Monday, Jun. 1, 2015

Municipal Bond Market
Munis are slightly weaker this morning after a quiet trading day on Friday, not uncharacteristic of a summer Fridays.  Despite last week’s abbreviated week, there were improvements across the curve with the biggest move on Thursday.  The coming month should be a stronger one for muni bond market performance with June being a seasonal reinvestment period.  Additionally, supply should be lower as there is less new paper being brought to market with 70% of new issuance being refundings.  Rising muni bond sales are expected to correlate with an impending rise in redemptions ($17bln) and maturing debt ($26.5bln) in the next few weeks.

States and localities intend issuance of $11.7bln for the new month, slightly up from the $11.5bln predicted last week.   New York should dominate the new issuance market this week, with sales of $915mln by New York city and $620mln by New York Dormitory Authority being brought to market.  There is also a $500mln D.C. GO deal in progress.

In terms of issued debt coming due, California ($8.26bln), New Jersey ($3.93bln), and New York ($3.74bln) total the highest.  Last week’s $700mln Chicago deal was well-subscribed with $6bln in orders, indicating both faith in the credit and a hunt for yield among buyers.  Lastly, the yield gap on Illinois inclined to 4.09% (33 BP), while that on Puerto Rico widened to 9.88% (from 34%). Puerto Rico signed the law to raise the sales tax from 7% to 11.5%.