Municipal bond issuance is expected to tick up this week, although it still remains at relatively low levels.
The municipal market can expect $7.18 billion in new issuance, up from last week’s revised $5.81 billion. In the negotiated market, $5.51 billion is expected to come to market, up from last week’s revised $4.12 billion. On the competitive calendar, $1.67 billion is expected to be priced, down slightly from last week’s revised $1.69 billion.
“It doesn’t look like there are any monster deals next week,” said Chris Mauro, head of municipal strategy at RBC Capital Markets. “We have been in the $6 billion to $7 billion range for the last few weeks and it looks like this week we are smack in the middle of that.”
And if reception for the deals last week is any indicator of how the market can handle the slightly increased issuance this week, everything should go well. “Deals have been well received and the calendar is manageable and I expect the same for this week,” Mauro said.
Other experts agree. “It’s hard to make an argument on why rates would rise,” said Peter Hayes, head of municipal bond trading at BlackRock. “I think people would like an increase in rates for more value, yield, and income, but we just have low issuance, a favorable rate environment, and strong flows once again. So all those three add up to what will be a favorable environment for munis.”
The largest deal of the calendar is expected to come to market Wednesday. Mesirow Financial is expected to price $596 million of Chicago general obligation bonds, rated Aa3 by Moody’s Investors Service, A-plus by Standard & Poor’s, and AA-minus by Fitch Ratings.
“This GO deal will have some spread and some yield in it and it will attract demand once again,” Hayes said.
Morgan Stanley is expected to price the second largest deal of the week, $497 million of New York State Environmental Facilities Corp. state clean water and drinking water revolving funds. The deal will be offered for retail investors Monday and institutions Tuesday. The bonds are rated AAA by Standard & Poor’s.