The Bond Buyer 40

The Bond Buyer - - Front Page - By Chip Bar­nett

The mu­nic­i­pal bond mar­ket is look­ing ahead to a new is­sue slate that’s dom­i­nated by two big com­pet­i­tive sales from Mas­sachusetts and three large tax­able deals in the ne­go­ti­ated sec­tor.

Ipreo es­ti­mates the weekly sup­ply cal­en­dar will to­tal $3.30 bil­lion, which is made up of $1.72 bil­lion of ne­go­ti­ated deals and $1.58 bil­lion of com­pet­i­tive sales.

Dan Heck­man, se­nior fixed in­come strate­gist at U.S. Bank Wealth Man­age­ment said that although it has been a slow start to the year vol­ume wise, mu­nis are po­si­tioned well, get­ting a bet­ter bid un­der them and do­ing well com­pared to Trea­suries right now.

“De­mand will be de­cent, the mar­ket has got to work through some of resid­ual over­hang from the rush at the end year,” he said. “I also think that peo­ple are try­ing to fig­ure out what all the tax re­form changes mean.”

He added that as we get into the next few weeks, we will have a bet­ter foot­print how not only the month will go, but the first quar­ter in gen­eral.

“It is tough for firms to gen­er­ate rev­enue, even with a lot of sup­ply, so it’s even harder still with less sup­ply,” Heck­man said.

“The bid mar­ket is start­ing to perk up and im­prove. We think it will be ex­tremely ac­tive this year.”

Mas­sachusetts is com­pet­i­tively of­fer­ing $600 mil­lion of gen­eral obli­ga­tion bonds in two sep­a­rate sales on Tues­day.

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 AA­plus by Fitch Rat­ings.

In the ne­go­ti­ated sec­tor, tax­able bond deals dom­i­nate the slate.

“Com­ing into the year, we thought tax­able is­suance would con­tinue to rise and the cal­en­dar is show­ing that early on,” said Heck­man.

“With the new tax low pro­vi­sions and the rate down to 21%, it makes things more dif­fi­cult for some buy­ers. Un­der­writ­ers may be telling is­suers that although a tax­able fi­nanc­ing is a lit­tle more costly, is­suers can lock some­thing in and have a broader in­vestor base. Today’s higher cost might look rel­a­tively cheap three or four months from now.”

Mor­gan Stan­ley is ex­pected to price the Stan­ford Health Care’s $500 mil­lion of Se­ries 2018 cor­po­rate CUSIP tax­ables on Wed­nes­day.

The deal is rated Aa3 by Moody’s, AA-mi­nus by S&P and AA by Fitch.

The MBIS mu­nic­i­pal non-callable 5% GO bench­mark scale was weaker in late trad­ing.

The 10-year muni bench­mark yield rose to 2.266% on Fri­day from the fi­nal read of 2.252% on Thurs­day, ac­cord­ing to Mu­nic­i­pal Bond In­for­ma­tion Ser­vices. The MBIS 30-year bench­mark muni yield in­creased to 2.745% from 2.737%.

The MBIS bench­mark index is up­dated hourly on the Bond Buyer Data Work­sta­tion.

Top-rated mu­nic­i­pal bonds ended weaker on Fri­day.

The yield on the 10-year bench­mark mu­nic­i­pal gen­eral obli­ga­tion rose two ba­sis points to 2.01% from 1.99% on Thurs­day, while the 30-year GO yield gained two ba­sis points to 2.58% from 2.56% ac­cord­ing to the fi­nal read of MMD’s triple-A scale. ◽

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