Calendar Week of 04/18/2022:

Primary volume levels will remain quiet in the coming week after last week's calendar supplied limited issuance ahead of the Holiday weekend. Persistent interest rate volatility across macro markets has presented challenges across the new issue market as participants seek to discover value amidst a turbulent landscape. Given the unpredictable nature of the primary arena, issuers remain reluctant to price new issue deals despite the potential benefits associated with securing rates ahead of any further rate hikes. Following the 25 basis point rate hike last month, participants are preparing for tighter monetary policy and a sequence of additional hikes over the course of the year in order to combat inflation nationwide. Ascending yields across the new issue landscape highlights a fundamental shift in pricing activities, affirmed by larger mutual fund outflows and greater demand for bids wanted in the secondary market as select broker/dealers off-load older inventory at a loss. While the current environment presents challenges, investors seeking greater tax-exempt returns have begun to methodically take down paper and ladder durations to maximize income potential. As the market adjusts to rising rates, treasuries demonstrated mixed performance over the course of last week, with bumps noted in the first several tenors, coupled with cuts of 15bp+ in the long end of the curve as volatility across the global market remains pronounced. Muni benchmarks outperformed the movement noted across US treasuries, with cuts of 11-14bps spread throughout all tenors, with the greatest cut noted in the 2025 maturity. Muni/UST ratios shifted accordingly, with the front end experiencing the largest shift (105%) in the first year coupled with 87% and 97% in the 10 & 30 year respectively. As the market braces for elevated yields, issuers are continuously modifying budgets and corresponding financing needs to adequately adjust for higher costs for goods and services in order to successfully maintain operations.

New issue offerings will remain subdued over the course of the week after last week's calendar offered $6.5Bn falling below the volumes witnessed across the first quarter. The Maryland Economic Development Corporation (Baa3/-/BBB) led last week's negotiated calendar to sell $643mm private activity green bonds for the Purple Line Light Rail project across 11/2028-06/2055 with cuts of 5bp noted in the last several maturities, with the 2055 maturity offering a spread of +181bps to the interpolated MAC or 4.59% YTW. The Regents of the University of Minnesota (Aa1/AA/-) also came to the negotiated market to offer $500mm of general obligation taxable bonds with a single 04/2052 maturity witnessing strong investor demand, suppressing the yield by 15bps and supplying investors a 4.05% return. This week's calendar is slated to supply $6.6Bn spanning across 184 new issues with $.9Bn on day-to-day status. The Iowa Finance Authority (Ba1/BBB-/BB+) will lead this week's negotiated calendar to offer $854mm of midwestern disaster revenue refunding bonds across three maturities ranging across 12/2032-12/2050, senior managed by Citi and pricing on Thursday 04/21. The Southeast Energy Authority (A2/-/-) will also tap into the negotiated arena to sell $646mm of commodity supply revenue bonds across 08/2023-08/2028, senior managed by Goldman Sachs and expected to price as early as tomorrow 04/19. This week's competitive calendar will span across 115 new issues for a total of $2Bn, led by the City and County of Denver Colorado (Aaa/AAA/AAA) auctioning $246mm of general obligation bonds across 08/2022-08/2039, selling tomorrow 04/19 at 10:30AM EST.

Posted 18 April 2022 by Matthew Gerstenfeld, Municipal Bond Business Development Specialist, IHS Markit

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