Monday morning in the municipal market began with little activity in the secondary as traders, underwriters, and investors used the quiet summer day to strategize and plan — and patiently await sizable new issues to set the tone for the rest of the week, a Florida trader said.
“Typically, Mondays are more lethargic, but as the day progresses and people come out of meetings they address the market — and wait for a majority of deals to price tomorrow, as well as more evidence of what the direction will be this week,” he said.
In the meantime, activity was limited to some secondary shopping before noon.
“We had one large money manager with a list out this morning, mostly front-end paper, sizable and close to $100 million,” the trader said.
Prices received on the paper, he said, were firm, if not aggressive — despite the fact that municipals were only off one basis point in spots compared to Treasuries Monday morning, according to Municipal Market Data.
“The end result is it’s a quiet listless summer day, but there is trading with strong bids,” he explained, noting that Mondays are usually when the market sets up a plan of action for later in the week.
“Customers dip down in the secondary and look at the bid lists of the day, but they’re also waiting for new issues to give some price transparency, and more follow-through from last week,” the trader added.
The problem is not available cash, but supply of new paper, however, the trader said, that doesn’t mean all bad news.
“Traders and dealers are optimistic that there is a lot of July money and I think we’re just waiting for more evidence,” he said. “They are willing to put that money to work and I expect the primary market to do well, and for that to lead into the secondary as the week progresses."
This week’s volume is estimated at $9.2 billion, composed of $7.5 billion of negotiated deals and $1.7 billion of competitive sales.
Ramirez & Co. held a second day or retail orders on the New York City Transitional Finance Authority’s $919.285 million of tax-exempt Fiscal 2019 Series S-1 and Fiscal 2019 Series S-2 Subseries S-2A building aid revenue bonds ahead of the institutional pricing on Tuesday. Also on Tuesday, the NYC TFA will competitively sell $111.455 million of taxable Fiscal 2019 Subseries S-2B BARBs.
The BARBs are rated Aa2 by Moody’s Investors Service and AA by S&P Global Ratings and Fitch Ratings.
Morgan Stanley is set to price the New Jersey Transportation Trust Fund Authority’s $1.2 billion of Series 2018A federal highway reimbursement revenue refunding notes for retail on Tuesday ahead of the institutional pricing on Wednesday.
The deal consists of tax-exempt GARVEE notes not subject to the alternative minimum tax. The notes are rated Baa1 by Moody’s, A-plus by S&P and A-minus by Fitch.
Siebert Cisneros Shank & Co. is set to price $600 million of Houston Series 2018C airport system subordinate lien revenue refunding bonds, subject to the AMT and the Series 2018D non-AMT bonds on Tuesday. The deal is rated A1 by Moody’s.
Jefferies is expected to price the Ohio Water Development Authority’s $167.07 million of fresh water Series 2018 water development revenue bonds on Tuesday. The deal is rated AAA by S&P.
Raymond James & Associates is set to price the Birmingham-Jefferson Civic Center Authority, Ala.’s $256.325 million of bonds, consisting of $117.36 million of Series 2018A special tax bonds, $76.97 million of Series 2018B special tax subordinate lien special tax bonds and Series 2018C taxable bonds, $46.615 million of Series 2018D revenue bonds for the city of Birmingham funding, and $15.38 million of Series 2018E revenue bonds for Jefferson County funding.
In the competitive arena on Tuesday, Los Angeles is selling $127.98 million of Series 2018A solid waste resources revenue bonds. The deal is rated Aa2 by Moody’s and AA by Kroll Bond Rating Agency. The financial advisors are Fieldman, Rolapp & Associates and Urban Futures; the bond counsel is Orrick Herrington.
The Suffolk County Water Authority, N.Y., is selling $100 million of Series 2018A water system revenue bonds. The deal is rated AAA by S&P and Fitch. The financial advisor is Goldman Sachs; the bond counsel is Harris Beach.
Click here for the NYC TFA retail pricing, Day 2
Prior week's top underwriters
The top municipal bond underwriters of last week included Bank of America Merrill Lynch, Morgan Stanley, Piper Jaffray, JPMorgan Securities and Citigroup, according to Thomson Reuters data.
In the week of July 8 to July 14, BAML underwrote $1.79 billion, Morgan Stanley $1.74 billion, Piper Jaffray $830.3 million, JPMorgan $725.5 million, and Citi $703.3 million.
Bond Buyer 30-day visible supply at $11.77B
The Bond Buyer's 30-day visible supply calendar increased $158.9 million to $11.77 billion on Monday. The total is comprised of $3.83 billion of competitive sales and $7.95 billion of negotiated deals.
Municipal bonds were stronger on Monday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields fell as much as one basis point in the one- to 30-year maturities. High-grade munis were also stronger, with yields calculated on MBIS’ AAA scale falling less than a basis point throughout the curve.
Municipals were weaker on Municipal Market Data’s AAA benchmark scale, which showed both the 10-year muni general obligation yield and the yield on the 30-year muni maturity rising by as much as one basis point.
Treasury bonds were weaker as stocks traded mixed.
On Friday, the 10-year muni-to-Treasury ratio was calculated at 85.2% while the 30-year muni-to-Treasury ratio stood at 98.9%, 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 32,000 trades on Friday on volume of $10.98 billion.
California, New York and Texas were the states with the most trades, with the Golden State taking 19.193% of the market, the Empire State taking 10.939% and the Lone Star State taking 10.799%.
Prior week's actively traded issues
Revenue bonds comprised 54.74% of new issuance in the week ended July 13, up from 54.42% in the previous week, according to Markit. General obligation bonds made up 39.59% of total issuance, down from 39.98%, while taxable bonds accounted for 5.67%, up from 5.60% a week earlier.
Some of the most actively traded munis by type in the week were from Colorado and California issuers.
In the GO bond sector, the Colorado 4s of 2019 traded 24 times. In the revenue bond sector, the Los Angeles 4s of 2019 traded 71 times. And in the taxable bond sector, the California 7.55s of 2039 traded 12 times.
Treasury to sell $45B 4-week bills
The Treasury Department said it will sell $45 billion of four-week discount bills Tuesday. There are currently $109.999 billion of four-week bills outstanding.
Treasury auctions discount bills
Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were higher, as the three-months incurred a 1.980% high rate, up from 1.945% the prior week, and the six-months incurred a 2.140% high rate, up from 2.100% the week before.
Coupon equivalents were 2.018% and 2.193%, respectively. The price for the 91s was 99.499500 and that for the 182s was 98.918111.
The median bid on the 91s was 1.950%. The low bid was 1.920%. Tenders at the high rate were allotted 26.67%. The bid-to-cover ratio was 2.76.
The median bid for the 182s was 2.120%. The low bid was 2.100%. Tenders at the high rate were allotted 27.91%. The bid-to-cover ratio was 2.98.
Gary Siegel contributed to this report.
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.