BLOG — Jan 10, 2022
Municipal Calendar Week of January 10th 2022
By Matthew Gerstenfeld
Calendar Week of 1/10/2022
New issue activity is positioned to return to larger weekly volumes as participants return from the Holiday season to price deals for state and local governments across the nation. Given last year's successful pricing performance, participants remain focused on overarching economic and political developments as issuers across the nation continuously battle pandemic-related disruptions. Recent economic data played a major factor in rate momentum after the December Nonfarm payroll report posted +199k jobs, falling well below street expectations as the national unemployment rate stands at 3.9%. Following last week's economic data, treasuries widened significantly with muni benchmarks following suit, bear steepening by 11-13bps over the course of the week after higher levels of volatility were noted across the macro markets. Muni/UST ratios shifted accordingly with the 10YR ratio hovering at 64% and 30YR posting 77% as investors seek to deploy capital across opportunistic entry points given the uptick in yield across the curve. Lackluster labor market conditions in conjunction with copious amounts of federal spending and expansive monetary injection has fueled increased national inflation figures, placing increased strain on businesses navigating higher prices for basic goods and services. As a result of persistent inflation, market participants forecast accelerated rate hikes throughout the course of the year, with street projections calling for a hike as early as Q1 after federal-driven measures failed to curb rapidly expanding inflation nationwide. Conversations surrounding the Build Back Better plan were recently postponed stemming from outspoken criticism across select democratic senators, raising questions surrounding the trajectory of the $1 Trillion+ social and climate spending package. Stable institutional and retail demand for new issue paper paired with positive mutual fund inflows is setting the scene for increased pricing confidence across the primary arena as issuers finance debt amidst advantageous borrowing rates, while investors seek to deploy capital across premier safe haven investments demonstrated across new issue bonds.
Buyside accounts are set to welcome greater par size follow a lighter calendar to start the new year after $2Bn of new issue supply priced across the course of last week, falling well beneath investor demand given the mounting sideline capital ready to be deployed across state and local credits. The Department of Airports of the City of Los Angeles (Aa3/AA-/AA-) led last week's negotiated calendar selling $504mm of subordinate revenue bonds with significant cuts noted across the scale following wide movements noted across muni benchmarks resulting in cuts of 7-10bps across the intermediate range of the scale, providing allotted investors a yield of 1.58% (+45bps off the interpolated MAC) in the 2032 maturity. The City of San Antonio, TX (Aa2/AA/AA) also tapped into the negotiated market to price $78mm of revenue refunding bonds with maturities spanning 05/2029-05/2042 with robust investor demand suppressing yields by 2-9bps across select maturities with the greatest bumps noted in the short term maturities available. This week's calendar is set to return to larger weekly volume levels, presenting investors $8.8Bn pricing across 198 new issue deals with the Board of Education of The City of Chicago, IL (-/-/BB+/BBB) leading the negotiated calendar to sell $863mm of dedicated revenue bonds with maturities spanning 12/2035-12/2047 selling on Thursday 01/13 and senior managed by Goldman Sachs. The State of Louisiana (Aa2/AA-/-) will also tap into the negotiated arena to price $651mm of taxable gasoline and fuel tax revenue refunding bonds, senior managed by Wells Fargo. This week's competitive calendar will span across 116 new issues for a total of $3.3Bn, led by the State of Colorado auctioning $400mm education loan program tax and revenue notes across a single maturity, selling on Wednesday 01/12.
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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.