May 29, 2024

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Investors to see $13B new-issue calendar amid challenging market

6 min read
Investors to see B new-issue calendar amid challenging market

A whopping $13 billion new-issue calendar awaits investors for the final full week of April in what has been a challenging month as macroeconomic data, Federal Reserve policy uncertainty and geopolitical turmoil have caused nearly daily mood swings in all markets.

Triple-A yields were little changed Friday ahead of the larger calendar while U.S. Treasuries made small gains and equities closed the session mixed.

The two-year muni-to-Treasury ratio Friday was at 63%, the three-year at 62%, the five-year at 59%, the 10-year at 59% and the 30-year at 83%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 64%, the three-year at 62%, the five-year at 60%, the 10-year at 60% and the 30-year at 82% at 4 p.m.

It is “hard to deny that April has been challenging for all fixed income products, with Treasury yields climbing more than 40bp in less than three weeks, while pushing the [investment grade] index returns further in the red (-1.4% YTD), and the HY index returns closer to zero (+0.6% YTD),” Barclays strategists Mikhail Foux and Clare Pickering wrote in a weekly report.

“When rates are selling off, tax-exempts typically outperform, at least initially, and this week has not been any different with MMD-UST ratios declining slightly across the curve,” they said. “However, a number of deals brought to market this week have struggled.”

This week also marked the first large outflows from municipal bond mutual funds, including the first outflows from high-yield since the first week of the year, which Barclays noted corresponds with the movements in USTs. Sharp rate moves — 10-year USTs selling off greater than 20bp in a month — often lead to “sizable and prolonged outflows.”

“Hence this week’s fund outflows is unlikely to be a one-off, especially if rates continue selling off, as our rate strategists expect, although renewed geopolitical tensions in the Middle East will likely put a lid on Treasury yields in the near term,” they said.

The Bond Buyer 30-day visible supply sits at $16.09 billion of which about $13 billion is schedule to price next week.

The Los Angeles Unified School District leads the market with a $2.98 billion Build America Bonds redemption and general obligation bond refunding.

Brightline Trains Florida LLC, the operating company of the high-speed line between Miami and Orlando, is on the day-to-day calendar with a $2 billion of tax-exempt private activity bond deal featuring its first investment-grade ratings as well as a tranche of unrated tax-exempt paper to an extensive debt restructuring that may price in the coming days.

Houston is set to price Tuesday $841.125 million of combined utility system first lien revenue refunding bonds while Energy Northwest is on the calendar with $569.28 million of Columbia Generating Station Electric revenue and refunding bonds.

As bids-wanted activity has also started to pick up “as investors are trying to increase their cash buffers” and, in general, market pressure has started building, it has made Foux and Pickering “more cautious near term.”

“To us, current market dynamics are not really surprising,” Foux and Pickering said.

A combination of a “stronger-than-expected economy, higher Treasury rates, robust supply, and rich valuations resulting in choppy markets” have made the trading environment in H124 “quite difficult.”

They said they still see municipals generating “solid, albeit not spectacular returns, which should mostly be driven by coupon income, as well as marginal excess returns due to spread tightening.”

AAA scales
Refinitiv MMD’s scale was unchanged: The one-year was at 3.38% and 3.15% in two years. The five-year was at 2.78%, the 10-year at 2.74% and the 30-year at 3.90% at 3 p.m.

The ICE AAA yield curve was cut up to two basis points: 3.40% (+2) in 2025 and 3.18% (+1) in 2026. The five-year was at 2.80% (unch), the 10-year was at 2.78% (unch) and the 30-year was at 3.86% (unch) at 4 p.m.

The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 3.41% in 2025 and 3.18% in 2026. The five-year was at 2.79%, the 10-year was at 2.79% and the 30-year yield was at 3.89%, according to a 3 p.m. read.

Bloomberg BVAL was unchanged: 3.41% in 2025 and 3.19% in 2026. The five-year at 2.72%, the 10-year at 2.7%2 and the 30-year at 3.91% at 4 p.m.

Treasuries were firmer across the curve.

The two-year UST was yielding 4.977% (-1), the three-year was at 4.815% (-1), the five-year at 4.663% (-2), the 10-year at 4.621% (-2), the 20-year at 4.847% (-3) and the 30-year at 4.718% (-3) near the close.

Negotiated calendar:
The Florida Development Finance Corp. is set to price $2.2 billion of Brightline Florida Passenger Rail Project tax-exempt AMT revenue refunding bonds for Brightline Trains Florida LLC (NR/BBB-/BBB-/BBB). Morgan Stanley & Co. LLC.

Houston (Aa2//AA/) is set to price Tuesday $841.125 million of combined utility system first lien revenue refunding bonds, serials 2024-20244, terms 2049, 2054. Jefferies LLC.

Energy Northwest (Aa1/AA-/AA/) is set to price Tuesday $569.28 million of Columbia Generating Station Electric revenue and refunding bonds, Series 2024-A and Project 3 Electric revenue refunding bonds, Series 2024-A, consisting of $514.44 Series A-Col and $54.84 million of Series Proj3. J.P. Morgan Securities LLC.

Oregon (Aa1/AA+/AA+/) is set to price Wednesday $299.87 million of general obligation bonds, Series BC. Morgan Stanley & Co. LLC.

The state is also set to price Wednesday $266.975 million of GOs, Series AD. Morgan Stanley & Co. LLC.

The New Jersey Health Care Facilities Financing Authority is set to price Wednesday $370.32 million of RWJ Barnabas Health Obligated Group revenue and refunding bonds (A1/AA-//). Jefferies LLC.

The Metropolitan Water District of Southern California (Aa1/AAA//) is set to price Tuesday $365.82 million of water revenue refunding bonds, serials 2025-2044, terms 2049, 2054. Siebert Williams Shank & Co., LLC.

Travis County, Texas, (Aa3/AAA//) is set to price Tuesday $266.28 million of permanent improvement limited tax ($176.405 million series 1, serials 2025-2044), unlimited tax road bonds ($43.795 million of series 2, serials 2025-2044) and limited tax certificates of obligation ($46.08 million series 3, serials 2025-2044). Ramirez & Co., Inc.

The Tarrant County Cultural Education Facilities Finance Corp. (A1//A+/) is set to price $210.695 million of Christus Health revenue bonds, Series 2024A. RBC Capital Markets.

The Community Development Administration (Aa1//AA+/) is set to price Tuesday $210 million of Maryland Department of Housing and Community Development taxable social residential revenue bonds, serials 2025-2034, terms, 2039, 2044, 2049, 2054, 2054. BofA Securities.

The New Jersey Housing and Mortgage Finance Agency (Aa2/AA//) is set to price Tuesday $205.5 million of single-family housing revenue non-AMT social bonds, Series K. Jefferies LLC.

The City of Valparaiso, Indiana, is set to price Thursday $173.565 million of non-rated Pratt Paper, LLC Project exempt facilities refunding revenue bonds, serials 2034, 2044, 2054. BofA Securities.

The Nebraska Investment Finance Authority (/AAA//) is set to price Tuesday $154.145 million of tax-exempt single family housing non-AMT social bonds and taxable bonds, consisting of $115 million of exempts and $39.145 million of taxables. J.P. Morgan Securities LLC

The Frisco Independent School District, Texas, (Aaa/AAA//) is set to price Wednesday $148.32 million of unlimited tax school building and refunding bonds, PSF-insured. Piper Sandler & Co.

The Maine Municipal Bond Bank (Aa2/AA+//) is set to price Wednesday $135.31 million of series A bonds, serials, 2025-2044, terms, 2049, 2054. BofA Securities.

Bethel School District No. 403, Pierce County, Washington, (Aaa///) is set to price Tuesday $131.92 million of unlimited tax general obligation bonds, insured by WA State SD Credit enhancement program. Piper Sandler & Co.

The Massachusetts Housing Finance Agency (Aa1/AA+//) is set to price Wednesday $124.27 million of single-family housing AMT, non-AMT and taxable social revenue bonds. Raymond James & Associates, Inc.

The Bell County Water Control and Improvement District No. 1, Texas, (/AA//) is set to price Tuesday $111.37 million of water system revenue bonds, insured by Build America Mutual, serials 2025-2049. Raymond James & Associates, Inc.

The Okaloosa Gas District, Florida, (Aa3///) is set to price Thursday $107.585 million fo taxable and tax-exempt gas system revenue bonds. BofA Securities.

The Gerald R. Ford International Airport Authority, Kent County, Michigan, (Aaa/AAA//) is set to price Tuesday $97.1 million of AMT limited tax general obligation bonds. J.P. Morgan Securities LLC.

Competitive:
Greenville, Texas, (/A//) is set to sell $104.12 million of waterworks and sewer system new lien revenue bonds at 11 a.m. eastern Tuesday.