Muni Market Heads for a `Measuring Stick’ Wednesday
Municipal bonds weakened Tuesday as handful of deals priced ahead of market-testing transactions from Chicago and Los Angeles that are scheduled for Wednesday.
“Today kind of came and went but tomorrow should be interesting,” said one New York trader. “All eyes will be on the two headliners and with the weight of issuance we should see tomorrow, it will be one of those measuring stick days.”
Siebert Cisneros Shank & Co. priced Los Angeles’ $360 million of wastewater system subordinate revenue green bonds and revenue refunding bonds. The deal is rated AA by S&P Global Ratings, Fitch Ratings and Kroll Bond Rating Agency.
Raymond James & Associates priced Ohio’s $170 million of capital facilities lease appropriation bonds and taxable parks and recreation improvement bonds on Tuesday. The deal is rated Aa2 by Moody’s Investors Service and AA by S&P and Fitch.
In the competitive arena, the
Florida Department of Management sold
$249.265 million of bonds. Wells
Fargo Securities won the bidding, with a true interest cost of
Morgan Stanley priced San Matteo Community College District, California’s $294.345 million of 2018 GO election of 2014 bonds on Tuesday. The deal is rated triple-A by Moody’s and S&P.
Bank of America Merrill Lynch priced the city of Riverside, Calif.’s $153.125 million of refunding sewer revenue bonds on Tuesday. The deal is rated A1 by Moody’s and AA-minus by S&P.
On Wednesday, Chicago will wrap up borrowing under a $3 billion sales tax securitization authorization, after doubling the deal to $1.3 billion to allow the city to beat rising interest rates and complete the refunding program before Mayor Rahm Emanuel exits in May. The deal is rated AA-minus by S&P and triple-A by Fitch and Kroll Bond Rating Agency.
JPM is also set to price the Department of Airports of the City of Los Angeles’ $714 million of subordinate revenue bonds, featuring both alternative minimum tax and non-AMT bonds. The deal is rated AA by S&P and Fitch.
Municipal bonds were mostly weaker on Tuesday, according to a late read of the MBIS benchmark scale. Benchmark muni yields rose as much as one basis point in the two- to 18-year and 28- to 30-year maturities. The remaining 10 maturities were either unchanged or lowering by less than one basis point.
High-grade munis were mostly weaker, with yields calculated on MBIS’ AAA scale increasing as much as a basis point in the six- to 18-year, and 26- to 30-year maturities. The remaining 12 maturities were weaker by less than one basis point or unchanged.
Munis were weaker on Municipal Market Data’s AAA benchmark scale, which showed yields on both the 10-year muni general obligation and 30-year muni rising by two basis points.
On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 86.8% while the 30-year muni-to-Treasury ratio stood at 99.5%, according to MMD.
Demand for municipals should perk up before year end -- despite continued rising rates and expectations for 2018 ending with potentially negative returns, according to Jeffrey Lipton, managing director and head of municipal research and strategy and municipal capital markets at Oppenheimer & Co.
“We do think that bonds will witness a more recurring appeal given a host of geopolitical events — even as the Fed continues to elevate interest rates,” he wrote in a weekly municipal report. ◽