Market Will Try to Squeeze $9B of Supply Into 4 Day Week
Municipal bonds finished mostly stronger Monday, as traders prepared for about $9 billion of new issues coming to market this week.
SIFMA has recommended all fixed-income cash markets close on Wednesday in honor of the national day of mourning for former President George H.W. Bush. President Donald Trump has closed federal government executive offices on Wednesday in honor of Bush.
A firm municipal market with a flattening yield curve was evident Monday afternoon as investors continued to wade through interest rate uncertainty, a New York trader said.
“The market is pretty strong, which is a little surprising,” he said, noting that the 10year Treasury was declining from 3.04% at the start of trading Monday.
He said decreasing yields were in response to Federal Reserve Board Chairman Jerome Powell’s comments last week that indicated the Fed may slow its interest rate hikes.
“There’s a big curve flattening going on,” with the 2-year Treasury at 2.82% and the 10-year at
2.99% just before the end of trading, he said.
The trader described the municipal market as being in “good shape” despite the continued outflows and supply shortage. A New Jersey trader agreed.
“The market has developed a pretty good tone as the day has progressed” after an “extremely quiet” morning, he said.
“The new issue calendar is expected to be somewhat larger than recent weeks,” he said. At the same time, he noted that the calendar will be compressed into a four-day week due to the government market being closed Wednesday.
Weekly bond volume is estimated at $9 billion, with the calendar comprised of $8 billion of negotiated deals and $989.6 million of competitive sales.
JPMorgan Securities is expected to price Chicago’s $1.848 billion of general airport senior lien revenue and refunding bonds on Tuesday for O’Hare International Airport.
The deal is equally divided into a Series 2018B tax-exempt series of senior lien general airport revenue bonds not subject to the alternative minimum tax, a Series 2018A tax-exempt GARB series subject to the AMT, and a Series 2018C taxable GARB series.
Frasca & Associates and Swap Financial Group are financial advisors while Mayer Brown and Neal & Leroy are bond counsel.
Ahead of the sale, S&P Global Ratings and Fitch Ratings affirmed their A ratings for O’Hare while Kroll Bond Rating Agency affirmed its A-plus rating. All three assign a stable outlook.
Municipal bonds were stronger on Monday, according to a late read of the MBIS benchmark scale.
Benchmark muni yields fell as much as four basis points in the one- to 30-year maturities.
High-grade munis were mostly stronger, with yields calculated on MBIS’ AAA scale decreasing as much as four basis points in the one- to 26-year maturities, rising as much as one basis point in the 28- to 30-year maturities and remaining unchanged in the 27-year maturity.
Municipals were steady on Municipal Market Data’s AAA benchmark scale, which showed the yield on both the 10-year muni general obligation and on the 30-year muni maturity remaining unchanged.
Treasury bonds were stronger as stocks traded higher. ◽