A confluence of upcoming events kept municipal bond buyers on the sidelines Monday as an uncertain and cautious tone was felt throughtout the market.

Investors are waiting for the results of Tuesday’s U.S. national elections as the Federal Reserve gets ready to hold its monetary policy meeting on Wednesday and Thursday and the Labor Department prepared to release the October employment report on Friday.

On Monday, munis finished steady to weaker across the curve, with yields higher on the shorter end of the AAA scales while remaining steady father out the curve.

Muni supply is estimated at only $759.6 million in a calendar composed of $529.1 million of negotiated deals and $230.5 million of competitive sales.

According to Kim Olsan, senior vice president at FHN Financial, this week is beginning to look a lot like Christmas, with only ultra-light volume expected.

“Based on so much supply being pre-issued ahead of the election, forward estimates have dropped 75% to just $5 billion,” she said.

October saw the second highest muni volume weekin history with $65 billion of bonds being priced as issuers raced to get deals done ahead of the election. Only the $69.83 billion that came in December of 2017 before tax law changes went into effect was a bigger month.

Olsan added November issuance will be jammed into a few weeks, since the upcoming Veteran Day and Thanksgiving holidays, leave only four full weeks in 2020 in which to process supply.

“Net implied demand between bonds rolling off from calls and maturities (estimated at $45 billion through December) and projected supply could exceed $20 billion into year end,” she said. “The variable is what amount of volume can realistically be readied for pricing in a narrow window, but indications lean more constructively for issuers.”

In its weekly report, FHN said a surge in taxable muni volume created some unique buying conditions compared to the corporate equivalents.

“A pricing of $299 million A2/A South Carolina Public Service bonds drew a 10-year yield of +171/ UST as contrasted with A3/NR $500 million Berkshire Hathaway Energy bonds spread +90/UST,” FHN said. “Smaller issues of higher-rated taxable munis also offer attractive spreads to new-issue corporates. King County WA (Aaa/AAA) sold $73 million GOs at auction with the 2030s pricing +82/UST, while Aa3/AA- Proctor and Gamble priced its new 10-year +47/UST.”

As long as refunding needs remain high and taxable bonds are a viable conduit, opportunities should be buyer-favorable, FHN said.

Bloomberg News

Last Friday was just a typical end-of-the-week session, with no tricks or treats for municipal investors as the market remained quiet ahead of the election, said John Mousseau, president of Cumberland Advisors.

“It was a good time to buy issues in the past few weeks because we know issuers were coming to market to beat the election.” He said this was especially true due to “memories of volatility and the sell-off from four years ago.”

Mousseau noted there were good buying opportunities in recent weeks, however, visible supply has noticeable decreased to $5 billion from $20 billion.

“We will see some reversion to the mean, of course, but this should revert to a sellers market,” he said.

Analysts expect the Federal Open Market Committee to keep rates unchanged this week, but will keep an eye out for what Fed Chair Jeome Powell says at the press conference after the meeting.

“Regardless of who wins the presidency, we expect another sizable fiscal stimulus bill to pass soon after the election,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. "Both monetary and fiscal policy should remain accommodative."

Economists surveyed by IFR Markets expect non-farm payrolls to have risen by 600,000 in October with the unemploiyment rate falling to 7.6% from 7.9% in September

Primary market
“Though there are no holidays this week, the new-issue calendar certainly looks like a holiday week,” said Peter Franks, Refinitiv MMD senior market analyst. “The week's issuance is below $1 billion and the only major sales will be (Aa3/AA-) $130 million Maine Turnpike tomorrow in the negotiated market and $93 million Charleston County, S.C., Ed selling Thursday in the competitive market. Time will tell if Florida ROW taxable and tax-exempts come off the day-to-day calendar.”

Bofa Securities is expected to price the Maine Turnpike Authority’s (Aa3/AA-/AA-/) $130 million of Series 2020 turnpike revenue bonds on Tuesday.

There are currently three competitive sales from Florida on the day-to-day calendar.

The Florida Department of Transportation has $179.17 million of Series 2020A tax-exempt and $189 million of Series 2020B taxable right-of-way acquisition and bridge construction bonds awaiting sale. The Florida Board of Governors has a $71.8 million sale of Series 2020 tax-exempt dormitory revenue bonds for the Florida International University on the daily slate.

Secondary market
Some notable trades on Monday:

Northeastern Texas ISD 5s of 2023 traded at 0.35%-0.34%. Maryland GOs, 5s of 2024, at 0.31%. New York EFC subs, 5s of 2025, at 0.37%-0.36%. Chesapeake Virgina 5s of 2028 traded at 0.69%-0.68%.

Clark County Washington Evergreen SD #114, 4s. of 2033 traded at 1.51%-1.50% after originally pricing at 1.54%.

NYC TFA subs 5s of 2033 at 1.69%-1.68%.

NYC TFA subs, 5s of 2034 at 1.77%-1.76% after originally pricing at 1.79%.

Arlington Texas ISD 4s of 2045 at 2.05%-1.94%.

Last week, the most traded muni sector was industrial development followed by education and utilities, according to IHS Markit.

On Monday, high-grade municipals were mixed, according to final readings on Refinitiv MMD’s AAA benchmark scale. Short yields in 2021 and 2022 rose one basis point to 0.21% and 0.22%, respectively. The yield on the 10-year muni was up one basis point to 0.94% while the yield on the 30-year was flat at 1.71%

The 10-year muni-to-Treasury ratio was calculated at 110.7% while the 30-year muni-to-Treasury ratio stood at 105.3%, according to MMD

The ICE AAA municipal yield curve showed short maturities were steady in 2021 and 2022 at 0.21% and 0.23%, respectively. The 10-year maturity rose one basis point to 0.93% and the 30-year was unchanged at 1.73%.

The 10-year muni-to-Treasury ratio was calculated at 110% while the 30-year muni-to-Treasury ratio stood at 106%, according to ICE.

The IHS Markit municipal analytics AAA curve showed short yields flat at 0.17% and 0.18% in 2021 and 2022, respectively, with the 10-year unchanged to yield 0.95% and the 30-year steady at 1.72%.

The BVAL AAA curve showed the yield on the 2021 and 2022 maturities unchanged at 0.16% and 0.18%, repectively, while the 10-year was steady at 0.92% and the 30-year flat at 1.73%.

Treasuries were stronger as stock prices traded higher.

The three-month Treasury note was yielding 0.09%, the 10-year Treasury was yielding 0.84% and the 30-year Treasury was yielding 1.62%.

The Dow rose 1.45%, the S&P 500 increased 0.90% and the Nasdaq gained 0.18%.

Christine Albano contributed to this report.