Mar­ket Will Try to Squeeze $9B of Sup­ply Into 4 Day Week

The Bond Buyer - - Market News - By Chip Bar­nett & aaron Weitz­man

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. ◽

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