BLOG — Feb 14, 2022
Municipal Calendar Week of February 14th 2022
By Matthew Gerstenfeld
Calendar Week of 02/14/2022
Primary market activity has plateaued after rising inflation levels and geopolitical tensions have sparked concerns among investors throughout the capital markets. As investors navigate a complex and evolving new issue landscape, primary volumes have recently drifted lower as accounts assess higher yields associated with new issue paper offered from state and local governments. With market attention geared toward economic activity, last week's consumer price index report affirmed the steep rise in costs for basic goods and services nationwide after peaking to historical highs of 7.5% in January. The pace of inflation continues to place greater strain on national economic recovery, stemming from the Fed's flexible mentality surrounding new money injection into the economy after ~40% of all U.S. dollars were printed within a year time span. While the Fed originally viewed inflation as a temporary environment, recent inflation data has naturally shifted the tone and future actions surrounding monetary and fiscal policy, with nearly half of the market forecasting a 50bp rate hike in March to combat surging inflation nationwide. As market-wide volatility persists, new issue financing activities have fluctuated in response to wider-movements across US treasuries stemming from last week's UST sell off triggered by global fears over a potential Russia-Ukraine conflict. Muni benchmarks outperformed the trajectory of treasuries last week, widening by 15-21bps across the curve with Muni/UST ratios climbing higher to 82% in the 10YR and 90% in the 30YR. As investors monitor evolving market dynamics, climbing yields in addition to recent mutual fund outflows and subdued trading action has presented challenges across the primary arena as state and local governments seek to address financing needs.
Retail and institutional investors continue to navigate subdued new issue supply levels after last week's calendar presented $8.7Bn of new issue deals, with the majority of bonds offered marked as tax-exempt, supporting greater activity among retail accounts. The Port of Portland, Oregon (-/AA-/-) witnessed stagnant investor demand last week, with cuts of 2-32bps registered across the scale, with the widest spread noted in the 2047 maturity, falling +100bps off the interpolated MAC curve. The State of Ohio (Aa3/A+/A+) also came to market last week with maturities spanning 02/2024-02/2039 and bumps of 4bps distributed across the scale as a result of investor demand, with the 2039 tranche presenting allotted investors a yield of 2.53% or (+85bps to the interpolated MAC). This week's calendar is expected to throttle down to $6Bn across 163 new issues with $1.3Bn of day-to-day deals as issuers stand on the sidelines amid increased volatility market-wide. The National Finance Authority of New Hampshire (-/BBB/-) will lead this week's negotiated calendar, offering an aggregate $1.3Bn across two separate 2037 tranches with a corresponding social certificate selling on Wednesday 02/16 and lead managed by Citigroup. The Pennsylvania Housing Finance Agency (Aa1/AA+/-) will also tap into the negotiated arena to offer $255mm single family mortgage revenue bonds, spanning across 10/2022-10/2052, selling on Wednesday 02/16. This week's competitive calendar will span across 84 new issues for a total of $1.7Bn, led by the State of Delaware (Aaa/AAA/AAA) auctioning $252mm of general obligation bonds across 03/2023-03/2042 on Wednesday.
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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.