New issue municipal bond deals coming to market have been robust so far in 2024, up 34% compared to 2023
So far there has been enough demand and naturally, the capital markets professionals are gauging whether there will be enough future demand for future new issue deals. The last thing the bankers and authorities want is to price a new deal and then have to drastically cut price to entice buyers.
Bifurcation in MuniLand:
1) MuniBonds trading in the secondary market have been trading at higher prices and thus, lower yields.
2) New issue deals have been "priced to sell", in other words, higher yields at lower prices.
3) Many of the new deals coming to market have been oversubscribed by multiples of 10-15x.
The rub is the difficulty of being allocated these new issue #MuniBonds with higher yield levels. Fortunately, through our relationships on the Street, we have been allocated adequate lots of new issues.
Recent Developments:
- Muni-Treasury Ratios: A heavy issuance calendar combined
with a rally in treasuries at the start of June has caused municipal bonds
to underperform compared to treasuries. This has resulted in more
attractive inter-market ratios, with a ten-year AAA municipal bond
yielding 70% of a comparable ten-year treasury bond. This is the widest
and most attractive ratio seen in over three months.
- High
Yield Ratios for Longer Maturities: For
A to AA rated municipal bonds with maturities between twenty and thirty
years, yields are now at 100% to 105% of comparable treasuries.
- We like and continue to extend maturities not only because of the better ratios of 100% - 105% to #USTreasurys, but investors are demanding to lock in the highest yields in a generation with ten-year call protection.
https://www.bondbuyer.com/news/wall-street-expects-muni-bond-issuance-to-rise-in-2024
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