The municipal market weakened Monday, despite the strengthening Treasury market, ahead of more than $10 billion of new issuance expected this week.
Traders said tax-exempt yields were six to eight basis points higher overall, with 30-year yields climbing to a 16-month high. Average weekly muni issuance is about $8 billion.
“It’s pretty messy out on the Street,” a trader in Los Angeles said. “The really short end is pretty flat, but the long end is looking particularly ugly. Treasuries are up a bit, but we’re going in the complete opposite direction and just doing our own thing.”
The Municipal Market Data triple-A 10-year scale widened eight basis points Monday to reach an eight-month high of 3.09%; the 20-year scale increased eight basis points to an 18-month high of 4.33%; and the scale for 30-year debt rose eight basis points to a 16-month high of 4.69%.
Monday’s triple-A muni scale in 10 years was at 93.9% of comparable Treasuries and 30-year munis were at 106.3%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 113.8% of the comparable London Interbank Offered Rate.
The Treasury market showed some gains Monday. The benchmark 10-year note finished at 3.29% after opening at 3.32%; the 30-year bond closed at 4.41%, after opening at 4.43%; and the two-year note finished at 0.61% after opening at 0.64%.
According to Ipreo LLC and The Bond Buyer, an estimated $10.38 billion of new volume is expected to a roil the waters of the municipal market this week. Last week ended with stability, but began with volatility as $10.13 billion of debt came to market.
The largest financing will consist of $1.4 billion of combined hydroelectric project revenue bonds issued by American Municipal Power Inc., a nonprofit wholesale power and energy distributor headquartered in Columbus, Ohio.
Chicago-based BMO Capital Markets is planning to price the bonds either Tuesday or Wednesday with a structure of serial and term bonds that ranges from 2016 to 2050.
The bonds are rated A3 by Moody’s Investors Service, and A by Standard & Poor’s and Fitch Ratings.
The bulk of the deal — $1.13 billion of Series 2010B — will be comprised of taxable direct-subsidy Build America Bonds, while the two other series consist of $148.2 million of traditional taxable bonds in Series 2010A, and $116 million of taxable direct-subsidy new clean renewable energy bonds in Series C.
In the Northeast, New York City will bring $1.04 billion of GO debt to the negotiated market, including $745 million of taxable BABs in the fiscal 2011F series, $260.8 million of tax-exempt bonds in the fiscal 2011G series, and $39.2 million of tax-exempt debt in the fiscal 2011H series.
JPMorgan will take indications of interest for the BAB portion on Tuesday, followed by a pricing on Wednesday. The firm is also targeting retail investors with a three-day retail order period scheduled for Monday, Tuesday, and Wednesday.
New York City priced for retail investors the $300 million of Series G and H tax-exempt debt Monday.
Bonds from the $260.8 million Series G mature from 2012 through 2020, with yields ranging from 0.82% with a 3% coupon in 2012 to 3.61% with a 5% coupon in 2020. These bonds are not callable.
Bonds from the $39.2 million Series H mature from 2011 through 2020, with yields ranging from 0.82% with a 4% coupon in 2012 to 3.61% with a 4% coupon in 2020. Bonds maturing in 2011 will be decided via sealed bid. These bonds are not callable.
Besides its negotiated sale, the city will also issue $130 million of GO debt in the competitive market on Wednesday with bonds maturing from 2012 to 2018.
The credit is rated Aa2 by Moody’s and AA by both Standard & Poor’s and Fitch.
The Nebraska Investment Financing Authority will bring $675 million of single-family housing revenue debt to market in a three-pronged offering scheduled for pricing by JPMorgan.
Series 2010A is comprised of fixed-rate revenue bonds not subject to the alternative minimum tax, while Series 2010B consists of variable-rate bonds that are also not subject to the AMT. Series 2010C is comprised of variable-rate securities that are subject to the AMT.
Massachusetts is slated to sell $576.2 million of transportation fund revenue bonds in a JPMorgan-led deal. The Series 2010 A accelerated bridge program debt consists of taxable BABs and direct-pay recovery zone economic development bonds.
The securities are rated triple-A by Moody’s and Standard & Poor’s. The firm will price the tax-exempt bonds for retail and take indications of interest on the taxable portion on Tuesday, with a pricing slated for Wednesday.
Massachusetts is also selling $388.1 million of special obligation refunding notes Tuesday in a deal to be priced by Jefferies & Co.
The bonds were priced for retail investors Monday and mature from 2011 through 2015. Yields range from 0.75% with a 2% coupon in 2012 to 1.75% with a 4% coupon in 2015. Bonds maturing in 2011 will be decided via sealed bid. The bonds are not callable.
Atlanta will sell $539.1 million of airport general revenue refunding bonds in a negotiated deal being priced by Citi on Tuesday.
The airport deal, which is rated A1 by Moody’s and A-plus by Standard & Poor’s, is structured to mature from 2012 through 2023, with term bonds in 2025, 2026, and 2030.
The deal was priced for retail investors Monday, with yields ranging from 2.05% with a 3% coupon in 2013 to 5.40% with a 5.375% coupon in 2030. Bonds maturing in 2012 will be decided via sealed bid. The bonds are callable at par in 2020.
In the competitive market, the San Francisco Public Utility Commission is on tap to sell a two-pronged offering of tax-exempt and taxable water revenue debt on Wednesday totaling $523.5 million.
The tax-exempt portion consists of $173.5 million of serial bonds maturing from 2017 to 2030, while the $350 million taxable BAB portion is structured to mature from 2031 to 2050. Both series are rated Aa2 by Moody’s and AA-minus by Standard & Poor’s.