BLOG — Oct 25, 2021
Municipal Calendar Week of 10/25/2021
By Matthew Gerstenfeld
Calendar Week of 10/25/2021
Primary market activity is slated to cool off following last week's active new issue session which posted double digit pricing figures spanning a myriad of issue types despite overarching interest rate volatility paired with mounting inflation concerns. While equities continue to climb to record levels, treasury yields widened over the week, attributed to stagnant economic recovery with municipal benchmarks following suit after cuts of 3-7bps were noted across the scale, with the widest movement noted in the intermediate range of the curve. Fluctuations across muni benchmarks have triggered greater shifts within the intermediate and long-end ratios, with the 10YR currently hovering at ~74% and 30YR sitting at ~83%, prompting investors to take a closer glance at implied value when purchasing new issue paper. Buyside investors remain focused on an array of economic indicators after recent labor department jobless figures hovered ~300k, playing a factor in FOMC asset purchase tapering in addition to potential rate hikes in effort to combat pressing inflation registered throughout the nation. As supply chain bottle necks persist, supply shock continues to permeate across numerous sectors, resulting in limited inventory and expanding costs associated with common goods and services, prompting greater uncertainty across successful economic expansion and recovery. Stalled bipartisan conversations behind additional federal stimulus support across infrastructure and social projects remains a focal point amongst market players given the nature of rapidly evolving market conditions, prompting state and local governments to take advantage of current borrowing levels ahead of any impending rate hikes. As market participants navigate further into the fall season, new issue supply levels are expected to remain consistent driven by seasonal fundamentals despite heightened cross currents across macro markets. Given the general consensus of climbing interest rates, the market is heading towards an inflection point among borrowers whom seek to actively reduce debt service expenditures via current opportunistic borrowing levels.
Buyside interest across new issue deals was noteworthy over the course of last week despite unenthusiastic macro market conditions after $12.8Bn priced, driven by several large scale ESG transactions which supplied green bond focused investors larger par size. Investor appetite for ESG paper was strong last week after the Utah Transit Authority (Aa2/AA/AA) priced $448mm of taxable green revenue refunding bonds with robust buyside participation after bumps of 5-25bps were registered across the scale, with the greatest bump noted in the 2036 maturity, falling +95bps off the 10YR UST. The City of Brockton, MA (A1/AA-/-) also tapped into the primary market to finance $302mm general obligation pension bonds, offering yield focused investors greater opportunity after strong buyside demand suppressed spreads by 8-11bps across the scale with allotted investors realizing a 3%+ yield in the 2035 maturity. This week's calendar is slated to fall under double digit levels to $9Bn, spanning 221 new issue offerings with a large presence from the state of California supplying ($2Bn+) of new issue deals. The Cities of Dallas and Fort Worth, TX (A1/-/A+/AA) will lead this week's negotiated calendar offering $704mm joint revenue refunding bonds with proceeds designated for Dallas Fort Worth International Airport with maturities spanning 11/2022-11/2046 led by Barclays Capital. The California Community Choice Financing Authority (A2/-/-) will also come to market supplying $564mm clean energy project revenue bonds with a corresponding climate bond certified ESG status, selling on Wednesday 10/25 and senior managed by Goldman Sachs. This week's competitive calendar will incorporate 118 new issues for a total of $1.85Bn with the City of Los Angeles, CA (Aa2/AA/AAA/AA+) leading the auction calendar with $212mm general obligation bonds, spanning 09/2022-09/2041 and carrying a self-labeled social ESG status, selling on Wednesday 10/27.
Negotiated ESG Offerings Week of 10/25/2021:
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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.