year Treasury dropped to 0.71% from 0.73% on Friday, while the 10-year Treasury yield declined to 1.62% from 1.63% and the yield on the 30-year Treasury bond was unchanged from 2.44%.
On Friday, June 10, the yield on 30-year muni general obligation dropped five basis points to 2.22% from 2.27% on Thursday, according to the final read of MMD's triple-A benchmark scale. It was the fourth day in a row it set a record low.
The yield on 10-year benchmark muni fell four basis points to 1.52% from 1.56% on Thursday, according to MMD. It now stands only five basis points above its all-time low of 1.47% set back in 2012.
Rates have been falling steadily over the past year. On June 10, 2015, the yield on the 30-year muni stood at 2.36% while the yield 10-year muni was at 2.38%.
On Friday, the 10-year muni to Treasury ratio was calculated at 92.9% compared to 93.0% on Thursday, while the 30-year muni to Treasury ratio stood at 90.7% versus 91.5%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 32,221 trades on Friday on volume of $12.77 billion.
Prior Week's Actively Traded Issues
Revenue bonds comprised 51.74% of new issuance in the week ended June 10, down from 52.19% in the previous week, according to data
General obligation bonds comprised 40.59% of total issuance, down from 40.94%, while taxable bonds made up 7.67%, up from 6.87%.
Some of the most actively traded issues by type were from California, New York and Indiana issuers.
In the GO bond sector, the Los Angeles County, Calif. 3s of 2017 were traded 74 times. In the revenue bond sector, the New York Transportation Development Corp. 5s of 2031 were traded 105 times. And in the taxable bond sector, the Indiana State Financing Authority 3.624s of 2036 were traded 28 times, Markit said.
Previous Week's Top Underwriters
The top negotiated and competitive underwriters of last week included JPMorgan Securities, Bank of America Merrill Lynch, Citigroup, Morgan Stanley and Piper Jaffray, according to Thomson Reuters data. In the week of June 5-June 11, JPMorgan underwrote $2.43 billion, BAML did $2.37 billion, Citi had $2.07 billion, Morgan Stanley did $821.8 million and Piper had $743.2 million.
Primary Market
This week's calendar is composed of about $3.7 billion of negotiated deals and $2.0 billion of competitive sales.
Action kicks off on Monday, with the New York State Environmental Facilities Corp.'s $500.64 million of Series 2016A state clean water and drinking water revolving funds revenue bonds.
Goldman Sachs is expected to price the NYS EFC's issue, New York City Municipal Water Finance Authority Projects Second Resolution bonds, for retail investors ahead of the institutional pricing on Tuesday. The bonds are rated triple-A by Moody's and S&P and AA-plus by Fitch.
Also on Monday, JPMorgan Securities is also set to price the Maryland Economic development Corp.'s $333.06 million of private activity revenue bonds for the Purple Line Light Rail project.
The issue consists of Series 2016A RSA bonds, Series 2016B FCP bonds, Series 2016C SLP bonds and Series 2016D AP bonds. The deal is rated BBB-plus by S&P and Fitch.
On Tuesday, JPMorgan is expected to price the Metropolitan Washington Airports Authority's $375 million of Series 2016A AMT and Series 2016B non-AMT airport system revenue refunding bonds. The deal is rated A1 by Moody's and AA-minus by S&P and Fitch.
Barclays Capital is set to price Cook County, Ill.'s $300 million of Series 2016A GO refunding bonds on Tuesday. The deal is rated A21 by Moody's, AA-minus by S&P and A-plus by Fitch.
JPMorgan is expected to price the California Infrastructure and Economic Development Bank's $138.41 million of Series 2016A infrastructure state revolving fund revenue bonds on Tuesday. The deal is rated Aa1 by Moody's and triple-A by S&P and Fitch.
The biggest deal of the week is coming out of the Land of Lincoln on Thursday. The state of Illinois is putting up for competitive bid $550 million of its Series 2016 general obligation bonds. The bonds are now rated Baa2 by Moody's Investors Service and BBB-plus by S&P Global Ratings and Fitch Ratings. All three raters have negative outlooks on the credit.
Illinois last competitively sold GOs on Jan. 14, when Bank of America Merrill Lynch won $480 million Series of January 2016 GOs with a true interest cost of 3.9989%. It was the state's first sale after a 20-monthj hiatus and the proceeds were to be used mostly for transportation projects. That issue was priced with a top yield of 4.27% in 2041, which was 161 basis points over the comparable maturity on MMD's triple-A scale.
Also on Thursday, Bank of America Merrill Lynch is expected to price the Dutchess County Local Development Corp., N.Y.'s $378.01 million of Series 2016B revenue and revenue refunding bonds for Health Quest Systems on Thursday. The deal consists of $28.01 million of Series 2016A revenue refunding bonds and $350 million of Series 2016B revenue bonds. The issue is rated A3 by Moody's and A-minus by S&P.
In the short-term competitive arena, the New York Metropolitan Transportation Authority is selling $700 million of bond anticipation notes in two separate sales on Thursday. The deals consist of $350 million of Series 2016A Subseries 2016A-1 dedicated tax BANs and $350 million of Series 2016A Subseries 2016A-2 dedicated tax BANs.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $38.9 million to $10.20 billion on Monday. The total is comprised of $4.52 billion of competitive sales and $5.68 billion of negotiated deals.
