| SAN FRANCISCO
SAN FRANCISCO Dec 16 Debt sales in the U.S.
municipal market will cool off next week as issuers bring fewer
offers in advance of the Christmas and New Year's holidays, with
new issuance totaling about $500 million next week.
The biggest competitive offer will come from Massachusetts,
which is offering two general obligation refunding deals
totaling $188 million.
Market participants overall remain neutral on whether the
lack of supply and participation will keep municipal trading
subdued and in a tight range, according to a survey by MMD, a
Thomson Reuters company.
Loop Capital Markets on Tuesday said municipal debt volume
will come in at $395 billion next year, down an estimated 13
percent from forecasts for 2016 as the incoming Trump
administration's impact on economic growth will fall short of
The Federal Reserve's announcement on Wednesday that it
would raise interest rates a quarter percentage point with three
additional increases next year made yields jump on Thursday.
But bulls in the muni market believe the meager supply next
week combined with more appealing rates and Jan. 1 reinvestment
money will push yields lower into the new year, according to the
Muni yields have risen dramatically since the Nov. 8
presidential election. In the first month after the election,
muni yields rose more than 80 basis points, John Mousseau,
executive vice president at Cumberland Advisors, said in a note
"The move up in taxable as well as tax-free yields has been
swift and sharp," Mousseau said. "Essentially, what could be
characterized as a year's worth of movement in bond yields was
compressed into a month."
As of market close on Friday, the yield on top-rated 10-year
paper was 77 basis points higher than it was the day of the
election. The 30-year yield has also risen 67 basis points since
then, MMD data showed.
Fear of a Trump administration led the market to immediately
discount a higher growth rate, increased government borrowing,
and expanded infrastructure spending, as well as accompanying
wage growth and higher inflation, Mousseau said.
An expected cut in the marginal tax rate and a potential
increase in the supply of municipal bonds as a result of
increased infrastructure spending also worked against munis, he
(Reporting by Rory Carroll; Editing by James Dalgleish)