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New issue activity is positioned to throttle down over the
holiday-shortened week as buyside accounts seek to take down muni
bond paper amidst lighter supply in effort to satisfy various
investment objectives. While bond issuance YTD remains in the red,
it is important to factor the plethora of supply which hit the
market last summer after issuers flooded the primary arena, driving
a greater variance in supply figures (%) as compared to September
of 2020. Muni benchmarks adjusted slightly over the course of last
week, with a 1bp cut noted across the curve, outperforming US
treasuries resulting in the 10YR Muni/UST ratio hovering at 70%.
Following Jerome Powell's remarks on August 27th, primary market
fundamentals generally remained intact, as participants directed
attention towards core economic indicators coupled with potential
rate hikes/fed tapering and most notably, extended federal support
appropriated towards state and local governments. Despite cross
currents flowing out of Washington and evolving macro market
trends, mutual funds continue to demonstrate strength with
sustained inflows as accounts continue to put away primary bonds,
with a greater concentration noted in high yield paper as investors
search for greater returns. Muni progression over the course of the
year has been noteworthy, after the market faced heighted
uncertainty a year ago during the apex of the pandemic with
mounting financial pressures across the country after a large
portion of local issuers faced revenue/budget shortfalls. Despite
greater financial strain spread throughout various state and local
governments over the course of the past year, the market continues
to demonstrate resiliency as participants successfully adapt to a
new pandemic landscape with a core focus on financing our nation's
state and local governments in a coordinated effort to foster
national economic success.
Primary activity will remain subdued following the Labor Day
Holiday, with last week's calendar registering
$6.1Bn of new issue activity after
several large issuers entered the primary arena to finance new
issue bonds. The New York City Transitional Finance Authority led
last week's calendar, successfully pricing $950mm of future tax
secured subordinate bonds with spread tightening noted throughout
the scale, with the greatest bumps (3bps) concentrated in the
intermediate range of the curve (+50bps to MAC). The State of
Wisconsin also tapped into the primary market to take advantage of
current borrowing levels, financing $326mm of general obligation
bonds, with noteworthy bumps across the scale ranging from
18-20bps, as accounts swarmed investment grade paper
driving a significant reduction in true interest cost to the
issuer. This week's holiday-shortened calendar is slated to fall in
line with last week's volume offering $6.3Bn
across 172 new issues, alongside a greater presence of various ESG
offerings amounting to $.65Bn, with the greatest
concentration noted in the housing sector. The Hamptons Roads
Transportation Accountability Commission (Aa2/A+/-) will lead this
week's negotiated calendar, supplying $818mm of senior lien notes
within a sole 07/2026 tranche, senior managed by Citi with an EPD
of tomorrow 09/09. The City of Grand Forks, North Dakota will also
come to market, offering $383mm for the Altru Health System
(Baa2/-/BBB-) across one series, senior managed by Bank of America.
This week's competitive calendar will span 105 issues for
a total of $2.3Bn or ~37% of the total weekly calendar,
led by the State of Minnesota auctioning three separate tranches
for an aggregated total of $879mm on Thursday 09/09.
Negotiated ESG Offerings Week of
09/06/2021
Posted 09 September 2021 by Matthew Gerstenfeld, Municipal Bond Business Development Specialist, IHS Markit
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