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
“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