Municipal bond buyers cautiously eye New York City's $1B GO deal

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New York City makes a run for the finish line as it gets set to come to market with over $1 billion of bonds in competitive and negotiated deals on Thursday.

Buyers are watching warily from the sidelines as the deals sell into an uncertain market environment that has investors uneasily watching for clues on the strength of the economy and possible pace of future interest rate hikes.

Primary market
Jefferies priced New York City's $700 million of tax-exempt fixed-rate general obligation bonds and remarketed $195.45 million of the city’s GOs on Thursday after holding a two-day retail order period.

NYC is also competitively selling $250 million of taxable fixed-rate bonds in two separate offerings on Thursday, consisting of $186.555 million and $63.445 million GOs.

Moody’s Investors Service rates the city’s GOs Aa2, while S&P Global Ratings and Fitch Ratings rate them AA. All three assign stable outlooks.

Since 2008, NYC has sold almost $47 billion of bonds, with the most issuance occurring in 2008 when it sold $6.7 billion of debt. It sold the least amount of bonds in 2011 when it issued $2.7 billion of debt.
There was still a sense of hesitation from the buy side market on Thursday — even as the NYC GO deal was priced 10 basis points cheaper on the long end at 3.70% in 2045.

“I think retail is cautious,” said a New Jersey trader Thursday morning. He said a lot of the recent maturing bond proceeds and coupon payments have “funneled” their way into the volatile equity market.

“There are more net sellers than buyers in the muni market right now,” even though Treasuries were firmer Thursday morning.

“There may be some buying of bonds at a concession to the intrinsic value, but I think you would have to see the Treasury market reverse itself for three or four days to get people off the sidelines,” he explained.

He said the NYC GO deal was less than appealing to traditional buyers.

“It was fairly priced for both the issuer and the buyers, I don’t think it’s cheap or rich, but I don’t think they had the typical amount of substantial demand from retail.”

He attributed retail’s mood to their pining for higher rates.

“I think the way the deals have been, people are saying ‘why buy something on Monday if similar bonds are priced on Thursday and I can get them cheaper?’”

Bond Buyer 30-day visible supply at $7.09B
The Bond Buyer's 30-day visible supply calendar decreased $1.48 billion to $7.09 billion on Thursday. The total is comprised of $2.33 billion of competitive sales and $4.75 billion of negotiated deals.

Previous session's activity
The Municipal Securities Rulemaking Board reported 44,874 trades on Wednesday on volume of $10.19 billion.

California, Texas and New York were the states with the most trades, with the Golden State taking 12.02% of the market, the Empire State taking 11.943%, and the Lone Star State taking 11.073%.

Tax-exempt money market funds saw outflows
Tax-exempt money market funds experienced outflows of $114.8 million, bringing total net assets to $137.90 billion in the week ended Feb. 20, according to The Money Fund Report, a service of

This followed an outflow of $338.5 million to $138.02 billion in the previous week.

The average, seven-day simple yield for the 197 weekly reporting tax-exempt funds inched up to 0.56% from 0.55% the previous week.

The total net assets of the 826 weekly reporting taxable money funds increased $5.11 billion to $2.665 trillion in the week ended Feb. 19, after an inflow of $14.34 billion to $2.660 trillion the week before.

The average, seven-day simple yield for the taxable money funds increased to 1.02% from 0.99% from the prior week.

Overall, the combined total net assets of the 1,023 weekly reporting money funds increased $5.00 billion to $2.803 trillion in the week ended Feb. 19, after inflows of $14.00 billion to $2.798 trillion in the prior week.

Treasury announces auction details
The Treasury Department Thursday announced these auctions: $45 billion of 182-day bills selling on Feb. 26; $51 billion of 91-day bills selling on Feb. 26; and $22 billion of 364-day bills selling on Feb. 27.

Gary Siegel contributed to this report.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.

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