Two large sales from New York City water and housing issuers were priced for retail investors on Tuesday as Municipal bonds finished mixed on Monday.

Muni bond buyers were wary ahead of this week’s smaller-than-average new issue calendar as Federal Reserve policy makers gathered. Most analysts expect the Federal Open Market Committee will raise interest rates when its two-day meeting concludes on Wednesday. The Fed is seen hiking the federal funds rate target 25 basis points to a range of 1.75% to 2% with at least one increase and possibly two to follow this year.

While the market was looking forward to this week’s volume for opportunities to reinvest their June 1 or upcoming July 1 redemption proceeds, a New York trader said that it may be a challenge to obtain paper — particularly in specialty states — as only about $5.6 billion is expected to be priced this week.

“There is no supply pressure next week,” he said Friday. “Everyone is scrambling for paper right now.”

Most analysts expect the Federal Open Market Committee will raise interest rates when its two-day meeting concludes on Wednesday. The Fed is seen hiking the federal funds rate target 25 basis points to a range of 1.75% to 2% with at least one increase and possibly two to follow this year.

Peter Hayes, head of BlackRock’s Municipal Bonds Group says the possibility of a pickup in gross supply this month could pressure muni performance.

Writing in this month’s municipal market commentary released on Monday, Hayes sees pressure building in June ahead of the more favorable July-August period. This dynamic could be further exacerbated if there’s a reversal from the late-May decline in interest rates and corresponding rise in muni bond prices, he wrote.

“As the month of June kicks off the summer, many investors expect it to be the start of the seasonally favorable period of net negative supply. But in actuality, June has been, on average, the third worst month of the year for muni performance due to a large month-over-month increase in gross issuance,” Hayes wrote. “Given the current rebound from the depressed issuance in early 2018, the possibility of a stark pickup in gross supply could pressure muni performance in June ahead of the more favorable July-August period. This dynamic could be further exacerbated should there be a reversal from the late-May decline in interest rates and corresponding rise in muni bond prices.”

Primary market
This week’s volume is estimated at $5.55 billion, comprised of $4 billion of negotiated deals and $1.55 million of competitive sales.

On Monday, JPMorgan Securities priced the New York City Housing Development Corp.’s $550.55 million of Series 2018C multi-family housing revenue sustainable neighborhood bonds for retail investors.

The bonds are rated Aa2 by Moody’s Investors Service and AA-plus by S&P Global Ratings.

Raymond James & Associates priced for retail the New York City Municipal Water Finance Authority’s $370.22 million of Fiscal 2018 Series FF water and sewer system second resolution revenue bonds.

The deal is rated Aa1 by Moody’s and AA-plus by S&P and Fitch Ratings. The credit carries stable outlooks from all three rating agencies.

Both deals will be priced for institutions on Tuesday.

In the competitive arena on Tuesday, Wayne County, Mich., will sell $156.29 million of Series 2018 taxable limited tax general obligation revenue notes.

Maine plans to sell $102.395 million of Series 2018B general obligation bonds on Tuesday.

And the Federal Way School District No. 210, Wash., is selling $140.27 million of Series 2018 GOs on Tuesday.

Monday’s bond sales

New York:
Click here for the retail housing deal

Click here for the retail water deal

Bond Buyer 30-day visible supply at $9.22B
The Bond Buyer's 30-day visible supply calendar increased $725.9 million to $9.22 billion on Tuesday. The total is comprised of $4.13 billion of competitive sales and $5.-9 billion of negotiated deals.

Prior week's top underwriters
The top municipal bond underwriters of last week included Citigroup, Bank of America Merrill Lynch, Morgan Stanley, JPMorgan Securities and RBC Capital Markets, according to Thomson Reuters data.

In the week of June 3 to June 9, Citi underwrote $1.97 billion, BAML $1.8 billion, Morgan Stanley $1.2 billion, JPMorgan $1.1 billion, and RBC $610.9 million.

Secondary market
Municipal bonds were mixed on Monday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell as much as one basis point in the two- to nine-year, 11- to 15-year and 25- to 30-year maturities, rose as much as one basis point in the one-year and 17- to 23--year maturities and were unchanged in the 10-year and 24-year maturities.

High-grade munis were also mixed, with yields calculated on MBIS’ AAA scale falling as much as one basis point in the one- to nine-year, 14-year and 26- to 30-year maturities, rising in the 10- to 12-year and 16- to 25-year maturities and remaining unchanged in the 13-year and 15-year maturities.

Municipals were unchanged according to Municipal Market Data’s AAA benchmark scale, which showed yields steady in the 10-year general obligation muni and flat in the 30-year muni maturity.

Treasury bonds were weaker as stock prices rose.

On Monday, the 10-year muni-to-Treasury ratio was calculated at 83.3% while the 30-year muni-to-Treasury ratio stood at 96.2%, 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.

Although the short end of the municipal market ended last week aggressively priced, large deals were snapped up by cash-flush investors, a New York trader said on Friday afternoon, indicating the market was in “good shape.”

While the market was looking forward to this week’s new issue slate for more opportunities to reinvest their June 1 or upcoming July 1 redemption proceeds, he said it may be more of a challenge to obtain paper — particularly in specialty states — as an estimated $5.6 billion is expected to be priced — down from last week’s $9.31 billion.

“There is no supply pressure next week,” he said on Friday. “Everyone is scrambling for paper right now.”

Previous session's activity
The Municipal Securities Rulemaking Board reported 33,608 trades on Friday on volume of $12.20 billion.

New York, California and Texas were the states with the most trades, with the Empire State taking 15.77% of the market, Golden State taking 12.44% and the Lone Star State taking 8.298%.

Prior week's actively traded issues
Revenue bonds comprised 55.36% of new issuance in the week ended June 8, down from 55.77% in the previous week, according to Markit. General obligation bonds made up 39.48% of total issuance, up from 38.47%, while taxable bonds accounted for 5.16%, down from 5.76% a week earlier.

Some of the most actively traded bonds by type were from Connecticut, California and Puerto Rico issuers.

In the GO bond sector, the Connecticut 4s of 2036 traded 32 times. In the revenue bond sector, the California Municipal Finance Authority 5s of 2047 traded 76 times. And in the taxable bond sector, the Puerto Rico Sales Tax Financing Corp. 6.05s of 2036 traded 37 times.

Treasury to sell $35B 4-week bills
The Treasury Department said it will sell $35 billion of four-week discount bills Tuesday. There are currently $89.997 billion of four-week bills outstanding.

Treasury auctions 3-year notes, 26-week bills
The Treasury Department auctioned $32 billion of three-year notes with a 2 5/8% coupon at a 2.664% high yield, a price of 99.888266. The bid-to-cover ratio was 2.83.

Tenders at the high yield were allotted 97.11%. All competitive tenders at lower yields were accepted in full. The median yield was 2.620%. The low yield was 2.188%.

Treasury also auctioned $42 billion of 26-week bills at a 2.075% high yield, a price of 98.950972. The coupon equivalent was 2.126%. The bid-to-cover ratio was 3.59.

Tenders at the high rate were allotted 39.79%. The median rate was 2.060%. The low rate was 2.040%.

Treasury sells re-opened 10-year notes, 13-week bills
The Treasury Department auctioned $22 billion of 9-year 11-month notes with a 2 7/8% coupon at a 2.962% high yield, a price of 99.254212. The bid-to-cover ratio was 2.58.

Tenders at the high yield were allotted 45.03%. All competitive tenders at lower yields were accepted in full.

The median yield was 2.920%. The low yield was 2.830%.

Treasury also auctioned $48 billion of 13-week bills at a 1.910% high yield, a price of 99.517194. The coupon equivalent was 1.946%. The bid-to-cover ratio was 3.01.

Tenders at the high rate were allotted 8.20%. The median rate was 1.880%. The low rate was 1.850%.

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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Chip Barnett

Chip Barnett

Chip Barnett is a journalist with more than 40 years of experience. Barnett is currently Senior Market Reporter for The Bond Buyer.
Christine Albano

Christine Albano

Christine Albano is a reporter in the Investor’s & Investing beat, which she has covered for the past two decades. She has a wide range of buy side sources in the municipal market.