The municipal market got off to a mixed start to the week as the New York City Transitional Finance Authority continued to round up retail orders on its big building aid revenue bond sale and secondary action remained muted ahead of a sizable new issue slate.
As Monday was winding down a New York trader reported that it was a dreary day on the trading front as there were no large new deals priced and there was little follow through from Friday’s retail pricing of the New York Transitional Finance Authority offering or the New Jersey Transportation Trust Fund Authority.
“It’s a no action Monday,” he said, adding that a new round of vacations this week will keep traders, underwriters, and investors out of the market and extend the summer doldrums. The one bright spot has been the steady demand from the July reinvestments.
“There’s a lot of cash to play with, and we’re trying to find holes to put it in,” he said, while acknowledging the decline in new volume has been making that task extremely difficult, especially since there are some investors who are temporarily reinvesting their available cash in fixed income equivalents, like corporates and Treasuries.
This week’s volume is estimated at $9.2 billion, composed of $7.5 billion of negotiated deals and $1.7 billion of competitive sales.
Ramirez & Co. held a second day or retail orders on the New York City Transitional Finance Authority’s $919.285 million of tax-exempt Fiscal 2019 Series S-1 and Fiscal 2019 Series S-2 Subseries S-2A building aid revenue bonds ahead of the institutional pricing on Tuesday. Also on Tuesday, the NYC TFA will competitively sell $111.455 million of taxable Fiscal 2019 Subseries S-2B BARBs.
The BARBs are rated Aa2 by Moody’s Investors Service and AA by S&P Global Ratings and Fitch Ratings.
On Monday, the TFA announced details on its upcoming sale of about $1.35 billion of future tax secured subordinate bonds, comprised of approximately $850 million of tax-exempt fixed rate bonds, $300 million of taxable fixed rate bonds and $200 million of tax-exempt variable-rate demand bonds. Proceeds from the bond sale will be used to fund capital projects.
The pricing of $850 million of tax-exempt fixed rate bonds is expected to take place on July 25 via negotiated sale led by book-running lead manager JPMorgan Securities and joint lead manager Rice Financial Products Co., with Bank of America Merrill Lynch, Citigroup, Goldman Sachs, Jefferies, Loop Capital Markets, Ramirez, RBC Capital Markets and Siebert Cisneros Shank & Co. as co-senior managers. There will be a two-day retail order period on July 23 and 24.
On July 25, the TFA is set to competitively sell $300 million of taxable fixed rate bonds.
During the week of Aug. 6, TFA plans to issue $200 million of tax-exempt variable-rate demand bonds, bringing the total sale to around $1.35 billion.
On Tuesday, Morgan Stanley is set to price the New Jersey Transportation Trust Fund Authority’s $1.2 billion of Series 2018A federal highway reimbursement revenue refunding notes for retail investors ahead of the institutional pricing on Wednesday.
The deal consists of tax-exempt GARVEE notes not subject to the alternative minimum tax. The notes are rated Baa1 by Moody’s, A-plus by S&P and A-minus by Fitch.
Siebert Cisneros Shank & Co. is set to price $600 million of Houston Series 2018C airport system subordinate lien revenue refunding bonds, subject to the AMT and the Series 2018D non-AMT bonds on Tuesday. The deal is rated A1 by Moody’s.
Jefferies is expected to price the Ohio Water Development Authority’s $167.07 million of fresh water Series 2018 water development revenue bonds on Tuesday. The deal is rated AAA by S&P.
Raymond James & Associates is set to price the Birmingham-Jefferson Civic Center Authority, Ala.’s $256.325 million of bonds, consisting of $117.36 million of Series 2018A special tax bonds, $76.97 million of Series 2018B special tax subordinate lien special tax bonds and Series 2018C taxable bonds, $46.615 million of Series 2018D revenue bonds for the city of Birmingham funding, and $15.38 million of Series 2018E revenue bonds for Jefferson County funding.
In the competitive arena on Tuesday, Los Angeles is selling $127.98 million of Series 2018A solid waste resources revenue bonds. The deal is rated Aa2 by Moody’s and AA by Kroll Bond Rating Agency. The financial advisors are Fieldman, Rolapp & Associates and Urban Futures; the bond counsel is Orrick Herrington.
The Suffolk County Water Authority, N.Y., is selling $100 million of Series 2018A water system revenue bonds. The deal is rated AAA by S&P and Fitch. The financial advisor is Goldman Sachs; the bond counsel is Harris Beach.
Click here for the NYC TFA retail pricing, Day 2
Prior week's top underwriters
The top municipal bond underwriters of last week included Bank of America Merrill Lynch, Morgan Stanley, Piper Jaffray, JPMorgan Securities and Citigroup, according to Thomson Reuters data.
In the week of July 8 to July 14, BAML underwrote $1.79 billion, Morgan Stanley $1.74 billion, Piper Jaffray $830.3 million, JPMorgan $725.5 million, and Citi $703.3 million.
Bond Buyer 30-day visible supply at $12.79B
The Bond Buyer's 30-day visible supply calendar increased $1.02 billion to $12.79 billion on Tuesday. The total is comprised of $4.03 billion of competitive sales and $8.76 billion of negotiated deals.
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- to four-year, nine- to 11-year and 18- to 24-year maturities, rose less than a basis point in the five- to eight-year, 13- to 15-year and 26- to 30-year maturities, and remained and remained unchanged in the 12-year, 16- and 17-year and 25-year maturities.
High-grade munis were also mixed, with yields calculated on MBIS’ AAA scale falling less than one basis point in the one- to four-year, nine- to 12-year and 17- to 26-year maturities, rising less than a basis point in the five- to eight-year, 13- to 15-year and 28- to 30-year maturities and remaining unchanged in the 16-year and 27-year maturities.
Municipals were mixed on Municipal Market Data’s AAA benchmark scale, which showed the 10-year muni general obligation yield remaining unchanged while the yield on the 30-year muni maturity rose by one basis point.
“Typically, Mondays are more lethargic, but as the day progresses and people come out of meetings they address the market — and wait for a majority of deals to price tomorrow, as well as more evidence of what the direction will be this week,” a Florida trader said.
In the meantime, activity was limited to some secondary shopping before noon. “We had one large money manager with a list out this morning, mostly front-end paper, sizable and close to $100 million,” the trader said.
“The end result is it’s a quiet listless summer day, but there is trading with strong bids,” he explained, noting that Mondays are usually when the market sets up a plan of action for later in the week. “Customers dip down in the secondary and look at the bid lists of the day, but they’re also waiting for new issues to give some price transparency, and more follow-through from last week,” the trader added.
The problem is not available cash, but supply of new paper, however, the trader said, that doesn’t mean all bad news.
“Traders and dealers are optimistic that there is a lot of July money and I think we’re just waiting for more evidence,” he said. “They are willing to put that money to work and I expect the primary market to do well, and for that to lead into the secondary as the week progresses."
Treasury bonds were weaker Monday as stocks traded mixed.
On Monday, the 10-year muni-to-Treasury ratio was calculated at 84.3% while the 30-year muni-to-Treasury ratio stood at 98.1%, 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 32,000 trades on Friday on volume of $10.98 billion.
California, New York and Texas were the states with the most trades, with the Golden State taking 19.193% of the market, the Empire State taking 10.939% and the Lone Star State taking 10.799%.
Prior week's actively traded issues
Revenue bonds comprised 54.74% of new issuance in the week ended July 13, up from 54.42% in the previous week, according to Markit. General obligation bonds made up 39.59% of total issuance, down from 39.98%, while taxable bonds accounted for 5.67%, up from 5.60% a week earlier.
Some of the most actively traded munis by type in the week were from Colorado and California issuers.
In the GO bond sector, the Colorado 4s of 2019 traded 24 times. In the revenue bond sector, the Los Angeles 4s of 2019 traded 71 times. And in the taxable bond sector, the California 7.55s of 2039 traded 12 times.
Treasury to sell $45B 4-week bills
The Treasury Department said it will sell $45 billion of four-week discount bills Tuesday. There are currently $109.999 billion of four-week bills outstanding.
Treasury auctions discount bills
Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were higher, as the three-months incurred a 1.980% high rate, up from 1.945% the prior week, and the six-months incurred a 2.140% high rate, up from 2.100% the week before.
Coupon equivalents were 2.018% and 2.193%, respectively. The price for the 91s was 99.499500 and that for the 182s was 98.918111.
The median bid on the 91s was 1.950%. The low bid was 1.920%. Tenders at the high rate were allotted 26.67%. The bid-to-cover ratio was 2.76.
The median bid for the 182s was 2.120%. The low bid was 2.100%. Tenders at the high rate were allotted 27.91%. The bid-to-cover ratio was 2.98.
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.