Wednesday, May 27, 2015

Municipal Bond Market
Munis are slightly weaker this morning after a strong performance yesterday.  Attention was on the secondary market as dealers used the rally as an opportunity to move older positions that have been tying up balance sheets for the past few weeks.  We should see the focus switch to the primary today with the pricing of $1.2bln PA GOs and Chicago City GOs. Price talk is currently around a 6% for the longer maturities of the Chicago deal.  This is right around where we have seen city GOs trade over the past week.  30-day supply is unchanged this morning with $13.3bln scheduled over compared to about $12.2bln on Friday.

PR paper was mostly unchanged Tuesday after rallying over the past few days.  Benchmark GO 8’s of 2035 traded as high as $83.50 (9.90%) after trading as low as $77.125 (10.80%) in early May.  We are starting to see traditional muni buyers step back into the market with demand for PR paper after a hiatus.  We could see GO debt continue to rally if the increased sales tax can help push a long a new deal.

30-Day visible supply: $13.4bln