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New issue activity will remain subdued over the course of the
week ahead of a widely anticipated FOMC meeting starting Tuesday as
participants await further guidance on government-driven measures
to curb inflation and foster economic growth. While the COVID-19
case count continues to improve nationwide, severe supply chain
bottlenecks coupled with lackluster employment figures have played
a major factor in a challenging return to economic levels
registered prior to the pandemic. The Federal Reserve is forecasted
to announce the tapering of asset purchases over the course of a
two day meeting as inflation figures peak to 30-year highs, causing
greater concerns throughout the capital markets. As the Fed
prepares to wind down the $120Bn monthly asset repurchase program
launched in the beginning of 2020, participants will direct
attention towards the timing of impending interest rate hikes
following the recent volatility registered across US treasuries.
Elevated levels of inflation has been brushed off by equities which
continue to climb to record levels, prompting investors to question
whether or not such momentum could be sustained into the new year.
Participants continue to monitor material developments flowing from
Washington as bipartisan discussions linger with no formal
agreement of a national infrastructure package as the market
carefully analyzes the bill for new issue volume impacts associated
with further federal funding appropriated towards state and local
governments. Recent upticks in rate volatility has presented
windows of opportunity for select investors as MUNI/UST ratios
experience larger fluctuations WoW after the 10YR ratio widened by
300bps to 77% and the 30YR ratio shifting 500bps to 88% as market
activity heats up prior to year-end. Muni benchmarks faced mixed
performance over the course of last week, with cuts of 1-2bps noted
in the front and intermediate range of the curve paired with bumps
of 3bps housed in the 30YR tenor as the market navigates cross
currents stemming from higher degrees of uncertainty. While
issuance over the course of October was down relative to 2020, it
is important to note the flood of supply which came to market ahead
of the 2020 election after muni volume peaked to record levels of
$70Bn+, with last month's volume of 40Bn+ falling above
the historical October average. Given the trajectory of new issue
performance over the course of the past year, market players
forecast yearly totals to fall slightly below last year's record
level of $497Bn as state and local governments steadily address
financing needs.
Investor demand for new issue paper remains intact after last
week's double digit calendar of $10.1Bn
presented buyside accounts an array of credits and purposes, with a
large presence of tax-exempt paper geared towards retail investors.
Volume registered across last week's offerings were substantial
after the State of Ohio (Aa1/AA+/AA+) sold $329mm of general
obligation improvement bonds across four tranches with bumps
peaking at 7bps in the 2036 maturity, falling +33bps off the
interpolated MAC Curve. The Cities of Dallas and Fort Worth, TX
(A1/-/A+/AA) also experienced a successful pricing after selling
$299mm of international airport bonds spanning 11/2022-11/2045 with
corresponding investor demand suppressing yields after the 2045
maturity was bumped 15bps, marking a 2.17 yield to allotted
investors. This week's calendar is slated to remain quiet ahead of
the FOMC meeting taking place tomorrow with $6.3Bn
spanning 189 new issue offerings and large presence of health care
deals throughout the week. The Texas Public Finance Authority
(-/AAA/AAA/-) will lead the negotiated calendar offering $831mm
general obligation and refunding bonds across two series with
maturities spanning 10/2022-10/2041. The Economic Development
Authority of The City of Lynchburg (Baa1/A-/A-/-) will also come to
market to sell $212mm hospital revenue and refunding bonds across
01/2027-01/2055 on Thursday 11/04, senior managed by Barclays. This
week's competitive calendar will span across 101 new
issues for a total of $1.34Bn with the School
District of Miami-Dade County, FL (Aa3/-/-) leading the auction
calendar with $169mm general obligation school refunding bonds
spanning 03/2022-03/2043, selling on Wednesday 11/03.
Negotiated ESG Offerings Week of
11/01/2021:
Posted 01 November 2021 by Matthew Gerstenfeld, Municipal Bond Business Development Specialist, IHS Markit
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