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Primary issuance has strengthened over recent weeks as state and
local governments seek to finance new issue deals amidst
opportunistic borrowing levels and fluctuating economic activity
nationwide. Participants remain engaged with macro-economic
factors, which continue to evolve as supply chain difficulties and
rising costs for basic goods and services hinder the return to
pre-pandemic operating levels. Following the most recent round of
government funding geared towards national infrastructure, the
House of Representatives passed the $1.7 trillion Build Back Better
Act with spending outlined for various social and climate
initiatives. As the Build Back Better package heads towards the
Senate, participants are focused on key muni bond provisions which
were initially omitted from earlier bi-partisan versions, most
notably the reinstatement of tax-exempt refunding's, which was
eliminated during the 2017 Tax Cuts and Jobs Act. Bi-partisan
leaders remain focused on passing the social and climate package
prior to year-end, falling into a similar timeline of a potential
national default after a recent $480Bn short term national debt
increase is set to deplete during the first week of December. While
a formal social and climate package has not been approved,
persistent federal funding appropriated towards state and local
issuers is positioned to fit well within the primary arena, as
issuers seek to lower expenditures while promoting greater economic
activity in order to sustain operations. As markets climb higher,
muni bond rate activity has hovered within a tight band, after cuts
of 1-3bps were noted in the front end of the curve, with no changes
occurring in the intermediate and long end over the week. Subtle
movements in rates has amounted to a slight uptick in the 30YR
Muni/UST ratio which climbed two points to 81% paired with the 10YR
ratio which currently sits at 69%. With nearly five weeks remaining
until the new year, buyside activity remains strong across the
board as demand for new issue paper continues to outweigh supply,
fueled by greater mutual fund inflows and suppressed yields driven
by substantial new issue oversubscriptions.
Strong demand from institutional and retail accounts
complimented last week's sizable calendar which supplied
$16.7Bn, presenting par focused investors
greater opportunity after the State of California dominated the
majority of the calendar, representing $5.4Bn of last
week's issuance. The California Health Facilities Financing
Authority (Aa3/AA-/AA-) priced $1Bn of revenue bonds with proceeds
designated for Cedars-Sinai Health System with investor interest
suppressing yields by 3-6bps across the scale, and the 2040
maturity falling +50bps off the interpolated MAC. The State of
Mississippi (Aa2/AA/AA) also experienced a successful pricing after
selling $965mm taxable general obligation bonds spanning
10/2022-10/2032 with significant bumps across the curve, ranging
from 5-20bps with the 2036 maturity registering a 20bp bump or
+95bps spread to the 10YR UST following robust order flow. This
week's Thanksgiving holiday-shortened calendar will provide
$1.4Bn spanning across 53 new issues with the
Desert Community College District (Aa2/AA/-/-) leading the
negotiated calendar offering $292mm of general obligation bonds
spanning across three series with maturities ranging from
08/2022-08/2051. The Massachusetts Housing Finance Agency
(Aa1/AA+/-/-) will also step up to the plate to price $71mm single
family housing revenue bonds selling today 11/22, senior managed by
Citi. This week's competitive calendar will span across 19 new
issues for a total of $114mm with Andrews County Hospital
District, TX (A3/-/-) leading the auction schedule to sell $27mm
general obligation refunding bonds.
Negotiated ESG Offerings Week of
11/22/2021:
Posted 22 November 2021 by Matthew Gerstenfeld, Municipal Bond Business Development Specialist, IHS Markit
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