BLOG — Feb 07, 2022
Municipal Calendar Week of February 7th
By Matthew Gerstenfeld
Calendar Week of 02/07/2022
New issue volume will ease over the course of the week as participants digest recent economic headlines and actively monitor developments flowing from Washington. Following the recent uptick in volatility throughout equities and treasuries, primary activity displayed mixed performance, after large drifts in yields supported demand from interest focused-investors, whereas issuers weighed the impacts of near-term borrowing costs. Focus surrounding economic activity continues to shine across market players after last week's Nonfarm payroll reported a gain of +467k, outpacing street estimates of +125k and fueling a rally across equities. Given the positive momentum registered within the labor market, attention will be directed towards evolving CPI data after December's report listed inflation of +7%, with new CPI data set to be released during the end of the week. Given the market-wide consensus of rate hikes dispersed throughout the course of 2022, buyside accounts actively seek to take advantage of climbing yields, offering greater returns as compared to levels witnessed during the beginning of 2021. As yields drift higher, state and local governments appear to face greater pricing pressure as borrowing rates climb and issuers seek to reduce debt service expenditures to maintain operations. Muni benchmarks regained ground over the course of last week, bull flattening across the curve by 2-13bps, with Muni/UST ratios drifting lower to 74% in the 10YR & 83% in the 30YR, presenting investors various opportunities to take down new issue paper amidst mutual fund outflows. Despite subdued issuance for the coming week, demand for muni bonds across retail and institutional investors remains in-tact despite the wide fluctuations in rate activity and corresponding credit spreads.
As accounts navigate influx in yields and new issue supply, last week's calendar provided $8Bn of new issue paper, with investor demand suppressing new issue yields and driving down issuance costs as retail and institutional accounts seek to put cash to work across high grade credits. The Virginia Small Business Financing Authority (-/BBB-/BBB) led the negotiated calendar last week, selling $638mm of senior lien revenue refunding bonds with maturities ranging from 01/2032-01/2048 and bumps of 5-20bps given strong investor demand, with the 2048 maturity offering allotted investors a yield of 3.49% or +120bps spread to the interpolated MAC. The Triborough Bridge and Tunnel Authority (-/AA+/AA+/AA+) also tapped into the negotiated arena to price $593mm payroll mobility and senior lien bonds with maturities spanning 05/2040-05/2057 and corresponding bumps of 2-13bps across the scale with the greatest bump noted in the 2040 tranche. This week's calendar is slated to supply $6.1Bn spanning across 168 new issues with The Port of Portland, Oregon (-/AA-/-) leading the negotiated calendar to offer $515mm of international airport revenue bonds across 07/2023-07/2052; senior managed by Jefferies and expected to price on Tuesday 02/08. The State of Ohio (Aa1/AA+/AA+) will also tap into the negotiated arena to sell $427mm of general obligation bonds across three series with maturities spanning 03/2023-03/2037, senior managed by Loop Capital and selling on Thursday 02/10. This week's competitive calendar will span across 97 new issues for a total of $2.26Bn, led by the State of Washington (Aaa/AA+/AA+) auctioning a combined total of $744mm various purpose bonds across 02/2023-02/2047 over the course of Tuesday 02/2028.
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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.