The week’s new issuance got off to a slow start on Tuesday, but the Street is flush with cash and ready to pounce as the bigger deals price on Wednesday and Thursday.
“They say it’s not how you start, it’s how you finish,” said one Mid-Atlantic trader. “While we haven’t exactly had a gangbusters start to this week, the next two days should make up for the slow start and I would say slow is even an understatement. Today was more of a whimper but the next two days should be howls.”
New issuance continues to dominate attention in municipals, while heavy demand is represented by strong funds flows in spite of some leftover weakness and heavy supply.
“Munis are quiet waiting for another heavy week of new issues,” said a New York trader Tuesday morning. He noted there were a fair amount of bonds out for the bid following last week’s heavy bids wanted activity.
This also marks the 44th week of positive cash flow for municipal mutual funds, the trader noted.
“Money is available for the new issues,” he said.
He said secondary liquidity is “not great” and as a result “the Street is being careful given the weak tone last week and the heavy calendar” ahead this week.
Primary market
Bank of America Securities priced South Carolina State Ports Authority’s (A1/A+/NR) $163.005 million of revenue taxable refunding bonds on Tuesday.
The deal was priced as a bullet maturity in 2036 and priced at par to yield 1.19%.
Frost Bank priced the city of Abilene, Texas’ ( /AA+/AA+) $73.095 million of general obligation taxable refunding bonds.
In the competitive arena, Palm Beach County, Fla. ( / /AA+) sold of $42.31 million of water and sewer revenue refunding bonds for the FPL reclaimed water project. The bonds were won by Fidelity Capital Markets with a true interest cost of 2.3936%.
Deal action will pick up speed on Wednesday, as the largest deal of the week is expected to price with several others.
Morgan Stanley is scheduled to price the largest deal of the week — District of Columbia’s (Aa1/AAA/AA+) $944.825 million of income tax secured revenue and revenue refunding bonds on Wednesday.
California (Aa2/AA-/AA) will hit the competitive market with $682.435 million of various purpose GO and refunding bonds on Wednesday.
JP Morgan is slated to price Harris County Cultural Education Facilities Finance Corporation, Texas’ (A1/A+/NR) $566.7 million of hospital revenue forward delivery taxable bonds on Wednesday.
Citi is slated to price Main Street Natural Gas Incorporated, Georgia’s (A3/ / ) $527.035 million of gas supply revenue bonds.
Secondary market
Munis were mixed on the MBIS benchmark scale, with yields rising by less than one basis point in the 10-year and falling by less than one basis point in the 30-year maturity. High-grades were also mixed, with yields on MBIS AAA scale rising by less than a basis point in the 10-year and falling by no more than a basis point in the 30-year maturity.
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10- year and the 30-year GO were unchanged from 1.60% and 2.22%, respectively.
The 10-year muni-to-Treasury ratio was calculated at 83.8% while the 30-year muni-to-Treasury ratio stood at 93.3%, according to MMD.
Treasuries were mostly lower, as were stocks were mixed, with the Nasdaq the only index in the green. The Treasury three-month was up and yielding 1.579%, the two-year was down and yielding 1.658%, the five-year was down and yielding 1.723%, the 10-year was down and yielding 1.916% and the 30-year was down and yielding 2.391%.
Muni CUSIP requests surged in October
Municipal CUSIP requests increased in October, CUSIP Global Services reported on Tuesday.
The total of all municipal securities — including municipal bonds, long-term and short-term notes and commercial paper — jumped 34.2% to 1,447 from 1,045 in September. Requests for municipal bond CUSIPS year to date is up 12.9% to 9,944 and it is up 13.2% year over year. In 2018, there were a total of 8,782 municipal CUSIP requests.
"The favorable interest rate environment for debt issuers has put municipal bond CUSIP request volume on pace for a record year," said Gerard Faulkner, Director of Operations for CUSIP Global Services. "While we have seen some month-to-month volatility in the municipal bond category over the course of 2019, the general trend for the first three quarters has been toward steady growth."
Among top state issuers, Texas, New York and California were the most active in October.
Previous session's activity
The MSRB reported 668 trades Monday on volume of $28 million. The 30-day average trade summary showed on a par amount basis of $10.51 million that customers bought $5.91 million, customers sold $2.75 million and interdealer trades totaled $1.84 million.
California, New York and Texas were most traded, with the Golden State taking 25.122% of the market, the Empire State taking 12.951% and the Lone Star State taking 10.43%.
The most actively traded securities were California Health Facilities Finance Authority revenue, 5s of 2051 traded 2 times on volume of $1.085 million.
Treasury auctions discount rate bills
Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were higher, as the $45 billion of three-months incurred a 1.565% high rate, up from 1.520% the prior week, and the $42 billion of six-months incurred a 1.550% high rate, up from 1.535% the week before.
Coupon equivalents were 1.597% and 1.588%, respectively. The price for the 91s was 99.604403 and that for the 182s was 99.216389.
The median bid on the 91s was 1.525%. The low bid was 1.490%.
Tenders at the high rate were allotted 37.24%. The bid-to-cover ratio was 2.70.
The median bid for the 182s was 1.520%. The low bid was 1.500%.
Tenders at the high rate were allotted 49.93%. The bid-to-cover ratio was 2.99.
Treasury to sell $55B 4-week bills
The Treasury Department said it will sell $55 billion of four-week discount bills Thursday. There are currently $40 billion of four-week bills outstanding.
Treasury also said it will sell $40 billion of eight-week bills Thursday.
Christine Albano and 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.
