BLOG — Oct 11, 2021
Municipal Calendar Week of 10/11/2021
By Matthew Gerstenfeld
Calendar Week of 10/11/2021
Muni activity continues to press onward as the market carefully navigates evolving economic conditions paired with heightened macro market volatility fueled by a myriad of cross currents as the nation strives to return to pre-pandemic operating levels. As buyside investors continue to deploy capital across various state and local governments new issue offerings, rising muni benchmark rates attributed to the recent volatility across US treasuries has investors on guard, with accounts seeking to take down new issue paper at higher yield returns. Muni benchmarks followed a similar trajectory to US treasuries last week, widening by 1-4bps across the curve with the greatest cuts noted in the belly, pushing the 10YR Muni/Treasury ratio to 72%, sparking a slowdown in muni mutual fund inflows as investors re-evaluate yield momentum and directional track. Despite the uptick in rates, developments flowing from Washington continue to evolve after the senate agreed to pass a short term national debt ceiling increase to avoid a national default, with $480Bn pending approval from the House to fill in the debt gap until the first week of December, pushing the national debt level to $28+ trillion. Market participants continue to direct attention towards the national infrastructure package progression, after bi-partisan discussions were placed on hold last week in effort to narrow down package details with a greater focus directed toward climate change in addition to social funding nationwide. While a formal package has not been approved, further federal funding appropriated towards state and local issuers would bode well within the primary arena, as issuers seek to reduce financing expenditures and take advantage of current borrowing levels prior to any deterrent climb in rates. Attention towards economic indicators remains front and center amongst participants following the most recent nonfarm payroll report for the month of September which posted +194k jobs, falling short of general market expectations for sustained growth, placing the national unemployment level at 4.8%. The recent nonfarm payroll report raised further questions surrounding the FOMC plan to taper asset purchases in the near future, in an effort to foster economic growth while curbing transitory inflation driven by the pandemic. Given the current momentum registered in the primary arena, participants forecast steady weekly issuance for the foreseeable future as issuers finalize financing activities prior to 2022.
Buyside activity continues to remain strong after last week's calendar supplied $11.4Bn, led by several large scale issuers funding new money activity with a noteworthy presence of ESG offerings spanning across various states and purposes. As muni benchmarks climb higher, investor activity appears firm, after new issue offerings noted substantial oversubscriptions, with the $1.5Bn Alabama Federal Aid Highway Finance Authority witnessing bumps of 2-12bps across the scale with the greatest bump noted in the 2033 maturity, falling +73bps off the 10YR treasury. The Riverside County Transportation Commission also experienced positive investor feedback, with extreme bumps across the scale, ranging from 5-22bps as accounts remained eager to take down bonds, with the greatest bump noted in the 2037 maturity (+63bps off the MAC benchmark). This week's calendar is slated to ease to $8.3Bn driven by the Columbus Day Holiday-shortened week, represented by 212 new issue offerings and a large presence from the State of New York, for an aggregated par of $2.8Bn across negotiated and competitive offerings. The Texas Water Development Board (-/AAA/AAA/-) will lead this week's negotiated calendar, supplying $366mm state revolving fund revenue bonds across 08/2022-08/2041, senior managed by Jefferies. The San Ramon Valley Unified School District (Aa1/AA+/-) will also come to market on Thursday, selling $257mm general obligation refunding bonds across a 10-year scale duration, led by Stifel. This week's competitive calendar will include 120 new issues for a combined total of $3.82Bn driven by the Empire State Development Corporation offering a combined total of $2.4Bn across six tranches selling throughout Thursday 10/14.
Negotiated ESG Offerings Week of 10/11/2021:
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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.