Though the primary market is due for a drop in overall issuance from the past week, this week's calendar features two billion dollar deals as well as a bevy of smaller deals.
Primary Market
Total volume for the week of Aug. 8 is estimated by Ipreo at $7.86 billion, after a revised total of $10.55 billion was sold in the past week, according to Thomson Reuters data. The calendar consists $5.81 billion of negotiated deals and $2.05 billion of competitive sales.
Although the overall volume will be lower, the calendar is very top heavy, featuring deals from Pennsylvania and California greater than $1 billion. The third biggest weighs in at $500 million.
"Next week's calendar is quite manageable," said Alan Schankel, a managing director at Janney Capital Markets. "There is wide variety including lower rated healthcare for yield seekers (NJ Health), the LIPA NY asset securitized bonds for AAA buyers and Pennsylvania, the only state GO selling next week. "
The largest deal of the week will be a competitive offering from the Keystone state, which is selling $1.21 billion of general obligation bonds on Tuesday.
The sale, originally scheduled for a few weeks earlier, was postponed, as some analysts speculated that the state wanted to allow investors and ratings agencies more time to evaluate the fiscal year budget signed on July 14th.
The delay paid off on July 19th, according to some analysts, as S&P Global Ratings removed the state from negative credit watch. The deal is rated Aa3 by Moody's Investors Service and AA-minus by S&P and Fitch Ratings.
"With the budget enacted, in contrast to last year's 9 month stalemate, and the S&P negative watch designation removed, PA should see strong interest next week," Schankel said. "Given the unrelenting fund inflows, and strong seasonal reinvestment (from maturities and calls) there is plenty of cash looking for a home, which will benefit Pennsylvania's deal."
Gary Binkiewicz, senior vice president and head municipal bond analyst at R. Seelaus and Co. said that while S&P removed the commonwealth from credit watch, it assigned a negative outlook, citing concerns over the budget's structure and revenue assumptions.
"The sale delay did play in the state's favor. but you also have to keep in mind that the GO rating for PA is at the lower end of the double –A category by Moodys, S&P and Fitch." Binkeiewicz said. "A downgrade would take it into another (lower) category where the interest penalty would be more pronounced."
Barclays Capital is expected to price the Regents of the University of California's $1.05 billion of medical center pooled revenue bonds of class L tax-exempts and class M of taxables on Wednesday, following a one day retail order period. The deal is rated Aa3 by Moody's and AA-minus by both S&P and Fitch.
"The U of Cal Regents taxable deal should do well, as cross-over buyers continue to be attracted to our yields and safer credits," said Binkiewicz.
The two largest deals both carry the same ratings from the three rating agencies, but Schankel doesn't see much conflict, "given geographic and sector differentials" between the two deals.
Citi is expected to price the New York Utility Debt Securitization Authority's $500 million of restructuring bonds. It is expected to mature serially from 2019 through 2035 and is rated triple-A by Moody's, S&P and Fitch.
"The NY utility debt restructuring authority deal will also be well received as highly visible high grade NYS paper usually is," Binkiewicz said.
Secondary Market
Top-quality municipal bonds finished weaker with Treasuries on Friday after the release of a strong employment report for July.
The Labor Department reported that non-farm payrolls rose 255,000 last month, surpassing economists' forecasts for a 188,000 jump. The payroll gain in June was upwardly revised to 292,000 from the originally reported 287,000 increase. The jobless rate in July remained at 4.9%.
On Friday, the yield on the 10-year benchmark muni general obligation rose three basis points to 1.44% from 1.41% on Thursday, while the yield on the 30-year muni increased two basis points to 2.17% from 2.15%, according to a final read of Municipal Market Data's triple-A scale.
The yield on the two-year Treasury rose to 0.72% from 0.64% on Thursday, the 10-year Treasury yield gained to 1.58% from 1.50% and the yield on the 30-year Treasury bond increased to 2.31% from 2.25%.
U.S. equities gained in late Friday trading. The Dow Jones Industrial Average rose 0.9%, the S&P 500 increased 0.8% and the Nasdaq was up 1.1%.
"July's job gains at 255,000 give the market a reason to cap the work week on a cheerier note. The average work week went up and average hourly earnings went up by 0.7 cents for a 2.6% year-over-year gain," S&P Global Ratings Economists Beth Ann Bovino and Satyam Panday, said in a statement. "A solid August jobs report should allow Federal Reserve officials to breathe a little easier when they meet in September and keep them on track for an interest rate hike likely after the U.S. elections in December."
The 10-year muni to Treasury ratio was calculated at 91.1% on Friday compared to 93.9% on Thursday, while the 30-year muni to Treasury ratio stood at 94.0% versus 95.3%, according to MMD.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $11.2 million to $11.37 billion on Monday. The total is comprised of $3.38 billion of competitive sales and $7.99 billion of negotiated deals.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Aug. 5 were from New York, Texas and Wisconsin issuers,
In the GO bond sector, the NYC 4s of 2035 were traded 71 times. In the revenue bond sector, the University of Texas 2s of 2041 were traded 57 times. And in the taxable bond sector, the Wisconsin 3.294s of 2037 were traded 50 times.
Week's Most Actively Quoted Issues
Illinois and Texas issues were among the most actively quoted names in the week ended Aug. 5, according to Markit.
On the bid side, the Illinois taxable 6.725s of 2035 were quoted by 13 unique dealers. On the ask side, the El Paso Water & Sewer revenue 5s of 2034 were quoted by 14 unique dealers. And among two-sided quotes, the Illinois taxable 5.1s of 2033 were quoted by 11 unique dealers.
Lipper: Muni Bond Funds See Inflows
For the 44th straight week, municipal bond funds reported inflows, according to Lipper data released on Thursday.
The weekly reporters saw $783.930 million of inflows in the week ended Aug. 3, after inflows of $782.940 million in the previous week, Lipper said.
The four-week moving average remained positive at $950.662 billion after being in the green at $939.178 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds experienced inflows, gaining $476.187 million in the latest week after inflows of $658.429 million in the previous week. Intermediate-term funds had inflows of $122.531 million after inflows of $23.786 million in the prior week.
National funds had inflows of $666.956 million on top of inflows of $634.324 million in the previous week. High-yield muni funds reported inflows of $267.286 million in the latest reporting week, after inflows of $206.715 million the previous week.
Exchange traded funds saw inflows of $76.659 million, after inflows of $166.130 million in the previous week.
