BLOG — Nov 29, 2021
Municipal Calendar Week of 29 November 2021
By Matthew Gerstenfeld
Calendar Week of 11/29/2021
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:
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