Municipals were a touch weaker to start the week as U.S. Treasury yields rose again, with the 10-year topping out at 1.32% and the 30-year creeping closer to 2% while equities were mixed on negative COVID Delta news.
Triple-A benchmarks saw cuts of one to two basis points across the curve, but still outperformed two days of UST weakness.
Municipal benchmark yields have risen less than UST with the 10-year moving a total of five basis points weaker since the beginning of the month and the 30-year climbing six since Aug. 2. The UST 10-year has risen 14 basis points since the start of the month and the 30-year rose 11.
Municipal to UST ratios fell slightly at 67% in 10 years and 73% in 30, according to Refinitiv MMD, while ICE Data Services had the 10-year at 67% and the 30 at 71%.
August returns are in the red so far with overall municipals returning -0.13%, high-yield at -0.06% and taxables at -0.50%, according to Bloomberg Barclays Indices.
The primary got an early start with Raymond James & Associates Inc. pricing and repricing for Henry County School District, Georgia (Aa1/AA+//) (State aid intercept) $210 million of general obligation bonds with two to five basis point bumps: 4s of 2024 at 0.15% (-3), 4s of 2026 at 0.42% (-5), 4s of 2031 at 1.05% (-2) and 1.874s at 1.88%.
Piper Sandler & Co. priced and repriced for the Bastrop Independent School District, Texas (Aaa/AAA//) (PSF Guarantee) $180.435 million of unlimited tax school building bonds and refunding bonds with small bumps on the short end. The first $167.9 million: 5s of 2022 at 0.10% (-1), 5s of 2026 at 0.38% (-3), 4s of 2031 at 1.07%, 3s of 2036 at 1.59%, 3s of 2041 at 1.79%, 3s of 2046 at 1.94% and 2.25s of 2051 at 2.38%.
The larger slate kicks off Tuesday with a competitive deal from the Massachusetts Bay Transportation Authority (Aa3/AA//) with $328 million of subordinate sales tax sustainability bond anticipation notes.
Secondary trading and scales
Trading showed a slightly weaker tone. New Mexico 5s of 2022 traded at 0.08%. Prince George's County 5s of 2022 at 0.06%. New York City 5s of 2023 at 0.08%. Loudoun County, Virginia 5s of 2023 at 0.11%. Montgomery County, Maryland 4s of 2024 at 0.14%.
South Carolina 5s of 2029 at 0.74%. Anne Arundel, Maryland 5s of 2029 at 0.82%. California 5s of 2029 at 0.79%. Virginia Beach 5s of 2030 at 0.86%.
Maryland 5s of 2032 at 0.94%.
New York City TFA 4s of 2039 at 1.54%. University of Washington 5s of 2046 at 1.54%. Georgia Toll and Roadway 3s of 2047 at 1.92%.
Los Angeles Department of Water and Power 5s of 2051 at 1.52%.
Refinitiv MMD saw the short end steady at 0.08% in 2022 and to 0.08% in 2023. The yield on the 10-year rose one basis point to 0.88% while the yield on the 30-year rose four to 1.43%.
ICE municipal yield curve saw bonds steady at 0.05% in 2022 and to 0.06% in 2023. The 10-year maturity sat at 0.88% and the 30-year yield steady at 1.40%.
The IHS Markit municipal analytics curve saw the one-year steady at 0.07% and the two-year at 0.08%, with the 10-year up one basis point to 0.86%, and the 30-year yield up one to 1.42%.
Bloomberg BVAL saw levels steady at 0.05% in 2022 and 0.05% in 2023, while the 10-year rose one to 0.87% and the 30-year up one to 1.42%.
Treasuries were higher while equities were mixed. The 10-year Treasury was yielding 1.316% and the 30-year Treasury was yielding 1.96% in late trading. The Dow Jones Industrial Average lost 75 points or 0.21%, the S&P 500 fell 0.03% while the Nasdaq gained 0.27%.
Number of job openings hits record high
The number of people looking for work in the United States hit a record high in June, the Labor Department reported on Monday.
The number of job openings increased to 10.1 million in June as the job openings rate rose to 6.5%, according to the Job Openings and Labor Turnover Survey (JOLTS). The gain followed May’s 9.48 million level, a rate of 6.1% Economists surveyed by IFR Markets had expected 9.27 million new job openings.
The largest job gains were seen in professional and business services, which rose +227,000; retail trade, which was up 133,000; and accommodation and food services, which gained 121,000. The number of job openings increased the most in the South.
The number of hires rose to 6.7 million, a rate of 4.6%, as total separations edged up to 5.6 million, a rate of 3.8%. Within separations, the quit rate increased to 2.7% while the layoffs rate remained at its all-time low rate of 0.9%. The number of hires increased most in the South and Midwest.
Also on Monday, The Conference Board reported its Employment Trends Index rose in July, the fifth straight monthly gain. The index increased to 109.80, up from 108.96 in June.
“This high mark comes off the back of nearly 1 million new jobs added in both June and July and a steep decline in the unemployment rate,” Gad Levanon, head of the board’s Labor Markets Institute, said in a statement. “However, recruiting and retention difficulties — and rapid wage growth — are expected through the summer, particularly in industries key to the reopening of the economy, such as food service and leisure and hospitality. The rapid wage growth is likely to lead to higher inflation in the coming year.”
Levanon said despite the still-high unemployment rate, many employers were having difficulty finding qualified workers.
“According to the National Federation of Independent Business, 49% of firms reported being unable to fill open positions in July — an all-time high,” he said. “For many of those currently unemployed, job-search intensity remains low due to an array of factors: enhanced unemployment benefits, fears of getting infected, a lack of childcare, and interest in pursuing and preparing for a different type of career.”
Meanwhile, consumers are expecting to see higher earnings with an easier time of find a job in the next year, according to the Federal Reserve Bank of New York’s Center for Microeconomic Data.
The Fed’s Survey of Consumer Expectations showed households’ expectations about earnings growth was positive and the likelihood of finding a job increased sharply last month.
“Short-term inflation expectations were unchanged while medium-term inflation expectation ticked up,” the Fed said. “While remaining elevated, home price growth expectations declined.”
One-year ahead inflation expectations were unchanged at 4.8% in July while inflation expectations at the three-year level increased to 3.7% from 3.6%, its highest reading since August 2013.
Expectations about year-ahead price changes remained steady at 7.1% for food, rose 0.1% to 9.8% for rent and up 0.1% to 9.5% for medical care and increased 0.5% to 7.5% for the cost of a college education. The year ahead expected change in gas prices fell 1.1% to 8.1%.
The year ahead expected earnings growth rose 0.3% to a new high of 2.9% in July, the fourth straight monthly increase.
Unemployment expectations, the probability that the unemployment rate will be higher a year from now, increased 1% to 31.7%. The probability of losing one’s job in the next 12 months moved off June’s all-time low of 10.9% to 12.2% in July, the series’ second lowest reading. The probability of leaving one’s job voluntarily in the next 12 months also increased, to 19.7% in July, from 18.6% in June.
The perceived probability of finding a job rose to 57.0% from 54.2% in June, the fourth straight increase and the highest level since February 2020.
Jobs data show strength; Delta a wildcard
“We view Friday’s unemployment report as a positive development. It certainly confirms that the jobs market and the economy continue to improve,” Marvin Loh, senior global macro strategist at State Street Global Markets, told The Bond Buyer.
“I think there was a concern after the GDP number [second quarter GDP was reported up 6.5% on July 29] that we were going to start to see a little bit of drop-off in terms of economic activity and the jobs report took some of those concerns off the table,” he said on Friday.
“I think this also confirms some of the recent commentary [from the Federal Reserve] that looks to set the market up for a taper announcement over the course of the next couple of meetings,” Loh said.
He added that December or January would be a logical starting point for the start of tapering, perhaps with an announcement being made by the Fed to prepare the market after their gathering at Jackson Hole, Wyoming, or at the December meeting of the Federal Open Market Committee.
“It’s encouraging that the jobs market continues to add employment at a clip that’s pretty impressive over the course of the last two months,” he said.
He added that he thinks the recent rise in inflation will only be transitory.
“I would start to expect a slowdown in those year-over-year numbers. And from a month-over-month perspective, we think we will have seen most of the highest month-over-month prints in the last few months. So we are in the transitory camp,” he said. “It’s going to take longer than I think that we expected at the beginning of the year, but I think we’re going to continue to trend towards a more intermediate-term view where its closer to the Fed’s goals.”
Looking ahead, he said the Delta variant of the COVID-19 virus would be a challenge.
“It remains a wildcard,” he said, but added that he still expects economy activity to continue to improve.
“Longer-term, if it does have an impact of economic activity getting back to normal more slowly, I think the market will start to re-look at the rate hike schedule,” Loh said, “However it’s not going to change the taper timetable too much, barring something like another set of lockdowns, which we don’t expect.”
Primary to come
In the competitive market, the Massachusetts Bay Transportation Authority (Aa3/AA//) is set to sell $328 million of subordinate sales tax sustainability bond anticipation notes at 10:45 a.m. Tuesday.
Gilt-edged Maryland has $615 million of exempt and taxable unlimited tax general obligation bonds in three sales Wednesday: $258.95 million at 10 a.m. eastern, $281.05 million at 10:30 a.m. and $75 million of taxables at 11.
In the negotiated market:
The Allegheny County Airport Authority (A2//A/A+) is set to price $823.55 million of Pittsburgh International Airport AMT and non-AMT revenue bonds on Wednesday. $711.13 million AMT, Serials 2026-2041, terms 2046, 2051, 2056; and $112.42 million non-AMT, Serials 2026-2041; terms 2046, 2051, 2056. Citigroup Global Markets Inc.
The Triborough Bridge and Tunnel Authority is set to price on Thursday $450 million of MTA Bridges and Tunnels payroll mobility tax senior lien bonds. J.P. Morgan Securities LLC.
The New York City Housing Development Corp. (Aa2/AA+//) is set to price on Wednesday $310.375 million of Multi-Family Housing Revenue Bonds, 2021 Series G-1 (Non-AMT) (Sustainable Development Bonds), 2021 Series G-2 (AMT) (Sustainable Development Bonds). Morgan Stanley & Co. LLC, New York.
The City of Lubbock, Texas (A1/A+/A+/) is set to price on Thursday $254.32 million of electric light and power system revenue bonds. BofA Securities.
Maryland (Aaa/AAA/AAA/) is set to price on Tuesday $237.625 million of general obligation forward-delivery refunding bonds. BofA Securities.
The CSCDA Community Improvement Authority, California (nonrated) is set to price on Wednesday $236.565 million of essential housing revenue social bonds, serials 2057. Goldman Sachs & Co. LLC.
The City of San Antonio, Texas (Aaa/AAA/AA+/) is set to price $226.53 million of general improvement bonds, combination tax and revenue certificates of participation and taxable combination tax and revenue certificates of obligation. J.P. Morgan Securities LLC.
The Oregon Community College Districts (/AA//) is set to price on Wednesday $214.235 million of full faith and credit pension obligations. Piper Sandler & Co.
The Henry County School District, Georgia (Aa1/AA+//) is set to price $210 million of general obligation bonds (Insured by: Georgia State Aid Intercept Program), serials, 2024-2036. Raymond James & Associates, Inc.
The Del Valle Independent School District, Texas (/AAA//) (PSF Guarantee) is set to price on Tuesday $187.275 million of unlimited tax school building bonds, serials 2022-2041. Siebert Williams Shank & Co., LLC.
The Windy Gap Firming Project Water Activity Enterprise, Colorado (Aa2/AA//) is set to price on Thursday $165.665 million of Windy Gap Firming Project senior revenue bonds. Goldman Sachs & Co. LLC.
The Allentown Neighborhood Improvement Zone Development Authority (Baa3///) is set to price on Tuesday $159.595 million of forward delivery tax revenue refunding bonds, serials 2024-2036, term 2042. Citigroup Global Markets Inc.
The City of Garland, Texas (A1//AA-/) is set to price on Tuesday $152.825 million of electric utility system taxable revenue refunding bonds. BofA Securities.
The Virginia Housing Development Authority (Aaa/AAA//) is set to price $151.129 million of commonwealth mortgage bonds, residential mortgage-backed securities, serial 2051. Wells Fargo Corporate & Investment Banking.
Friendship Independent School District, Texas (Aaa/AAA//) (PSF Guarantee) is set to price on Tuesday $141 million of unlimited tax school building bonds, serials, 2022-2024, 2034-2051. RBC Capital Markets.
The University of North Dakota is set to price on Thursday $130.4 million of certificates of participation. Stifel, Nicolaus & Company, Inc.
Pecos-Barstow-Toyah Independent School District (/AAA//) (PSF Guarantee) is set to price on Wednesday $111.79 million of unlimited tax school building bonds, serials 2022-2041. RBC Capital Markets.
