Municipal bond prices finished out the week on a strong note, traders said, with some yields falling on Friday by another basis point.
The yield on the 10-year benchmark muni general obligation closed down one basis point to 2.20% from 2.21% on Thursday, while the yield on the 30-year GO lost one basis point to 3.15% from 3.16%, according to the final read of Municipal Market Data's triple-A scale.
On the week yields were down as much as 10 basis points. On Friday, June 17, the yield on the muni 10-year year was at 2.29% while the 30-year muni yield stood at 3.25%.
Treasury prices were higher on Friday, with the yield on the two-year Treasury note falling to 0.68% from 0.69% on Thursday, while the 10-year yield fell to 2.26% from 2.28% and the 30-year yield decreased to 2.97% from 2.98%.
The 10-year muni to Treasury ratio was calculated on Friday at 95.1% versus 97.2% on Thursday, while the 30-year muni to Treasury ratio stood at 105.3% compared to 106.3%, according to MMD.
Primary Market
Volume for the week came in at a revised total of $8.39 billion, according to Thomson Reuters, consisting of $6.82 billion of negotiated deals and $1.56 billion of competitive sales.
The biggest deal of the week was the New York State Dormitory Authority's $1.52 billion of Series 2015A New York State sales tax revenue bonds, which was priced by Morgan Stanley. The issue was rated triple-A by Standard and Poor's and AA-Plus by Fitch Ratings.
Siebert Brandford Shank priced the New York Metropolitan Transportation Authority's $419.71 million of Series 2015C transportation revenue refunding bonds. The issue was rated A1 by Moody's Investors Service, AA-minus by S&P, A by Fitch and AA-plus by Kroll Bond Rating Agency.
Morgan Stanley also priced the Port of Seattle, Wash.'s $585.88 million of intermediate lien revenue bonds. The issue was rated A1 by Moody's and A-plus by S&P and Fitch.
Bank of America Merrill Lynch priced the city and county of Honolulu, Hawaii's $581.88 million of wastewater system revenue bonds, which consisted of junior refunding bonds and senior refunding bonds. The senior bonds were rated Aa2 by Moody's and AA-minus by S&P while the junior bonds were rated Aa3 by Moody's and AA-minus by S&P.
BAML also priced the Hillsborough County Aviation Authority's $322.18 million of 2015 Series A AMT revenue bonds, 2015 Series A subordinated AMT revenue bonds and Series B non-AMT subordinated revenue for the Tampa International Airport. The revenue bonds were rated Aa3 by Moody's, AA-minus by S&P and Kroll and A-plus by Fitch while the subordinated revenue bonds were rated A1 by Moody's, A-plus by S&P and Kroll and A by Fitch.
Additionally, BAML priced the Harris County Cultural Education Facilities Finance Corp., Texas' $300 million of Series 2015 revenue bonds for the Houston Methodist Hospital. The bonds were priced as 4s to yield 4.21% and as 5s to yield 3.89% in a split 2045 maturity. The bonds were rated AA by S&P.
Raymond James priced Lafayette, La.'s $91.60 million of Series 2015 communications system revenue refunding bonds.
The bonds were sold by the city to refinance the outstanding Series 2007 bonds and pay the new issuance costs. The savings on debt service payments from the refunding was expected to be used by the city to fund the expansion of its communications system. The bonds were insured by Assured Guaranty Municipal Corp. and rated A2 by Moody's and AA by S&P.
In the competitive arena, the Metropolitan Government of Nashville and Davidson County, Tenn., sold $347.46 million of Series 2015C general obligation improvement bonds. Morgan Stanley won the deal with a true interest cost of 3.18%. The bonds were rated Aa2 by Moody's and AA by S&P.
Back in the Black: Municipal Bond Funds See Inflows
For the first time in 12 weeks, municipal bond funds reported cash inflows.
The weekly reporting funds saw $125.410 million of inflows in the week ended July 22, after seeing outflows of $29.255 million in the previous week, according to the latest Lipper data.
This brings to 16 out of 30 weeks this year that the funds have seen cash infusions. For the year to date, muni bond funds have attracted a net inflow of $3.334 billion.
The four-week moving average remained negative at $352.090 million after being in the red at $409.882 million in the previous week. The moving average has now been negative for nine weeks in a row. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds also experienced inflows, gaining $39.114 million in the latest week, after seeing inflows of $34.223 million in the previous week. Intermediate-term funds again recorded inflows, of $152.569 million after seeing inflows of $20.109 million in the prior week.
And exchange traded funds saw inflows of $108.499 million, after experiencing inflows of $45.314 million in the previous week.
High-yield muni funds, however, saw outflows of $3.550 million in the latest reporting week, after seeing an inflow of $14.513 million the previous week. In the past 12 weeks, high-yield funds have seen outflows nine times totaling $1.707 billion and inflows three times totaling $78.785 million.
"Negative returns and the flight from Puerto Rico have driven high-yield muni mutual fund outflows," Bank of America Merrill Lynch said in a recent report. "The correlation between the total return of high-yield index and fund flows is high."
Barclays Municipal Research also said in a report that it was concerned about high-yield muni fund flows, which it said may continue to be affected by Puerto Rico woes.
The Week's Most Actively Quoted Issues
Puerto Rico and California were some of the most actively quoted names in the week ended July 24, according to data released by Markit.
On the bid side, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 13 unique dealers. On the ask side, the California tax 7.55s of 2020 were quoted by 19 dealers. And among two-sided quotes, the Puerto Rico commonwealth GO 5 3/4s of 2041 were quoted by 19 dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues in the week ended July 24 were in Texas, Maryland, and California.
In the revenue bond sector, the Harris County, Texas, Cultural Educational Facilities Financing Corp.'s 4s of 2045 were traded 73 times. In the GO bond sector, the Maryland 3s of 2028 were traded 72 times. And in the taxable bond sector, the Vernon, Calif., electric system revenue 4.05s of 2023 were traded 20 times, according to Markit.
