The Bond Buyer 40
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. ◽