California issuers, second BVAL pricing headline nearly $7B week

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The muni market is ready to pick up where it left off. Municipals have seen robust demand for the entirety of the year thus far and after a little break, it should be back to business as usual. Meanwhile, another deal — a Charleston, South Carolina, water deal — is set to price using the BVAL AAA callable benchmark. More on that below.

“When everyone is back on Monday, we will be well into the redemption season with high reinvestment cash trickling in from July 1 through the rest of the summer,” said Eric Kazatsky, portfolio manager at Clark Capital Management. “There will be money looking to get back to work and I see no issues with deals [in the coming] week doing well, with California, New York and specialty state Colorado leading the calendar.

Volume next week is estimated at $6.9 billion, with 22 deals scheduled $100 million or larger — five of which are competitive.

Topping the negotiated slate is the Trustees of the California State University’s (Aa2/AA-/NR) $543.72 million of revenue bonds. Barclays Capital will price the Series 2018A and taxable Series 2019B bonds on Thursday.

Citigroup is expected to price the Massachusetts Port Authority’s (Aa2/AA/AA) $461.215 million of Series 2019B revenue bonds not subject to the alternative minimum tax and Series 2019C AMT bonds on Wednesday.

Barclays is set to price the NYC Municipal Water Finance Authority’s (Aa1/AA+/AA+) $400 million of tax-exempt fixed-rate second general resolution revenue bonds on Wednesday after a one-day retail order period on Tuesday.

In the competitive arena, San Jose, California, (Aa1/AA+/AA+) is selling $502.26 million of general obligation bonds in three offerings on Tuesday.

The sales consist of $173.4 million of Series 2019A-1 disaster preparedness, public safety and infrastructure GOs, $170.37 million of Series 2019B Taxable GOs and $158.49 million of Series 2019C refunding, libraries, parks and public safety project GOs.

Wells Fargo is expected to price Charleston, S.C.’s (Aaa/AAA/NR) $135.23 million of waterworks and sewer system capital improvement revenue bonds with PFM as the financial advisor on Wednesday.

A source close to the deal told The Bond Buyer that the deal will be priced using BVAL, not MMD — the traditional curve used by the market. This comes a few weeks after Lansing, Michigan, priced a $325 million utility deal using BVAL.

Secondary market
Munis were stronger in late trading on the MBIS benchmark scale, with yields falling by no more than three basis points in the 10-year and lower by less than a basis point in the 30-year maturity. High-grades were stronger, with MBIS’ AAA scale showing yields rising by no more than two basis points in the 10-year and by less than one basis point 30-year maturity.
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10-year and 30-year rose by two basis points to 1.62% and 2.29%, respectively.

The 10-year muni-to-Treasury ratio was calculated at 79.3% while the 30-year muni-to-Treasury ratio stood at 90.2%, according to MMD.

Treasuries were stronger as stocks fell. The Treasury three-month was yielding 2.228%, the two-year was yielding 1.872%, the five-year was yielding 1.839%, the 10-year was yielding 2.045% and the 30-year was yielding 2.545%.

"The ICE muni yield curve is virtually unchanged today despite the weakness in Treasuries with little trading activity," ICE Data Services said in a Friday market comment.

Kazatsky noted that with a jobs number of 224,000 it appears that hiring still seems robust even as we are well over a decade into the expansion.
“This complicates the decision for the Fed whereby a rate cut would be in order to help support the economy, something that is not directly inferred from the jobs report," said Kazatsky.

"According to data on Bloomberg, there is market anticipation of up to four rate cuts over the coming year,” he said. “We think that may be a bit much and one to two cuts would be more in line with our expectations. Odds of a larger rate cut in July have decreased as well as the market digested the jobs report and UST rates increased off of their recent lows.”

Previous session's activity
The MSRB reported 21,142 trades Wednesday on volume of $5.58 billion. The 30-day average trade summary showed on a par amount basis of $12.29 million that customers bought $6.52 million, customers sold $3.74 million and interdealer trades totaled $2.03 million.

New York, California and Texas were most traded, with the Golden State taking 15.567% of the market, the Empire State taking 13.013% and the Lone Star State taking 9.97%.

The most actively traded security was the Illinois Series 2017D GO 5s of 2028, which traded six times on volume of $23.70 million.

Week's actively traded issues
Some of the most actively traded munis by type in the week ended July 5 were from New York, California and Illinois issuers, according to IHS Markit.

In the GO bond sector, the New York City zeros of 2036 traded 20 times. In the revenue bond sector, the Los Angeles 5s of 2020 traded 136 times. In the taxable bond sector, the Illinois 5.1s of 2033 traded 22 times.

Week's actively quoted issues
Puerto Rico, New Jersey, and California names were among the most actively quoted bonds in the week ended July 5, according to IHS Markit.

On the bid side, the Puerto Rico Sales Tax Financing Corp. revenue 5s of 2058 were quoted by 41 unique dealers. On the ask side, the Toms River Board of Education, N.J., GO 3s of 2039 were quoted by 167 dealers. Among two-sided quotes, the California taxable 7.3s of 2040 were quoted by 12 dealers.

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.

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