The View For July 22-26: Muni Market, Blockbuster NYC Deal Set To Hit The Block

Offerings of municipal bonds are set to ramp up in the week ahead, highlighted by US$1.5bn worth of New York City general obligation (GO) bonds.

Supply in the muni market has averaged around US$8bn over the past two weeks, contributing to a total of roughly US$185bn year-to-date in 2019.

Analysts at Barclays pointed out that during the week, US$885m of Children’s Healthcare of Atlanta revenue bonds sold across several issuers with 1.15-3.14% yields and mostly 5% coupons, US$652m of North Texas Tollway Authority System revenue refunding bonds sold with 1.16-2.88% yields and mostly 5% coupons, US$460m of Port of Seattle revenue bonds sold with 1.34-2.95% yields and primarily 5% coupons, US$300m of Massachusetts School Building Authority Subordinated Dedicated Sales Tax bonds sold with 1.13-2.52% yields and 5% coupons, and US$264m of Virginia Small Business Financing Authority Senior Lien revenue bonds (95 Express Lanes LLC Project) sold with 2.52-2.57% yields and 5% coupons.

The issuance generally continues to meet with strong demand, underscored by continued inflows into bond funds.

(Click on image to enlarge)

The Vanguard Tax exempt bond etf (vteb)

For the week ended July 17, Thomson Reuters/Lipper U.S. Fund Flows reported a net inflow of roughly US$1.43bn into municipal bond funds – not including ETFs such as the iShares National Muni Bond fund (NYSEARCA: MUB) and the Vanguard Tax-Exempt Bond fund (NYSEARCA: VTEB).

Janney Montgomery strategists noted there will be “opportunities to put these funds to work” in the week ahead, with the Bloomberg 30-day visible supply at US$14.9bn – the most in nine months.

Janney said the heavy wave of new supply over the next few weeks “will benefit from strong and persistent investor appetite for tax-free bonds,” evidenced by the unbroken, 28-week string of positive weekly inflows to mutual fund and muni ETFs.

They added that following an underperforming week, with the 10-year AAA muni benchmark yield ending only 1.5 bps lower, compared to the nearly 7 bps drop in the 10-year U.S. Treasury, “munis are poised for a strong week.”

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The author does not hold any positions in the financial instruments referenced in the materials provided.

Disclosure: The analysis in this material is provided for information only and is not ...

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