Municipal market anticipation builds for billion-dollar deals

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Municipal investor anticipation was high for several billion dollar-plus deals on this week’s $7.5 billion supply slate.

The Dormitory Authority of the State of New York and the N.J. Transportation Trust Fund Authority have offerings scheduled for $1.7 billion and $1.6 billion, respectively.

The N.J. TTFA’s deal will grab a lot of attention, according to Howard Mackey, managing director at NW Financial Group in Hoboken, N.J.

“There will be a large focus on this New Jersey deal,” as there has been a lack of state paper lately, he said of the financing, in which his firm is a co-manager with lead Citigroup.

Mackey said demand should be strong for both 5% and 5.25% coupons because they provide a favorable defensive structure in the current rate scenario.

Meanwhile 4% coupons will able be snatched up by hungry investors. “In this environment when you have yields above 4% you could see demand for 4s at a discount,” he said.

Depending on the structure crafted by the syndicate group at the pricing, “those are two scenarios I envision might materialize,” he said.

There has been evidence of strong demand for New Jersey paper lately — including NW Financial’s own $15 million Bergen County deal last week, which was triple-A rated and was two to three times oversubscribed.

“There’s just no Jersey paper out there,” he said. “For major buyers who approve the paper, I suspect demand will be pretty strong.”

Citi is slated to price the N.J TTFA’s $1.56 billion of Series 2018A transportation system bonds on Wednesday. Proceeds will refund outstanding bonds.

The deal is rated Baa1 by Moody’s Investors Service, BBB-plus by S&P Global Ratings and A-minus by Fitch Ratings.

Prior week's top underwriters
The top municipal bond underwriters of last week included Wells Fargo Securities, Bank of America Merrill Lynch, Barclays Capital, Ziegler and Citigroup, according to Thomson Reuters data.

In the week of Sept. 23 to Sept. 29, Wells Fargo underwrote $479.0 million, BAML $436.million, Barclays $384.22 million, Ziegler $277.9 million and Citi $272.4 million.
Primary market
Volume for the week is estimated at $7.5 billion, consisting of $5 billion of negotiated deals and $2.5 billion of competitive sales.

In the competitive arena on Tuesday, DASNY is selling over $1.7 billion of tax-exempts and taxables in six separate offerings. Proceeds will be used for various state programs.

Public Resources Advisory Group and Backstrom McCarley Berry are the financial advisors; Hawkins Delafield and Golden Holley James are the bond counsel.

Additionally, the California Public Works Board is competitively selling $104.235 million of Series 2018C lease revenue bonds on Tuesday. Proceeds will be used to finance and refinance a portion of the costs of the design and construction associated with various correctional facilities projects.

KNN Public Finance is the financial advisors; the bond counsel is Stradling Yocca and the State Attorney General.

The deal is rated A1 by Moody’s and A-plus by S&P and Fitch.

Also on Tuesday, Raymond James & Associates is set to price the Texas Public Finance Authority’s $168.065 million of general obligation refunding bonds.

And JPMorgan Securities is expected to price the Indiana Finance Authority’s $162.075 million of hospital revenue bonds for Parkview Health consisting of Series 2018A and Series 2018C tax-exempts, Series 2018B taxables and Series 2019A forward delivery bonds.

Bank of America Merrill Lynch is set to price the Maine Municipal Bond Bank’s $129 million of Series 2018B bonds on Tuesday.

BAML is also expected to price the Kentucky Bond Development Corp.’s $101 million of convention facilities revenue bonds for the Lexington Center Corp. on Tuesday.

Bond Buyer 30-day visible supply at $11.59B
The Bond Buyer's 30-day visible supply calendar increased $1.81 billion to $11.59 billion for Monday. The total is comprised of $4.57 billion of competitive sales and $7.02 billion of negotiated deals.

Prior week's top FAs
The top municipal financial advisors of last week included Acacia Financial Group, Hilltop Securities, Ponder & Co., Urban Futures Inc., and PFM Financial Advisors, according to Thomson Reuters data.

In the week of Sept. 23 to Sept. 29, Acacia advised on $276.2 million, Hilltop $213.9 million, Ponder $213.7 million, Urban $173.9 million, and PFM $159.0 million.
Secondary market
Municipal bonds were mixed on Monday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell less than one basis point in the one-year, seven- to 12-year and 20- to 30-year maturities, rose less than a basis point in the three- to six-year and 14-year maturities and were unchanged in the two-year, 13-year and 15- to 19-year maturities.

High-grade munis were also mixed, with yields calculated on MBIS' AAA scale falling less than one basis point in the eight- to 10-year and 28- to 30-year maturities and rising as much as one basis point in the one- to seven-year and 11- to 27-year maturities.

Municipals were mixed on Municipal Market Data’s AAA benchmark scale, which showed the yield on the 10-year muni general obligation remaining unchanged while the yield on 30-year muni maturity rose two basis points.

Treasury bonds were weaker as stock prices traded higher.

On Monday, the 10-year muni-to-Treasury ratio was calculated at 83.7% while the 30-year muni-to-Treasury ratio stood at 99.3%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.

Previous session's activity
The Municipal Securities Rulemaking Board reported 32,583 trades on Friday on volume of $9.57 billion.

California, New York and Texas were the municipalities with the most trades, with the he Golden State taking 15.015% of the market, the Empire State taking 11.566%, and the Lone Star State taking 11.183%.

Prior week's actively traded issues
Revenue bonds comprised 56.66% of total new issuance in the week ended Sept. 28, up from 56.65% in the prior week, according to Markit. General obligation bonds made up 38.66%, up from 38.56% while taxable bonds accounted for 4.68%, down from 4.79%.

Some of the most actively traded munis by type in the week were from Puerto Rico, Minnesota and Pennsylvania issuers.

In the GO bond sector, the Puerto Rico Commonwealth 8s of 2053 traded 23 times. In the revenue bond sector, the Minneapolis Health Care System 4s of 2048 traded 59 times. And in the taxable bond sector, the Pocono Mountains Industrial Park Authority, Pa., 5.05s of 2049 traded 24 times.
Treasury sells discount rate bills
Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were mixed, as the $48 billion of three-months incurred a 2.175% high rate, down from 2.180% the prior week, and the $42 billion of six-months incurred a 2.335% high rate, down from 2.320% the week before.

The coupon equivalent on the 91s was 2.217%. The price was 99.450208. The median bid was 2.160% and the low bid was 2.125%. Tenders at the high rate were allotted 84.60%. The bid-to-cover ratio was 2.93.

The coupon equivalent on the 182s was 2.396%. The price was 98.819528. The median bid was 2.300% and the low bid was 2.280%. Tenders at the high rate were allotted 62.96%. The bid-to-cover ratio was 2.89.

Treasury to offer $40B of 4-week bills
The Treasury Department said Monday it will sell $40 billion of four-week discount bills on Tuesday.

The bills have an original issue date of May 3, an issue date of Oct. 4 and are due on Nov. 1.

There are currently $92.999 billion of four-week bills outstanding, including $144,953 billion held by the public.

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 Ziad Saba at 212-803-6079 for more information.

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Primary bond market Secondary bond market New Jersey Transportation Trust Fund Authority New York State Dormitory Authority Maine Municipal Bond Bank Indiana Finance Authority Texas Public Finance Authority State of Texas State of New York State of California