Bonds

New deals see ample demand; markets better ahead of CPI data

Municipals were firmer and Wednesday’s larger new-issue calendar was well received while U.S. Treasuries were weaker on the short end but improved 10 years and out. Equities were in the black as markets await Thursday’s monthly inflation data.

“U.S. stocks pared losses after a strong auction signaled that Wall Street is very confident that inflation will continue to fall,” said Edward Moya, senior market analyst for the Americas at OANDA. “It looks like investors will gladly be eating all the extra issuance that comes from the Treasury. Deflation in China is also providing limited optimism that disinflation pressures will steadily ease across Europe and North America.”

Triple-A yields fell one to four basis points, depending on the curve, while U.S. Treasuries were two to four weaker on the short end, but saw the 10-, 20- and 30-year yields fall two to four.

The two-year muni-to-Treasury ratio Wednesday was at 65%, the three-year at 67%, the five-year at 68%, the 10-year at 68% and the 30-year at 88%, according to Refinitiv MMD’s 3 p.m. read. ICE Data Services had the two-year at 65%, the three-year at 67%, the five-year at 66%, the 10-year at 67% and the 30-year at 88% at 4 p.m.

The Investment Company Institute reported investors pulled $189 million out of municipal bond mutual funds the week ending Aug. 2 after $427 million of inflows the week prior. Exchange-traded funds saw outflows of $533 million after inflows of $345 million the previous week.

“These are topsy-turvy times for fixed income and munis are no exception,” said Kim Olsan, senior vice president at FHN Financial. “Single-session days can be down big (with 10 basis points or more price losses) and up in the following session or unchanged for days — all indicative of low relative values competing against strong reinvestments and attractive absolute rates.”

Several metrics are pointing to an engaged buyer base, she said.

“The upside for new inquiry is that absolute yields have trended to their 2023 highs with [taxable equivalent yields] well into the 5%-7% area,” she said. “Buyers appear to be recognizing the options as several new issues repriced to lower yields on heavy order books, pointing to the value of negotiated product in volatile cycles to navigate specific order interest.”

Olsan said credit compression is occurring as name diversity outside of usual general market credits remains a challenge.  

Across the 5-, 10- and 20-year tenors, “there is virtually no discernable difference between GO and revenue spreads in both AA- and single-A names,” she said. 

Secondary trades prove out the credit consolidation, she said, noting a sale of NR/A+ (non-AMT) O’Hare Airport 5s due 2031 were sold +36/Refinitiv MMD, nearby the spread of AAA- and AA-rated new issues.

Longer-dated AA- and single-A revenue bonds capture spreads comparable to recent pricings, she said. Illinois Toll (Aa3/AA-) 5s due 2044 (callable 2033) traded at 4.04%, spread +51/Refinitiv MMD and within a comparable range of the Washington DC Transit new-issue with the same maturity.   

“Between AA-rated GOs and revenues and single-A counterparts, there is currently about a 15-20 basis point  yield pickup across various tenors,” she said.

Olsan also noted that with a shortage of New York paper, in-state buyers are confronting a general lack of local credit options, “forcing allocations into the more active issuers.” 

The state’s supply is down 39% from last year, “pushing a state index to a 50 basis point outperformance to the broad market,” she said. The Triborough Bridge and Tunnel Authority offered Aa3/AA- bonds with a series due 2024-2030 yielding single-digit spreads, but a longer series finalized a 30-year 5.25% at 4.10%, generously spread +37/Refinitiv MMD, she said.    

It was another active day in the primary market Wednesday. Loop Capital Markets priced and re-priced for institutions $1.01 billion of general obligation bonds for New York City (Aa2/AA/AA /AA+) with up to 10 basis point bumps from the preliminary pricing: the $950 million Series A bonds saw 5s of 2025 at 3.12% (-5 basis points from the preliminary pricing), 5s of 2028 at 2.95% (-3), 5s of 2033 at 3.09% (-3), 5s of 2043 at 3.91% (-10), 5s of 2048 at 4.12% (-6) and 4.45s of 2053 at 4.35% (-10), callable in 8/1/2033.

The second tranche, $67.245 million of Fiscal 2012 Series G, Subseries G-5, saw 5s of 2028 at 2.96%, 5s of 2033 at 3.08%, 5s of 2038 at 3.56% and 5s of 2041 at 3.81%, callable on 10/1/2033.

Goldman Sachs & Co. priced for the Sports Authority of the Metropolitan Government of Nashville & Davidson County (A1/AA//AA+/) $426.485 million of stadium project senior and subordinate revenue bonds. The first tranche, $345.795 of Series 2023A, saw 5s of 7/2028 at 3.16%, 5s of 2033 at 3.25%, 5s of 2038 at 3.79%, 5s of 2043 at 4.09%, 5.25s of 2048 at 4.28%, 5.25s of 2053 at 4.37% and 5.25s of 2056 at 4.42%. Callable 1/1/2034. The second tranche, $80.690 of Series 2023B, saw 5s of 7/2028 at 3.23%, 5s of 2033 at 3.30%, 5s of 2038 at 3.88%, 5s of 2043 at 4.16%, 5.25s of 2048 at 4.38%, 5.25s of 2053 at 4.47%, and 5.25s of 2056 at 4.51%. Callable 1/1/2034. 

Goldman also priced for the Nashville sports authority $220.720 million of federally taxable non-tax revenues pledged stadium project revenue bonds , Series 2023D, all priced at par: 4.932% in 7/2028, 5.168% in 2033, 5.418% in 2038, 5.447% in 2043 and 5.597% in 2056. Subject to make whole call. 

Ramirez & Co. priced for the Texas Public Finance Authority (/AAA/AAA/) $364.600 million of GO and refunding bonds, taxable Series 2023, with 5.15s of 10/2024, 4.578s of 2028, 4.7s of 2033, 5.13s of 2038, and 5.235s of 2043, all priced at par. Callable 10/1/2033. 

Secondary trading
Montgomery County, Maryland, 5s of 2024 at 3.32%. Maryland 5s of 2024 at 3.27%.

Prince George’s County, Maryland, 5s of 2026 at 2.96%. New York City TFA 5s of 2028 at 2.80%.

Minnesota 5s of 2033 at 2.78%. Washington 5s of 2035 at 3.07%. Wake County, North Carolina, 5s of 2037 at 3.14%. Washington 5s of 2041 at 3.58%.

California 5s of 2045 at 3.54%. New York City waters 5s of 2046 at 3.85%. Los Angeles DWP 5s of 2049 at 3.78%. Massachusetts 5s of 2052 at 4.01%.

AAA scales
Refinitiv MMD’s scale was bumped two basis points on the short end: The one-year was at 3.28% (-2) and 3.12% (-2) in two years. The five-year was at 2.79% (unch), the 10-year at 2.72% (unch) and the 30-year at 3.69% (unch) at 3 p.m.

The ICE AAA yield curve was bumped across the curve: 3.26% (-3) in 2024 and 3.12% (-4) in 2025. The five-year was at 2.75% (-4), the 10-year was at 2.69% (-4) and the 30-year was at 3.68% (-3) at 4 p.m.

The S&P Global Market Intelligence (formerly IHS Markit) municipal curve saw bumps on the short end: 3.29% (-2) in 2024 and 3.12% (-2) in 2025. The five-year was at 2.80% (unch), the 10-year was at 2.74% (unch) and the 30-year yield was at 3.68% (unch), according to a 4 p.m. read.

Bloomberg BVAL was bumped: 3.20% (-1) in 2024 and 3.09% (-1) in 2025. The five-year at 2.77% (-1), the 10-year at 2.70% (-1) and the 30-year at 3.75% (-1) at 4 p.m.

Treasuries were mixed.

The two-year UST was yielding 4.082% (+4), the three-year was at 4.428% (+3), the five-year at 4.128% (+2), the 10-year at 4.006% (-2), the 20-year at 4.329% (-3) and the 30-year Treasury was yielding 4.169% (-4) at the close.

Primary to come
The Pecos-Barstow-Toyah Independent School District, Texas, (/AAA//) is set to price Thursday $300 million of PSF-insured unlimited tax school building bonds, Series 2023, serials 2024-2043. RBC Capital Markets. 

Competitive
Oyster Bay, New York, is set to sell $125 million of bond anticipation notes, Series 2023, at 10:45 a.m. Thursday.

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