Calendar Week of 09/20/2021

Primary volume climbed to higher levels over the course of last week, playing into seasonal market strength despite evolving developments streaming from Washington in addition to heightened concerns surrounding the national debt ceiling and corresponding impacts to state and local governments. On Friday of last week, a memo from the White House outlined the potential of drastic cuts to state and local government funding should the government fail to successfully raise the debt ceiling to cover outstanding obligations, with a government default projected to occur in October should conversations fail. Given the trajectory of bipartisan discussions, participants remain highly focused on the financial impacts associated with an unsuccessful outcome, as Treasury Secretary Janet Yellen issued a stern warning that such default would fuel further widespread financial hardship, curtailing the nations effort to rebound from the pandemic. Market participants have also monitored ongoing developments surrounding the national infrastructure package, after several key muni bond provisions advanced within the House Ways and Means Committee, paving the way for the legislation to be debated by a full house. The package is set to include a host of key provisions which have played a factor in reshaping the financing activity across the marketplace, most notably the reinstatement of tax-exempt advanced refundings which was eliminated during the 2017 Tax Cuts and Jobs Act, marking a major shift in state and local issuers abilities to refinance debt in advance and lower borrowing costs. Another key component of the proposed package would raise the bank qualified debt limit from $10mm to $30mm fostering greater participation from banks who had interest in purchasing new issue offerings, but were limited in the amount of municipal bond exposure permitted. While the advancement of the municipal bond oriented package is a promising step forward for the marketplace, ongoing discussions surrounding the scope and size of the national package remain convoluted, with participants forecasting a final vote to occur by October given the current progression.

Primary offering volume is on track to remain in the double digit range after last week's calendar supplied $12.7Bn, with the majority of volume oriented in the long end of the curve following several large general obligation issues which surfaced in the primary arena. The State of California provided a substantial portion of last week's volume after $2.1Bn of general obligation bonds successfully priced, spanning across two series with the majority of par size issued in the October 2041 maturity. Institutional demand was front and center across the scale after bumps of 5bps were registered in the 2037 maturity, falling +30bps off the interpolated MAC curve. The New York City Municipal Finance Authority also stepped up to the plate last week to price $630mm of water and sewer system revenue bonds with bumps registered across the scale, after the series BB-2 06/2027 maturity priced through the interpolated MAC at -7bps or .43 yield given overarching buyside demand. This week's calendar is slated to provide $11.4Bn spanning 224 new issues with another strong presence from California, supplying $3Bn+ of new issue offerings with the bulk of issuance flowing within the intermediate range of the curve. The Triborough Bridge and Tunnel Authority (-/AA+/AA+/AA+) will lead this week's negotiated calendar, supplying $881mm MTA bridge and tunnel senior lien bonds spanning 05/2022-05/2056 across three series with the majority of ($) par size found in the long end of the curve. The Department of Airports for the City of Los Angeles California will also come to market with $750mm private activity revenue bonds with proceeds designated for Los Angeles International Airport, senior managed by Jefferies. This week's competitive calendar will include 117 issues for a total of $3.3Bn led by the Commonwealth of Massachusetts auctioning three separate general purpose obligation tranches for an aggregated total of $961mm, selling throughout Tuesday morning 09/21.

Negotiated ESG Offerings Week of 09/20/2021:

Posted 20 September 2021 by Matthew Gerstenfeld, Municipal Bond Business Development Specialist, IHS Markit

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