The municipal bond market on Monday is patiently waiting for this week’s new issue sales to get underway with competitive sales on Tuesday from Massachusetts and Fairfax County, Va.
Trading was subdued in the secondary, with prices little changed at midday.
After a slow start to 2018, this week’s volume is estimated at $3.30 billion, which is composed of $1.72 billion of negotiated deals and $1.58 billion of competitive sales.
"January tends to be a tad sluggish in the beginning of the month,” Stephen Winterstein, managing director at Wilmington Trust, wrote in a weekly market comment. “In point of fact, over the past 32 years since 1986, the first month of the year has averaged only 6% of that year’s total supply, whereas the final three months of the year have averaged 9%. The month with the highest average new issuance over that same time period is May, at 11%.”
Wilmington Trust expects supply to accelerate to a more normal pace, though Winterstein said that the elimination of tax-exempt advance refundings will subdue issuance in 2018. The firm’s municipal supply estimate for 2018 is about $350 billion, a 20% decline from last year.
“After December’s $62.502 billion flood of new issuance, supply slowed in the first week of 2018 to a scant $42.100 million,” Winterstein wrote. “The slowing of new deals should serve as a support mechanism for municipal bond prices. While we are closely watching retail demand as measured by mutual fund flows, the institutional market appears to be on firm footing for the upcoming week.”
Primary activity kicks off on Tuesday and is centered in the competitive sector.
Massachusetts s competitively selling $600 million of unlimited tax general obligation bonds in two separate offerings.
The issues consist of $400 million of consolidated loan of 2018 Series A GOs and $200 million of consolidated loan of 2018 Series B GOs.
Both deals are rated Aa1 by Moody’s Investors Service, AA by S&P Global Ratings and AA-plus by Fitch Ratings
The last time the state competitively sold comparable bonds was on Oct. 18, 2017, when Bank of America Merrill Lynch won $300 million of consolidated loan of 2017 Series E GOs with a true interest cost of 2.8724%.
Fairfax County, Va., is selling $225.19 million of Series 2018A unlimited tax GO public improvement bonds.
The deal is rated triple-A by Moody’s, S&P and Fitch.
The Roseville Area Schools Independent School District No. 623, Minn., is selling $139.24 million of Series 2018A unlimited tax GO school building bonds.
The deal is being sold under the Minnesota School District Credit Enhancement Program.
Later in the week, Morgan Stanley is expected to price the Stanford Health Care’s $500 million of Series 2018 corporate CUSIP taxables on Wednesday, RBC Capital Markets is expected to price the Pennsylvania Commonwealth Financing Authority’s $410 million of Series 2-018A taxable revenue bonds on Thursday while JPMorgan Securities is set to price the Illinois Finance Authority’s $218.67 million of Series 2018 taxable revenue refunding bonds on Thursday.
Bond Buyer 30-day visible supply at $6.81B
The Bond Buyer's 30-day visible supply calendar decreased $111.2 million to $6.81 billion on Monday. The total is comprised of $3.12 billion of competitive sales and $3.68 billion of negotiated deals.
Prior week's actively traded issues
Revenue bonds comprised 56.45% of new issuance in the week ended Jan. 5, up from 56.41% in the previous week, according to Markit. General obligation bonds made up 37.83% of total issuance, down from 38.10%, while taxable bonds accounted for 5.72%, up from 5.49% a week earlier.
Some of the most actively traded bonds by type in the week were from New York and Illinois issuers.
In the GO bond sector, the New York City zeroes of 2042 were traded 31 times. In the revenue bond sector, the New York City Municipal Water Finance Authority zeroes of 2050 were traded 24 times. And in the taxable bond sector, the Illinois 5.1s of 2033 were traded 12 times.
The MBIS municipal non-callable 5% GO benchmark scale was stronger in midday trading.
The 10-year muni benchmark yield fell to 2.270% on Monday from the final read of 2.275% on Friday, according to Municipal Bond Information Services. The MBIS 30-year benchmark muni yield decreased to 2.745% from 2.748%.
The MBIS benchmark index is updated hourly on the Bond Buyer Data Workstation.
Top-rated municipal bonds are unchanged on Monday. The yield on the 10-year benchmark muni general obligation was steady from 2.01% on Friday, while the 30-year GO yield was flat from 2.58% according to a read of MMD’s triple-A scale.
U.S. Treasuries are mixed in midday activity. The yield on the two-year Treasury rose to 1.96% on Monday from 1.96% on Friday, the 10-year Treasury yield was unchanged from 2.48% and the yield on the 30-year Treasury increased to 2.82% from 2.81%.
On Friday, the 10-year muni-to-Treasury ratio was calculated at 81.2% compared with 81.3% on Thursday, while the 30-year muni-to-Treasury ratio stood at 91.8% versus 92.0%, according to MMD.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 38,762 trades on Friday on volume of $10.35 billion.
Previous week's top underwriters
The top municipal bond underwriters of last week included RBC Capital Markets, Stifel, BB&T Capital Markets, Roosevelt & Cross and Robert W. Baird, according to Thomson Reuters data.
In the week of Jan. 1 to Jan. 6, RBC underwrote $566.7 million, Stifel $116.0 million, BB&T $37.7 million, R&C $10.5 million, and Baird $8.4 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. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.