The U.S. Week Ahead: Muni Market (May 13-17)

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The muni bond market continues to generate steam, as funds attract further inflows and new issuance remains relatively light. According to the Investment Company Institute, investors in the latest week added more than US$1.7bn to municipal bond funds, contributing to a tally of roughly US$35bn to date this year – while holders of some major muni-fueled ETFs have also been enjoying a recent surge in value. Janney Montgomery municipal strategist Alan Schankel recently highlighted that the muni bond market is “on one of the strongest performance streaks we’ve seen in a while,” as light supply and continuing strong demand have pushed municipal relative value ratios to their lowest level in about a decade. Against this backdrop, a handful of issuers have potential new offerings on the fixed-rate calendar in the week ahead, including nearly US$738m worth of University of Pittsburgh Medical Center, single ‘A’-rated revenue bonds through Pennsylvania’s Allegheny County Hospital Development Authority. UPMC said it intends to apply the proceeds from the sale to refunding certain existing outstanding debt, as well as certain debt-related expenses. Fitch analysts earlier in May had cut the revenue bond rating by one notch, mainly on the back of UPMC's “lower liquidity position.” Fitch noted that while investment valuations have recently recovered, UPMC’s year-end results “highlight the vulnerability of a low cash position in times of market volatility for a system with a higher debt load and historically low cash flow generation.” They also anticipate “no significant changes” in either its profitability or balance sheet metrics in the near- to intermediate-term. UPMC’s latest proposed debt sale is expected to be issued as fixed-rate, tax-exempt bonds and sold via negotiation.  Meanwhile, other proposed deals on the radar for the week ahead include a sale of general revenue bonds from New York’s Triborough Bridge and Tunnel Authority, as well as school district revenue bonds from New York State’s Dormitory Authority. Find out more in my full article ‘Muni Bond Market Heats Up As Fund Inflows Swell’ on IBKR’s Traders’ Insight, and receive a wealth of muni bond trading tools using the IBKR Trader Workstation. I’m Steven Levine for Interactive Brokers asking you to enjoy the week ahead.