BLOG — Mar 07, 2022
Municipal Calendar Week of March 7th 2022
By Matthew Gerstenfeld
Calendar Week of 03/07/2022:
Primary volumes continue to fluctuate given the uncertainty surrounding the Russian/Ukrainian war in addition to growing concerns over national inflation levels and economic success. As market players navigate sharp reversals in yields and credit spreads given the fluctuation in demand, state and local governments continue to tap into the capital markets ahead of a widely anticipated rate hike later in the month. Volatility across macro markets have persisted in recent weeks as investors gauge overseas conflict and national economic activity after last week's nonfarm payroll for February posted +678k jobs, pushing the unemployment rate down to 3.8%. Uncertainty among investors have also fueled wide movements in US Treasuries, after muni benchmarks bear steepened by 2-6bps over the week following greater volatility and lackluster supply levels across the primary arena. Muni/UST ratios adjusted accordingly with the 10YR ratio standing at 95% and the 30YR at 94% marking a steep increase across both tenors following a week filled with turbulence as investors deployed cash across safe haven investments. Buy side apprehension to take down muni paper has climbed given overarching volatility in conjunction with muted trading activities as participants witness mutual fund outflows over the course of the first quarter, with totals exceeding $10Bn+, marking a stark contrast to 2021. As institutional and retail investors analyze evolving geopolitical dynamics and national economic progression, market players will remain focused on new issue supply levels after performance over the course of the past several months have trailed behind last year's levels. As the market looks ahead, rising borrowing costs stemming from impending rate hikes may promote accelerated issuance as state and local governments seek to lower debt service expenditures and take advantage of current rates available.
Primary activity for the last week of February was larger compared to weeks prior, with $8.9Bn of new issue deals priced and the majority of par size housed in the long end of the curve. The New York City Municipal Water Finance Authority (Aa1/AA+/AA+) tapped into the negotiated market to price $779mm of water and sewer system revenue bonds, witnessing mixed pricing performance after bumps of 1-6bps were noted in the intermediate range of the scale coupled with cuts on longer dated maturities. The Department of Water and Power of the City of Los Angeles (Aa2/-/AA/AA+) also came to market to offer $495mm of water system revenue bonds, with varying demand driving bumps and cuts across the scale, with the greatest spread noted in the 07/2049 maturity, supplying allotted investors a yield of 2.53% (+54bps off the interpolated MAC). This week's calendar is slated to rise, supplying investors $11.7Bn across 214 new issues, with $2Bn of day-to-day deals, marking a reduction of $400mm from the week prior after issuers stepped to the sidelines. The State of California (Aa2/AA-/AA) will lead this week's calendar to sell $2.2Bn of general obligation bonds spanning across two series and supplying maturities ranging from 04/2023-04/2052, selling on Wednesday March 9th and senior managed by Wells Fargo. The Regents of The University of Michigan (Aaa/AAA/-) will also tap into the negotiated arena on Wednesday March 9th to price $1.5Bn of taxable revenue bonds, spanning across two series with the $300mm 2022B tranche offering a kestrel green bond certification. This week's competitive calendar will span across 129 new issues for a total of $2.1Bn, led by the New York City Transitional Finance Authority (Aa1/AAA/AAA) auctioning $198mm of future tax secured taxable subordinate bonds spanning 11/2024-11/2037, selling on Wednesday March 9th.
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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.