MON­DAY’S YIELDS

The Bond Buyer - - Front Page -

The mu­nic­i­pal bond mar­ket is set for a surge in is­suance this week, with 19 deals $100 mil­lion or larger in­clud­ing the $1.3 bil­lion Chicago se­cu­ri­ti­za­tion trans­ac­tion.

Ipreo fore­casts weekly bond vol­ume will in­crease to at least $6.5 bil­lion from a re­vised to­tal of $5.7 bil­lion in the prior week, ac­cord­ing to up­dated data from Thom­son Reuters. Ipreo’s es­ti­mates were cal­cu­lated be­fore the Chicago deal was ap­proved for sale. The cal­en­dar is com­posed of $5.8 bil­lion of ne­go­ti­ated deals and $703.3 mil­lion of com­pet­i­tive sales.

The Se­cu­ri­ti­za­tion Corp. was es­tab­lished last year to lever­age city sales tax rev­enue to re­fund out­stand­ing debt. Loop Cap­i­tal Mar­kets will be the lead man­ager on the deal, which is ex­pected to price on Wed­nes­day in the third sale since its in­cep­tion.

The of­fer­ing is com­prised of $917.64 mil­lion of Se­ries 2018C sales tax se­cu­ri­ti­za­tion bonds and $388.56 mil­lion of Se­ries 2018D tax­ables sales tax se­cu­ri­ti­za­tion bonds and car­ries rat­ings of AA-mi­nus by

S&P Global Rat­ings and AAA by

Fitch Rat­ings and

Kroll Bond Rat­ing

Agency.

“With the $1.3 bil­lion Chicago deal on the hori­zon, the mu­nic­i­pal mar­ket was mildly firmer by two to three ba­sis points on Fri­day,” said one New York trader. “Bid lists shrank as well, as the mar­ket was and is fo­cused on the Chicago deal whose sell­ing points in­clude: size, and the name recog­ni­tion, and pos­si­bly yield. De­mand will be a func­tion of price; size cre­ates in­ter­est.”

Siebert Cis­neros Shank and Co., priced the city of Los An­ge­les’s $360.20 mil­lion of waste­water sys­tem sub­or­di­nate rev­enue bonds for re­tail on Mon­day, ahead of Tues­day’s in­sti­tu­tional pric­ing. The deal is rated AA by S&P and AA by Fitch and Kroll.

Mu­nic­i­pal bonds were mostly weaker on Mon­day, ac­cord­ing to a late read of the MBIS bench­mark scale. Bench­mark muni yields rose as much as one ba­sis point in the one- to 13-year and 15- to 26-year ma­tu­ri­ties. The re­main­ing ma­tu­ri­ties were stronger by less than one ba­sis point.

High-grade mu­nis were also mostly weaker, with yields cal­cu­lated on MBIS’ AAA scale in­creas­ing as much as a ba­sis point in the two- to 13-year and 18- to 30-year ma­tu­ri­ties. The re­main­ing ma­tu­ri­ties were stronger by less than one ba­sis point.

Mu­nis were un­changed on Mu­nic­i­pal Mar­ket Data’s AAA bench­mark scale, which showed steady yields on both the 10-year muni gen­eral obli­ga­tion and the yield on 30year muni ma­tu­rity.

On Mon­day, the 10-year muni-to-Trea­sury ra­tio was cal­cu­lated at 87.0% while the 30year muni-to-Trea­sury ra­tio stood at 99.8%, 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.

With no large new is­sues pric­ing for in­sti­tu­tions on Mon­day, there was a fairly quiet tone amid slow trad­ing ac­tiv­ity and con­tin­ued growth of bid wanted lists flood­ing the sec­ondary mar­ket, ac­cord­ing to a New York trader.

“Lack­adaisi­cal” is how he de­scribed the muni mar­ket be­fore it closed on Mon­day.

“It’s pretty ap­a­thetic,” he said. “There is just an over­rid­ing feel­ing of un­der­per­for­mance. There’s no real en­try point in here.”

He said the “real money” buy­ers, such as large in­sti­tu­tional ac­counts, are be­ing cau­tious. ◽

By Chris­tine Al­BAno & AAron Weitz­mAn

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