The municipal market was unchanged with a firmer tone Monday amid fairly light secondary trading activity as long muni yields closed to within two basis points of matching long Treasuries.
“There’s a little bit of firmness out there, but it’s fairly quiet,” a trader in New York said. “It’s just the summer doldrums continuing. There’s a bit more activity in the primary this week than last week, but I don’t expect it to be tremendously active.”
A second New York trader deemed the session a “very quiet summer Monday.”
“There is very little activity,” the trader said. “The outlook for the week is more of the same. It is a somewhat low issuance period. There is a scarcity of bonds. It is slow. The scale may firm up by one or two basis points today, if anything.”
The Treasury market showed some losses Monday. The benchmark 10-year note finished at 2.97% after opening at 2.92%. The 30-year bond finished at 3.99% after opening at 3.93%. The two-year note finished at 0.60% after opening at 0.58%.
The Municipal Market Data triple-A scale yielded 2.61% in 10 years and 3.68% in 20 years Monday, nearly identicial to levels of 2.60% and 3.68% Friday. The scale yielded 3.97% in 30 years Monday, matching Friday.
“It is kind of flat, typical Monday,” San Francisco a trader said. “There’s not a lot of bid wanteds, not a lot of data coming this week. We are watching the stock market.”
Early Monday’s triple-A muni scale in 10 years was at 88.8% of comparable Treasuries and 30-year munis were at 100.5%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 106.7% of the comparable London Interbank Offered Rate.
Volume is expected to increase slightly this week thanks to the arrival of several significantly sized financings in the long-term market. They include a large Florida airport deal, a pair of California utility offerings, and a trio of Northeast deals hailing from issuers in New York, Pennsylvania, and the District of Columbia.
According to Ipreo LLC and The Bond Buyer, an estimated $5.26 billion in new volume is expected to be priced this week — slightly more than the revised $4.34 billion that actually came to market last week, according to Thomson Reuters.
The primary market features a trio of separate note deals this week from cash-strapped Illinois totaling $1.3 billion. The three are expected to be priced in the competitive market Tuesday but not factored into the week’s estimated volume, which excludes short-term debt.
The notes, which will mature in 2011 and be issued as GO certificates, consist of a $500 million series as well as two others sized at $400 million each — all rated SP-1 by Standard & Poor’s.
The long-term market will be headlined by the expected issuance of $523.47 million of tax-exempt aviation revenue bonds by Miami-Dade County in what is believed to be the last major financing for Miami International Airport’s $6.49 billion capital improvement plan.
The deal, which is not subject to the alternative minimum tax, is expected to be priced on Wednesday by JPMorgan after a retail order period Tuesday. It completes the financing of the airport’s north terminal renovation and expansion as well as other airport improvements.
The structure includes serials tentatively maturing from 2012 to 2030, and term bonds in 2030, 2035, and 2041. The bonds are rated A2 by Moody’s Investors Service, A-minus by Standard & Poor’s, and A by Fitch Ratings.
A $455.8 million water revenue deal from the San Francisco Public Utility Commission is the larger of two California utility deals that include taxable Build America Bonds.
Slated for pricing in the competitive market Thursday, the deal includes $409.6 million of water revenue bonds, which will be sold as taxable BABs, as well as another $46.2 million that consists of tax-exempt water revenue and refunding bonds. Rated Aa2 by Moody’s and AA-minus by Standard & Poor’s, the deal will finance capital improvement projects.
Also on tap is a $400 million sale of consolidated bonds from the Port Authority of New York and New Jersey planned for pricing in the competitive market Wednesday. The bonds are rated Aa2 by Moody’s, AA-minus by Standard & Poor’s, and AA-minus by Fitch.
The Metropolitan Washington Airports Authority is expected to add to the regional volume when it sells between $340 million and $387 million of system revenue and refunding bonds in a two-pronged, negotiated deal being senior-managed by Barclays Capital.
The issue, which is structured with serial and term bonds maturing between 2011 and 2040, is slated for pricing Tuesday and rated Aa3 by Moody’s, AA-minus by Standard & Poor’s, and AA by Fitch.
Market sources also indicated that a $282 million offering of subordinated revenue bonds from the Pennsylvania Turnpike Commission, which JPMorgan had planned to price Tuesday, was delayed and moved to the day-to-day calendar.
The deal, which includes new-money and refunding debt, is structured as non-AMT bonds maturing from 2020 to 2037. The bonds are rated A3 by Moody’s and A-minus by Standard & Poor’s.
In the new-issue market Monday, King County, Wash., sold $334.4 million of sewer revenue and refunding bonds to Bank of America Merrill Lynch.
The bonds mature from 2011 through 2032, with term bonds in 2036, 2040, 2045, and 2050. They yield 2.35% with a 5% coupon in 2018 and 4.55% with a 5% coupon in 2050. None of the other bonds were formally re-offered. The bonds, callable at par in 2020, are rated Aa2 by Moody’s and AA-plus by Standard & Poor’s.
The economic calendar was light Monday.
Priti Patnaik contributed to this column.