Municipal bond buyers were offered up revenue, general obligation and taxable bonds on Tuesday as two big issuers from the East and West Coasts, and one from the Midwest, hit the market.
Primary market
With a heavy calendar this week, new issues remain in focus and well received by supply-hungry investors, according to a New York trader.
“There’s very little activity today,” the trader said Tuesday. Prior to the release of weaker-than-expected manufacturing data, the muni market "was probably three basis points weaker," he said. "But after that number Govies have rallied and the market is recovering.”
For example, he said this week’s taxable Wisconsin deal was well received as its pricing was being finalized.
Jefferies priced New York City (Aa1/AA/AA) $850 million of tax-exempt general obligation bonds for retail investors. The deal will be priced for institutions on Thursday after a second day of retail orders is held on Wednesday.
The deal contains 3%, 4% and 5% coupons. The issue was priced to yield from 1.23% with a 3% and 5% coupons in 2021 (one basis point over the comparable MMD) to 2.76% with a 3% coupon (80 basis points over the comparable MMD) and 2.46% with a 4% coupon (50 basis points over the comparable MMD) in a split 2044 maturity.
The city will also competitively sell $130 million of taxable GOs on Thursday.
Seattle, Washington, (Aa2/AA/NR) sold $350.815 million of Municipal Light and Power bonds in two offerings. BofA Securities won the $210.54 million of Series 2019A improvement revenue bonds with a true interest cost of 3.2029%. Morgan Stanley won the $140.275 million of Series 2019B refunding revenue bonds with a TIC of 1.2863%.
Piper Jaffray is the financial advisors; Stradling Yocca is the bond counsel. Proceeds will be used to finance certain capital improvements and conservation programs for the city s municipal light and power plant and to refund debt.
Since 2009, the city has sold about $7 billion of debt, with the most issuance occurring in 2010 when it offered $1.2 billion of bonds. It sold the least amount of debt in 2009 when it issued $239 million.
Goldman Sachs priced Wisconsin’s (Aa1/AA/NR/AA+) $329.665 million of taxable Series 1 GO refunding bonds of 2019.
Goldman also priced the Regents of the University of Colorado’s (Aa1/NR/AA+) $204.725 million of Series 2019C term-rate revenue and refunding revenue green bonds. The deal was priced as 2s to yield 1.59% in 2054.
Citigroup priced the Trinity River Authority of Texas (NR/AAA/AA+) Regional Wastewater System’s $147.495 million of Series 2019 revenue improvement and refunding bonds.
Tuesday’s bond sales
NYS releases $11.28B Q4 bond sale calendar
A tentative schedule for $11.28 billion in bond sales from New York State, New York City and their major public authorities during the fourth quarter of 2019 was released Tuesday by State Comptroller Thomas DiNapoli.
The calendar includes anticipated bond sales by: New York City, the Dormitory Authority of the State of New York, Empire State Development, the Metropolitan Transportation Authority, the New York City Municipal Water Finance Authority, the New York City Transitional Finance Authority, the New York State Housing Finance Agency, the New York State Thruway Authority, the Port Authority of New York & New Jersey, the State of New York, and the State of New York Mortgage Agency.
A breakdown of the sales include $6.08 billion of new money and $5.2 billion of refundings as follows: $8.07 billion scheduled for October, of which $4.26 billion is new money and $3.81 billion are refundings; $1.43 billion scheduled for November, of which $1.09 billion is new money and $340 million are refundings; and $1.78 billion scheduled for December, of which $725 million is new money and $1.05 billion are refundings.
The anticipated sales in the fourth quarter compare to past planned sales of $7.68 billion in the third quarter of 2019 and $6.91 billion in the fourth quarter of 2018, according to Dinapoli.
All borrowings are scheduled at the request of the issuer and done under their borrowing programs.
Secondary market
Weak data pressured financial markets on Tuesday.
The ISM Manufacturing Index fell to 47.8 in September from 49.1 in August, below the consensus expectations of 50.0. It is at the lowest level since the recession ended in 2009.
“The ISM Manufacturing Index fell further into contractionary territory to 47.8 in September and is now firmly below the six-month average of 50.8,” Scott Anderson, chief economist at Bank of the West, said in a market note. “The slowing global economy, U.S.-China trade war and stronger U.S. dollar are all weighing on the U.S. manufacturing sector. The fourth consecutive monthly decline in the index will reinforce the pressure for the Fed to cut interest rates again to support the slowing U.S. economy."
There was more disappointing data as construction spending rose 0.1% in August, below the consensus forecast for a 0.5% increase.
“Moreover, total private construction was flat in August while total public construction registered a gain of 0.4%,” Anderson said. “Construction spending is down 1.9% from a year earlier, due to a 5.0% decline in residential construction and 2.8% decline in private nonresidential construction.”
Munis were weaker on the MBIS benchmark scale Tuesday, with yields rising by one basis point in the 10-year maturity and by two basis points in the 30-year maturity. High-grades were also stronger, with yields on MBIS AAA scale rising all along the curve.
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10- and 30-year GOs dropped one basis point to 1.41% and 2.00%, respectively.
“The ICE muni yield curve is almost one basis point higher on light volume to start the quarter,” ICE Data Services said in a Tuesday market comment. “High-yield and tobaccos are both one basis point higher, while Puerto Rico is unchanged.”
The 10-year muni-to-Treasury ratio was calculated at 85.6% while the 30-year muni-to-Treasury ratio stood at 94.9%, according to MMD.
Treasuries were stronger as stock prices traded lower. The Treasury three-month was yielding 1.810%, the two-year was yielding 1.556%, the five-year was yielding 1.497%, the 10-year was yielding 1.638% and the 30-year was yielding 2.098%.
Previous session's activity
The MSRB reported 25,502 trades Monday on volume of $7.58 billion. The 30-day average trade summary showed on a par amount basis of $10.87 million that customers bought $5.80 million, customers sold $3.21 million and interdealer trades totaled $1.86 million.
California, Texas and New York were most traded, with the Golden State taking 15.613% of the market, the Lone Star State taking 12.287% and the Empire State taking 8.991%.
The most actively traded security was the Texas 2019 TRAN 4s of 2020, which traded 18 times on volume of $31.23 million.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.
