Slow traffic ahead: Muni CUSIP requests drop 30%; NYC TFA in spotlight

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New York City Transitional Finance Authority was able to cut yields amid healthy demand for its $1 billion bond sale Wednesday, as a drop in CUSIP requests signaled the supply drought may continue.

Jefferies priced the New York City TFA's building aid revenue bonds for institutions after holding a two-day retail order period. The TFA also competitively sold $75 million of taxable fixed-rate bonds.

The TFA’s tax-exempts have been receiving a warm reception from retail buyers who snapped up the bonds over the past few days. The TFA said it received about $846 million of retail orders – "one of the highest participation levels by retail in recent history" – of which around $471 million was usable.

The TFA received $1.8 billion of institutional orders, making it 3.5 times oversubscribed. At the institutional repricing, the TFA was able to cut yields from one to five basis points for maturities in 2030 through 2046.

The tax-exempt bonds were sold via negotiated sale through TFA’s underwriting syndicate for Building Aid Revenue Bonds, led by book-running senior manager Jefferies, with BofA Merrill Lynch and Ramirez & Co., Inc. serving as co-senior managers.

"The market is surprisingly stable,” said one New York trader. “There’s plenty of money around, especially in New York. While the DASNY deal did front-run the TFA deal, I think they won’t get in the way of each other. It may take a bit in the aftermarket to clean them up, but at wider spreads then recent trades it will be fine.”

A New Jersey municipal trader, when asked about the TFA deal, said that following a “pretty strong” order period, the institutional demand was just as robust as evidenced by the repricing.

The TFA also sold $75.28 million of taxable Fiscal 2018 Subseries S-4B BARBs.The taxables attracted eight bidders, with Bank of America Merrill Lynch winning the bonds with a true interest cost of 2.560%.

Since 2008, the NYC TFA has sold over $45 billion of bonds, with the most issuance occurring in 2017 when it issued $6.5 billion of securities. Prior to this year, it sold the least amount of bonds in 2008 when the TFA issued $1.3 billion.
In the competitive arena, Clark County, Nev., sold $200 million of Series 2018 limited tax general obligation Las Vegas Convention and Visitors Authority convention center expansion bonds additionally secured with pledged revenues.

Morgan Stanley won the deal with a TIC of 3.9204%.

In the negotiated sector, Jefferies priced the University of Connecticut’s $145.96 million of Series 2018A special obligation fee revenue bonds.

Wednesday’s bond sales

Click here for the institutional repricing

Click here for the institutional pricing

Click here for the competitive sale

Click here for the Day 2 retail pricing

Click here for the Day 1 retail pricing

UConn bonds:
Click here for the pricing

Clark County sale:
Click here for the pricing

Muni CUSIP requests off 30% YOY
Municipal CUSIP requests were light again in February, CUSIP Global Services said on Tuesday. The report tracks requests by issuers for bond identifiers as an early indicator of new volume.

Total municipal CUSIP requests, which include bonds, long- and short-term notes and commercial paper, were up 1.1% last month to 740 from 732 in January, but municipal bond requests were down 3.0%.

Year-over-year, total municipal CUSIP requests are off by 30%.

“Municipal bond issuance has been trending downward following the implementation of the Tax Cuts & Jobs Act, which repeals advanced refunding of municipal bonds,” CUSIP said in its report.

The report indicates a slowdown in new muni issuance in the first quarter of 2018.

“Pre-trade activity among corporate equity and debt issuers has shown a steady appetite for new capital creation, but the downward trend in municipal request volume cannot be ignored,” said Gerard Faulkner, CUSIP’s director of operations. “The stark contrast between what we’re seeing in corporate and municipal markets so far this year underscores the impact that the Tax Cuts & Jobs Act is having in the municipal bond market. With all other market variables being equal, muni issuers have dramatically curbed their volume relative to corporates.”

Among top state issuers, CUSIPs for scheduled public finance offerings from Texas, Illinois, and California were the most active in February.

Secondary market
A New Jersey municipal trader could only use the word “quiet” to describe market activity on Wednesday.

“Volumes are down and there’s not much going on,” he said. “Unfortunately, it’s another day in munis.”

The lackluster tone continued to plague the market in the Midwest, even though ratios are rising and more attractive, a Chicago municipal trader said.

“The last week has been very quiet, and it’s not super active today; it’s a little slower than usual,” she said. “There is some firmness, but munis are not keeping up with Treasuries.”

The ratio of 10-year municipals to Treasuries was at 89% as of Tuesday, it’s cheapest in months, she said, noting that Nov. 30 was the last time it was as high. "We have been in the 85% range for the last three months, so this is moving toward 90%, which is a good sign,” she said.

She completed some random trades, but the less than brisk activity had her confused as to what strategy investors were following now that ratios have improved.

“We have been in this 1.80% to 1.90% range in Treasuries so there’s no reason not to do anything,” she said. “If you think rates are going up there’s no reason why you are sitting on your hands when we have gotten cheaper relative to Treasuries,” she lamented.

Previous session's activity
The Municipal Securities Rulemaking Board reported 41,369 trades on Tuesday on volume of $11.36 billion.

California, New York and Texas were the states with the most trades, with the Golden State taking 17.697% of the market, the Empire State taking 12.058% and Lone Star State taking 11.146%.

Bond Buyer 30-day visible supply at $7.59B
The Bond Buyer's 30-day visible supply calendar decreased $819.6 million to $7.59 billion on Thursday. The total is comprised of $3.38 billion of competitive sales and $4.21 billion of negotiated deals.

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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Primary bond market Secondary bond market State of California State of Texas State of New York New York City Transitional Finance Authority Clark County Nevada University of Connecticut