DASNY, Georgia, Pa. Turnpike deals top calendar; muni fund inflows continue

Bonds

Another big week lies in store for the municipal bond market as 2018’s top issuer gets set to hit the market with $1.6 billion of new supply.

Overall, IHS Markit Ipreo forecasts weekly bond volume will hit $6.19 billion, down from a revised total of $9.9 billion in the prior week, according to updated data from Refinitiv. The calendar is composed of $3.97 billion of negotiated deals and $2.22 billion of competitive sales.

Primary market
Topping the slate is the Dormitory Authority of the State of New York’s $1.633 billion of state personal income tax general purpose revenue bonds. DASNY ranked number one on the list of top issuers for last year.

On Thursday, DASNY plans to competitively sell $419.31 million of Series 2019A Bidding Group 2 tax-exempts, $414.14 million of Series 2019A Bidding Group 4 tax-exempts, $394.34 million of Series 2019A Bidding Group 1 tax-exempts, $393.435 million of Series 2019A Bidding Group 3 tax-exempts and $11.975 million of Series 2019B taxables. Public Resources Advisory Group is the financial advisor.

On Wednesday, Georgia is selling $950.905 million of unlimited tax general obligation bonds in four sales. The deals consist of $351.185 million of Series 2019A Tranche 1 GOs and Series 2019C refunding GOs, $321.17 million of Series 2019A Tranche 2 GOs, $141.07 million of Series 2019B taxable GOs and $137.48 million of Series 2019B taxable GOs.

Proceeds will be used to finance capital improvements; to make grants to governmental entities for capital outlay projects and to refund certain outstanding debt. Public Resources Advisory Group and Terminus Municipal Advisors are the financial advisors. Gray Pannell is the bond counsel.

The Georgia Legislature passed a $48.63 billion total budget for fiscal 2020, an increase of $1.2 billion over the current year and was signed by Gov. Brian Kemp on May 10. The spending plan called “Putting Georgians First” includes approval of $1.09 billion of new GOs to finance capital projects such as public schools, universities, state buildings and equipment, and funds to replace voting systems statewide.

In the short-term sector, Idaho (MIG1/SP1+/NR) is selling $555 million of Series 2019 tax anticipation notes on Thursday. Piper Jaffray is the financial advisor and MSBT Law is the bond counsel.

In the negotiated sector, Citigroup is expected to price the Pennsylvania Turnpike Commission’s (A3/NR/A-/A+) $706.335 million of Series 2019A turnpike subordinate revenue bonds on Wednesday.

Kroll Rating Agency said its A+ rating reflects the “solid market position and inelastic demand profile of the Pennsylvania Turnpike System. Statutorily required annual toll increases, together with operational cost controls, have produced debt service coverages in excess of both targets and covenants on all liens in the face of a large and growing debt burden.”

BofA Securities is set to price the Montgomery County Higher Education and Health Authority, Pennsylvania’s (A2/A/NR) $415.5 million of Series 2019 revenue bonds for Thomas Jefferson University on Thursday.

Fresh off one of the busiest weeks of the year where the swarm of supply was digested easily, strong names continued to have the books solidly oversubscribed.

“The $900 million Pennsylvania GO deal, which while competitive, did adjust some yields down considerably on the front end,” said Eric Kazatsky, portfolio manager at Clark Capital Management. “Prior to pricing, there seemed to be a wide dispersion of yields in 2020 from several dealers. Ultimately, spreads for the state continued to tighten on the backs of market demand and a positive credit outlook compared to prior years.”

Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management, said the market was pretty rich right now. “Demand is still strong but it is getting harder to justify some of the shorter term yields,” he said. “Now is a great time to extend duration, rather than dropping down in credit quality.”

He added the Federal Reserve will set the tone for the muni market going forward, but he is starting to sense that we could be in for some softening in the near-future. “I’m starting to get the sense that secondary market inventory is beginning to build and if we get some more bigger supply weeks like we had this past week, it would be interesting to see how it would be handled.”

Lipper: More inflows into muni funds
For 23 straight weeks, investors remained bullish on municipal bond funds, according to data from Refinitiv Lipper.

Those tax-exempt mutual funds which report flows weekly saw $778.412 million of inflows in the week ended June 12 after inflows of $792.876 million in the previous week.

Exchange traded muni funds reported outflows of $108.653 million after inflows of $52.877 million in the previous week. Ex-ETFs, muni funds saw inflows of $887.065 million after inflows of $740.000 million in the previous week.

The four-week moving average remained positive at $997.979 million, after being in the green at $1.121 billion in the previous week.

Long-term muni bond funds had inflows of $652.507 million in the latest week after inflows of $612.524 million in the previous week. Intermediate-term funds had inflows of $189.275 million after inflows of $207.550 million in the prior week.

National funds had inflows of $662.490 million after inflows of $695.027 million in the previous week. High-yield muni funds reported inflows of $370.941 million in the latest week, after inflows of $250.240 million the previous week.

On Wednesday, the Investment Company Institute reported long-term municipal bond funds and exchange-traded funds saw a combined inflow of $1.430 billion in the week ended June 5, while long-term muni funds alone saw an inflow of $1.263 billion and ETF muni funds saw an inflow of $167 million.

Secondary market
Munis were mixed on the MBIS benchmark scale on Friday, with yields rising one basis point in the 10-year maturity and falling less than a basis point in the 30-year maturity. High-grade munis were stronger, with MBIS’ AAA scale showing yields rising by less than one basis point in the 10- and 30-year maturities.

On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10-year muni GO and the 30-year muni yield remained unchanged.

The 10-year muni-to-Treasury ratio was calculated at 79.3% while the 30-year muni-to-Treasury ratio stood at 90.7%, according to MMD.

Treasuries were mixed as stocks traded mixed. The Treasury three-month was yielding 2.181%, the two-year was yielding 1.847%, the five-year was yielding 1.847%, the 10-year was yielding 2.094% and the 30-year was yielding 2.593%.

“The ICE Muni Yield Curve is hovering around yesterday’s levels as the market digests the $10 billion in issuance this week,” ICE Data Services said in a Friday market comment. “High-yield and tobaccos are unchanged as well.”

Previous session’s activity
The MSRB reported 39,980 trades Thursday on volume of $15.82 billion. The 30-day average trade summary showed on a par amount basis of $12.62 million that customers bought $6.24 million, customers sold $4.25 million and interdealer trades totaled $2.13 million.

Texas, California and New York were most traded, with the Lone Star State taking 14.793% of the market, the Golden State taking 12.513% and the Empire State taking 12.177%.

The most actively traded security was the Pennsylvania Economic Development Financing Authority Series 2019 revenue 5.75s of 2036, which traded 30 times on volume of $56.56 million.

Week’s actively traded issues
Some of the most actively traded munis by type in the week ended June 14 were from Puerto Rico, Missouri and Puerto Rico issuers, according to IHS Markit.

In the GO bond sector, the Puerto Rico 8s of 2035 traded 28 times. In the revenue bond sector, the Kansas City Industrial Development Authority 5s of 2046 traded 44 times. In the taxable bond sector, the Puerto Rico Sales Tax Finance Corp. 4.55s of 2040 traded 20 times.

Week’s actively quoted issues
Puerto Rico and New York names were among the most actively quoted bonds in the week ended June 14, according to IHS Markit.

On the bid side, the COFINA taxable 4.55s of 2040 were quoted by 27 unique dealers. On the ask side, the Metropolitan Transportation Authority, N.Y., 5s of 2022 were quoted by 127 dealers. Among two-sided quotes, the COFINA restructured revenue 5s of 2058 were quoted by 13 dealers.

Shelly Sigo contributed to this report.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Ziad Saba at 212-803-6079 for more information.

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