The municipal bond market will see less than $4 billion of new paper to close out the month and market participants remain hopeful volume will spike in September and stay strong into the fall.
“The summer is slowly crawling to an end and the light calendar this week should be digested quickly and easily,” said one New York trader. “From what I am seeing, the deals will start stacking up come September, once everyone is back, and hopefully it’s a strong end to the year.”
Weekly bond volume estimates says issuance will inch up to $3.9 billion this week from a revised total of $3.7 billion in the prior week, according to updated data from Thomson Reuters. The calendar is composed of $2.8 billion of negotiated deals and $1.1 million of competitive sales.
Secondary market
Municipal bonds were mostly weaker on Monday, according to a late read of the MBIS benchmark scale. Munis yield rose by less than one basis point in 17 total maturities, while Benchmark muni yields fell no more than one basis point in 12 total maturities.
High-grade munis were mostly steady, with yields calculated on MBIS’ AAA scale remaining flat in 11 maturities, while nine maturities were weaker and the remianing 10 were stronger.
Municipals were unchanged on Municipal Market Data’s AAA benchmark scale, which showed the yield on the 10-year muni general obligation steady at 2.44% and 30-year muni maturity flat at 3.00%.
On Monday, the 10-year muni-to-Treasury ratio was calculated at 85.4% while the 30-year muni-to-Treasury ratio stood at 100.2%, 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.
Primary market
The trader noted that while issuance in the fourth quarter won’t be nearly as high as it was last year, but should still be more robust than the “average” 2018 deal flow.
“We should start seeing more of those billion dollar deals or close to, come September,” he said.
Muni bond buyers will get another chance in the upcoming week to get hold of some Massachusetts and Texas paper, as both issuers will be in the market as the unofficial summer season winds down in the last week before Labor Day.
Morgan Stanley is set to price Massachusetts’ $727.145 million of general obligation and GO refunding bonds on Wednesday after holding a one-day retail order period. The issue is tentatively structured as $500 million of Series E consolidated loan of 2018 GOs and $227.145 million of Series 2018C refunding GOs.
Also in the Bay State, Citigroup is expected to price the Massachusetts Clean Water Trust’s $162 million of Series 21 state revolving fund green bonds on Tuesday.
Piper Jaffray is set to price the Texas Public Finance Authority’s $300 million of Series 2018 taxable GO and refunding bonds on Tuesday. The deal is rated triple-A by Moody’s Investors Service and S&P Global Ratings.
JPMorgan Securities is set to price the West Virginia Hospital Finance Authority’s $260 million of hospital refunding and improvement revenue bonds for the Cabell Huntington Hospital Obligated Group on Tuesday. The issue consists of Series 2018A bonds and Series 2018B taxable bonds. The deal is rated Baa1 by Moody’s and BBB-plus by S&P.
Prior week's actively traded issues
Revenue bonds comprised 56.53% of new issuance in the week ended Aug. 24, according to
Some of the most actively traded munis in the week were from Puerto Rico, Texas and New York and New Jersey issuers.
In the GO bond sector, the Puerto Rico 8s of 2035 traded 34 times. In the revenue bond sector, the Texas 4s of 2019 traded 204 times. And in the taxable bond sector, the Port Authority of N.Y. & N.J. 4.031s of 2048 traded 55 times.
Treasury auctions two-year notes
The Treasury Department Tuesday auctioned $36 billion of two-year notes with a 2 5/8% coupon at a 2.655% yield, a price of 99.941940.
The bid-to-cover ratio was 2.89.
Tenders at the high yield were allotted 42.73%.
The median yield was 2.625%. The low yield was 1.888%.
Treasury auctions discount rate bills
Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were higher, as the three-months incurred a 2.080% high rate, up from 2.035% the prior week, and the six-months incurred a 2.210% high rate, up from 2.185% the week before.
Coupon equivalents were 2.120% and 2.266%, respectively. The price for the 91s was 99.474222 and that for the 182s was 98.882722.
The median bid on the 91s was 2.060%. The low bid was 2.030%.
Tenders at the high rate were allotted 21.00%. The bid-to-cover ratio was 2.90.
The median bid for the 182s was 2.190%. The low bid was 2.170%.
Tenders at the high rate were allotted 33.00%. The bid-to-cover ratio was 3.06.
Treasury to sell $65B 4-week bills
The Treasury Department said it will sell $65 billion of four-week discount bills Tuesday. There are currently $92.997 billion of four-week bills outstanding.
Gary E. 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.
