Municipals were little changed on Monday as market participants await this week’s holiday-pared new-issue slate. The bond markets close early on Friday in observance of the Good Friday holiday.
Supply is estimated at $3.6 billion for the week, consisting of $2.4 billion of negotiated deals and $1.2 billion of competitive sales.
Primary Market
JPMorgan Securities is set to price Miami Beach’s (Aa2/AA+/NR) $152.74 million of Series 2019 general obligation and refunding bonds on Tuesday. Co-managers are BofA Securities, Jefferies and PNC Capital Markets.
RBC Capital Markets is the financial advisor while Squire Patton Boggs is the bond counsel. Proceeds will fund some of the city’s public safety projects, neighborhoods and infrastructure projects, and parks, recreation and cultural facilities projects, as well as to refund some outstanding debt.
In the competitive arena, the California Department of Water Resources (Aa1/AAA/NR) is set to sell $306.35 million of Series BA revenue bonds on Tuesday. Proceeds of the deal, which benefits the Central Valley Project Water System, will be used to retire some outstanding commercial paper notes. Montague DeRose is the financial advisor and Orrick Herrington is the bond counsel.
Rhode Island (Aa2/AA/AA) will sell $148.6 million of GOs in two sales on Tuesday, which consist of $123.6 million of tax-exempt Series A consolidated capital development loan of 2019 GOs and $25 million of taxable Series B consolidated capital development loan of 2019 GOs. Proceeds will be used to finance various capital improvements. Public Resources Advisory Group is the financial advisor; Nixon Peabody is the bond counsel.
On Wednesday, a $450.76 million multi-part hospital deal is scheduled to come from the Cleveland Clinic Health System Obligated Group (Aa2/AA/NR). Barclays Capital is set to price the Martin County Health Facilities Authority, Fla.’s $226.23 million of Series 2019A hospital revenue bonds and the state of Ohio’s $224.54 million of Series 2019B hospital revenue bonds.
Melio is the financial advisor and Squire Patton Boggs is the bond counsel. Proceeds of the Series 2019A bonds will be used to provide a loan to the non-profit Cleveland Clinic Foundation to finance the costs of acquiring the entire ownership interest in Martin Memorial Health Systems. Proceeds of the Series 2019B bonds will be used to finance the costs of healthcare facilities.
Also on Wednesday, Goldman Sachs is expected to price the Anaheim Public Financing Authority, Calif.’s (A1/A/AA-) $176 million of tax-exempt and taxable revenue refunding bonds.
Bond Buyer 30-day visible supply at $5.32B
The supply calendar is $5.32 billion and is composed of $2.01 billion of competitive sales and $3.31 billion of negotiated deals.
Foreign holders of munis on the rise
There has been a steady rise in foreign holders of U.S. municipal debt, with quarterly flow reports showing a rise to $101 billion by the end of 2018, an increase of 7% from $94 billion at the end of 2016, Kimberly Olsan, a senior vice president of municipal trading at FTN Financial, wrote in a Monday market commentary.
“Domestically, long-duration taxable entities have options within the municipal high-grade space at taxable-equivalent yields that approach 5% (as contrasted with low-investment grade corporate names at lower yields),” Olsan wrote. “A down-in-coupon approach nets an additional 20-40 basis points, something that has gained greater market acceptance, and hence more prevalence in recent weeks.”
Looking at performance, Olsan said that yields adjusted slightly higher in the first week of the new quarter saw while still trading at the low end of the last six-month range.
“It appears the curve is attempting an adjustment on the short end — normalizing back towards 70% muni/UST ratios — while reacting to more fluid inquiry in the 15-25 year range,” she wrote. “Ahead of the tax deadline the makeup of bid lists reflected activity focused on liquidations of short maturities, so as that winds down the market can then turn to a more balanced assessment of fundamentals.”
Long maturities have been somewhat exempt from the tax period and rather have been influenced by cross-asset flows searching for quality and yield.
Secondary market
Munis were little changed on the MBIS benchmark scale Monday, which showed yields steady on the 10-year maturity while rising less than a basis point in the 30-year maturity. High-grade munis were a little stronger, with yields dipping less than one basis point in the 10- and 30-year maturities.
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yields on both the 10-year muni GO and the 30-year muni were unchanged.
The 10-year muni-to-Treasury ratio was calculated at 75.6% while the 30-year muni-to-Treasury ratio stood at 90.4%, according to MMD.
Treasuries were stronger as stocks traded lower.
“This is a short trading week due to the confluence of Easter and Passover on Friday. The muni market continues to be range-bound after last month’s rally,” ICE Data Services said in a Monday market comment. “The ICE Muni Yield curve today is little changed from levels seen late Friday. Prices of municipal high yield and tobacco issues likewise show minimal movement from Friday. In the taxable muni market, the three-year yield is up 1.6 basis points today while the seven-year yield is almost one basis point lower.”
California 10-year GO 5s trading strong
California’s (Aa3/AA-AA-) new GO bonds were trading stronger on Monday.
One of the most actively traded securities were the new Cal GO 3.25s of 2045 [13063DNL8]. The bonds, originally priced at 99.00 to yield 3.308%, were trading Monday at a high price of 100.00, a low yield of 3.25%, down from a high price of 100.45, a low yield of 3.197% when the bonds first began trading on Friday. Volume totaled $3.05 million in 14 trades compared to $112.85 million in 250 trades on Friday.
The new Cal GO 5s of 2029 [13063DPH5] were trading at a high price of 126.333 cents on the dollar, a low yield of 2.06%.
The bonds, originally priced at 126.333 to yield 2.06%, were down from a high price of 126.436, a low yield of 2.05% when the bonds began trading on Friday. Volume totaled $20.62 million in 32 trades compared to $148.19 million in 232 trades on Friday.
Previous session's activity
The MSRB reported 36,016 trades Friday on volume of $15.39 billion.
California, New York and Texas were most traded, with the Golden State taking 20.332% of the market, the Empire State taking 11.41% and the Lone Star State taking 8.673%.
Week's actively traded issues
Revenue bonds made up 53.88% of total new issuance in the week ended April 12, down from 54.01% in the prior week, according to
Some of the most actively traded munis by type in the week were from New York and Oregon issuers.
In the GO bond sector, the New York City zeros of 2038 traded 18 times. In the revenue bond sector, the NYC Municipal Water Finance Authority 4s of 2041 traded 49 times. In the taxable bond sector, the Oregon University 4.052s of 2052 traded 22 times.
Treasury auctions discount rate bills
Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were mixed, as the $42 billion of three-months incurred a 2.380% high rate, up from 2.375% the prior week, and the $36 billion of six-months incurred a 2.390% high rate, down from 2.395% the week before. Coupon equivalents were 2.434% and 2.460%, respectively. The price for the 91s was 99.398389 and that for the 182s was 98.791722.
The median bid on the 91s was 2.360%. The low bid was 2.320%. Tenders at the high rate were allotted 19.36%. The bid-to-cover ratio was 2.81. The median bid for the 182s was 2.365%. The low bid was 2.340%. Tenders at the high rate were allotted 2.99%. The bid-to-cover ratio was 3.09.
Gary E. 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.
