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Muni supply is positioned to ease heading into the holiday
weekend as summer redemptions throttle down and participants
prepare for the fall season which has historically drawn greater
supply figures. Muni benchmarks displayed nominal movement over the
course of last week, widening by 1-2bps as participants awaited
further guidance on economic activity and government market policy
updates. New issue activity was partially subdued ahead of Jerome
Powell's speech last Friday, as market players analyzed key
insights behind impending monetary policy announcements. Throughout
the course of the speech, Fed Chair Powell supported a
laissez-faire approach to tightening monetary policy, after
affirming current inflation levels should be deemed temporary and
would subside as labor and market conditions improve. Nonetheless,
Powell noted a cautious approach behind any interest rate increases
to avoid any unforeseen economic repercussions which may delay the
eventual return of pre-pandemic national employment levels. As part
of the outlook, Powell alluded to near term tapering of central
bank asset repurchases, spanning mortgage backed securities and US
treasuries which have hovered ~$120Bn per month in effort to foster
healthy economic expansion. Evolving pandemic conditions have
contributed to careful consideration of potential federal policy
adjustments, as timelines for such decisions remain heavily
dependent on risks associated with the delta variant, a potential
inhibitor of job creation and lingering inflation. As the nation
vigorously battles pandemic-induced setbacks, state and local
governments continue to navigate COVID-19 case fluctuations,
marking a challenging return to a pre-covid operating
environment.
Primary activity remains stable as participants step away for
summer vacations after last week's calendar supplied
$9.8Bn of muni paper after several large
issuers stepped up to the plate and priced new issue bonds. The
Pennsylvania Turnpike Commission led last week's primary calendar
with a successful pricing of $530mm oil franchise revenue bonds
with tighter spreads noted in the intermediate range of the scale,
after 2031 maturity spreads landed +19 off the interpolated MAC.
The South Carolina Public Service Authority also took advantage of
opportunistic pricing levels, selling $430mm tax-exempt revenue
bonds with bumps of 2-9 basis points registered across the scale.
This week's calendar is slated to taper down to
$6Bn ahead of the Labor Day Holiday weekend, with
167 new issues on the roster and noteworthy presence of New York
offerings, representing ~25% of total issuance over the week. The
New York Transitional Finance Authority (Aa1/AAA/AAA) is set to
lead this week's negotiated calendar, offering $950mm future tax
secured subordinate bonds spanning 08/2023-08/2048 with the
greatest par size presented in the longer-dated maturities. New
Hope Cultural Educational Facilities of Texas will also make a
debut, selling $500mm senior living revenue bonds on Wednesday
across three series, senior managed by Hilltop Securities. This
week's competitive calendar will span 86 issues for a total of
$1.64Bn, led by the New York Transitional Finance
Authority, auctioning $250mm of future tax secured taxable
subordinate bonds selling on Wednesday.
Posted 31 August 2021 by Matthew Gerstenfeld, Municipal Bond Business Development Specialist, IHS Markit
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