Municipal market sees more supply
The supply keeps coming for municipal bond buyers, with a slew of new deals pricing in the primary. Quality and quantity dictated the activity in the municipal bond market on Wednesday as investors continued to exhibit strong demand — especially for investment-grade paper — in a week where a glut of supply is up for grabs in a wide variety of financings.
The market exhibited fairly strong bids to start the day’s trading activity as nearly $12 billion of new issuance is making its way to market this week, noted Howard Mackey, managing director at NW Capital Markets in Hoboken, N.J.
“Today there is a strong tone in the Treasury market and I think that will lead to firmness in the muni market,” he explained.
Although the summer season still has many investors in vacation mode, Mackey said a scarcity of high-grade paper to meet the excess demand is creating a strong environment. “There is very little product around — particularly in high-grade specialty states,” Mackey said, noting strong bids on paper from New York and New Jersey paper.
“Triple-A New York and New Jersey municipalities are trading at or through the [Municipal Market Data] scale for triple-A paper,” he added.
Other large deals this week, such as the city and county of Denver airport financing, could also appeal to investors, according to Mackey.
“Denver could be interesting,” he said, noting that the bonds subject to the alternative minimum tax could see a “fair amount of buyers at the right price” for investors eligible to buy that structure. Meanwhile, he said the deal’s non-AMT paper will be “very strong.”
Bank of America Merrill Lynch priced the city and county of Honolulu’s $272.91 million of Series 2018A and Series 2018B tax-exempt general obligation bonds.
The deal is rated Aa1 by Moody’s Investors Service and AA-plus by Fitch Ratings. Both ratings agencies assign stable outlooks to the credit.
Since 2008, the city and county has issued about $7 billion of debt, with the most issuance occurring in 2015 when it sold nearly $1.6 billion. It did not come to market in 2013 or 2014.
RBC Capital Markets held a morning retail order period on the New York City Municipal Water Finance Authority’s $263.755 million of Fiscal 2019 Series AA water and sewer system second general resolution revenue bonds
The deal is rated Aa1 by Moody’s and AA-plus by S&P and Fitch.
Siebert Cisneros Shank & Co. is set to price Connecticut’s $639.135 million of Series 2018E and Series 2018F tax-exempt general obligation bonds for institutions after holding a one-day retail order period.
The deal is rated A1 by Moody’s, A by S&P, A-plus by Fitch and AA-minus by Kroll Bond Rating Agency.
RBC priced the Campbell Union High School District of Santa Clara County, Calif.’s’ $197 million of Election of 2016, Series B GOs.
The deal is rated Aa1 by Moody’s and AAA by S&P.
Piper Jaffray priced the Denton Independent School District, Texas’ $400.13 million of Series 2018 unlimited tax school building bonds on Tuesday.
The deal, backed by the Permanent School Fund guarantee program, is rated AAA by S&P and Fitch.
Late Tuesday, BAML Lynch received the official award on the city and county of Denver’s $2.526 billion of airport system subordinate revenue bonds.
The offering is one of the single-biggest aviation deals ever. It consists of $2.342 billion of Series 2018A bonds subject to the alternative minimum tax and $184.365 million of Series 2018B non-AMT bonds.
The deal is rated A2 by Moody’s, A by S&P and A-plus by Fitch. All three ratings agencies assign stable outlooks to the credit.
Click here for the Campbell UHSD pricing
Click here for the state retail pricing
Bond Buyer 30-day visible supply at $14.74B
The Bond Buyer's 30-day visible supply calendar decreased $1.91 billion to $14.74 billion for Wednesday. The total is comprised of $2.47 billion of competitive sales and $12.27 billion of negotiated deals.
Municipal bonds were stronger on Wednesday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields fell as much as two basis points in the one- to 30-year maturities.
High-grade munis were also stronger, with yields calculated on MBIS’ AAA scale falling as much as two basis points across the curve.
Municipals were steady on Municipal Market Data’s AAA benchmark scale, which showed the yield on both the 10-year muni general obligation and on the 30-year muni maturity remaining unchanged. Intermediate maturities were as much as one basis point higher.
Treasury bonds were weaker as stock prices fell.
On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 84.7% 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 39,811 trades on Tuesday on volume of $11.63 billion.
California, Texas and New York were the municipalities with the most trades, with Golden State taking 18.164% of the market, the Lone Star State taking 10.522% and the Empire State taking 9.931%.
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.