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New issue activity is set to return to larger volumes following
lighter issuance registered over the Thanksgiving Holiday week as
participants finalize financing activities prior to the new year.
Despite subdued issuance over the course of last week, rate
volatility was front and center after fear of a COVID variant drove
a major plunge in equities with investors transitioning into safe
haven investments, pushing US treasury yields lower with munis
following suit. Muni benchmarks bull flattened over the course of
last week with bumps of 1-2bps across the curve resulting in
MUNI/UST ratios climbing higher with the 10YR sitting at 71% and
30YR tenor at 83% following increased macro market volatility.
Focus directed towards national inflation dynamics continues to run
high as the FOMC tapers asset repurchases and the market remains on
guard for potential rate hikes should surging inflation figures
persist. Supply chain bottlenecks and increasing costs for basic
goods and services continues to pose challenges for a successful
return to pre-pandemic economic activity despite historic levels of
government-led funding to alleviate economic setbacks stemming from
the pandemic. As federal spending ramps up, bi-partisan discussions
remain in motion surrounding the Build Back Better package which
passed the House of Representatives and faces hurdles in the Senate
as both parties strive to narrow down spending objectives for
various social and climate initiatives. Market players continue to
analyze federal spending packages and corresponding impacts to
primary issuance figures as munis remain on track to fall slightly
below last year's record volume, fueled by opportunistic borrowing
levels coupled with persistent institutional and retail demand for
new issue paper. With one month left until the new year, state and
local issuers are positioned to remain active in the primary arena
with weekly volumes expected to hover in a double digit range as
accounts continue to actively take down paper, supported by steady
inflows into muni mutual funds given this month's substantial
performance of +68% relative to 2020.
Buyside accounts will welcome greater par size following the
volume-reduced Thanksgiving Holiday week which supplied
$1.4Bn, after several issuers stepped up
to the plate and priced throughout a period of quiet new issue
activity. The Desert Community College District, CA (Aa2/AA/-) led
last week's negotiated calendar, offering buyers $205mm of general
obligation bonds spanning across two series with maturities ranging
from 08/2022-08/2037, with investor demand suppressing yields by
2-5bps with the largest bumps noted in the front end maturities.
The Schertz-Cibolo-Universal City Independent School District of
Texas (Aaa/-/-) also came to market with $68mm of unlimited tax
refunding bonds with a PSFG enhancement across 02/2023-02/2039 with
noteworthy bumps of 5-20bps across the scale, providing longer date
focused investors a yield of 2.75% in the 2039 maturity, falling
+109bps off the 10YR UST. This week's uninterrupted calendar will
provide $8.8Bn spanning across 247 new issues with
The Illinois State Toll Highway Authority (Aa3/AA-/AA-) offering
$600mm of highway senior revenue bonds spanning across
01/2039-01/2046, selling on Thursday 12/02 and senior managed by
Loop. The New York State Housing Finance Agency (A2/-/-) will also
tap into the negotiated arena to price $454mm affordable housing
revenue bonds across four sustainability/climate bond series with
maturities ranging from 05/2024-05/2066, senior managed by Citi.
This week's competitive calendar will span across 131 new
issues for a total of $2.4Bn with the State of Illinois
(Baa2/BBB/BBB-) leading the auction schedule to sell $200mm of
general obligation bonds on Wednesday December 1st.
Negotiated ESG Offerings Week of
11/29/2021:
Posted 29 November 2021 by Matthew Gerstenfeld, Municipal Bond Business Development Specialist, IHS Markit
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