Top-shelf municipal bonds finished weaker on Friday as the market gets ready for one of the biggest new issue slates of the year, with over $14 billion of new deals on tap.
"The week's calendar is certainly robust with a variety of issues – something for everyone," said Alan Schankel, managing director at Janney.
He pointed out that that the five largest issues are all refunding bonds. "So even though total new issue volume for the week is elevated" he said, "the fact that refundings dominate the slate removes some of the supply pressure, since in most cases, older bonds will be redeemed."
Ipreo estimates total volume for the week at $14.23 billion, up from total sales of $5.68 billion in the previous week, according to revised data from Thomson Reuters. The upcoming calendar is composed of $13.08 billion of negotiated deals and $1.14 billion of competitive sales.
"Despite the calendar size, I think the market will be well able to absorb the week's sales since demand remains strong as evidenced by continuing strong [municipal bond fund] inflows," Schankel said.
Primary Market
The biggest deal of the week is coming from the Massachusetts Development Finance Agency.
Goldman Sachs is set to price the $1.54 billion of Series 2016A revenue bonds for Harvard University on Wednesday. The deal is rated triple-A by Moody's Investors Service and S&P Global Ratings.
Citigroup is expected to price the Dormitory Authority of New York's $1.1 billion of Series 2016D personal income tax revenue bonds on Thursday.
JPMorgan Securities is expected to price the City and County of San Francisco, Calif.'s water revenue bonds consisting of Subseries A refunding bonds and Subseries B refunding bonds for retail investors on Wednesday ahead of the institutional pricing on Thursday. The deal is rated Aa3 by Moody's.
JPMorgan is also expected to price the Maricopa County Industrial Development Authority, Ariz.'s $766.14 million of Series 2016A revenue bonds for Banner Health on Thursday. The deal is rated AA-minus by S&P and Fitch Ratings.
Morgan Stanley is expected to price the Tarrant County Cultural Education Facilities Finance Corp., Texas' $631.62 million of Series 2016A revenue bonds for the Texas Health Resources System on Wednesday.
Jefferies is set to price the New York Metropolitan Authority's $622 million of transportation revenue bonds for retail investors on Wednesday ahead of the institutional pricing on Thursday. The deal is rated A1 by Moody's, AA-minus by S&P, A by Fitch and AA-plus by Kroll Bond Rating Agency.
And Barclays Capital is set to price the Massachusetts School Building Authority's $604.3 million of Series 2016B senior dedicated sales tax bonds and Series 2016C senior dedicated sales tax refunding bonds for retail investors on Tuesday ahead of the institutional pricing on Wednesday. The deal is rated Aa2 by Moody's and AA-plus by S&P and Fitch.
Also on tap, the California State Public Works Board is returning to the market with new underwriters. Loop Capital Markets replaces Wells Fargo Securities and is set to price the board's $527.54 million of Series 2016C&D lease revenue refunding bonds on Wednesday. The deal is rated A1 by Moody's and A-plus by S&P and Fitch.
On Wednesday, Wisconsin is selling the biggest competitive deal of the week. The state is offering about $325 million of Series 2016D general obligation bonds. The last time the state competitively sold comparable bonds was on July 12 when Morgan Stanley won $83.98 million of Series 2016B GOs with a true interest cost of 0.99%.
Also in the Midwest, Minneapolis, Minn., is competitively selling $120 million of Series 2016 GO improvement and various purpose bonds. The deal is rated Aa2 by Moody's and triple-A by S&P and Fitch.
The last time the city competitively sold comparable bonds was on Nov. 18, 2014, when Citigroup won $37.4 million of Series 2014 GOs with a TIC of 0.52%.
Secondary Market
The yield on the 10-year benchmark muni general obligation on Friday rose one basis point to 1.51% from 1.50% on Thursday, while the yield on the 30-year increased two basis points to 2.31% from 2.29%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were also weaker on Friday. The yield on the two-year Treasury rose to 0.76% from 0.75% on Thursday, the 10-year Treasury yield gained to 1.59% from 1.56% and the yield on the 30-year Treasury bond increased to 2.32% from 2.28%.
The 10-year muni to Treasury ratio was calculated at 94.6% compared to 96.6% on Thursday, while the 30-year muni to Treasury ratio stood at 99.4% versus 100.7%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 35,863 trades on Thursday on volume of $18.32 billion.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Sept. 30 were from California, Pennsylvania and Illinois, according
In the GO bond sector, the Grossmont Unified High School District, Calif. 3s of 2044 were traded 70 times. In the revenue bond sector, the Pennsylvania Turnpike Commission 3.375s of 2041 were traded 92 times. And in the taxable bond sector, the Illinois 5.1s of 2033 were traded 21 times.
Week's Most Actively Quoted Issues
Pennsylvania, Colorado and California issues were among the most actively quoted bonds in the week ended Sept. 30, according to Markit.
On the bid side, the Bucks County Water and Sewer Authority, Pa., revenue 4.75s of 2022 were quoted by 197 unique dealers. On the ask side, the Colorado Health Facilities Authority revenue 3.125s of 2042 were quoted by 364 unique dealers. And among two-sided quotes, the California taxable 7.55s of 2039 were quoted by 14 unique dealers.
Lipper Reports One Year of Inflows
For the 52nd week in a row, a complete year, municipal bond funds reported inflows, according to Lipper data released on Thursday.
The weekly reporters saw $664.257 million of inflows in the week ended Sept. 28, after inflows of $517.593 million in the previous week, Lipper said.
The four-week moving average remained positive at $663.289 million after being in the green at $604.298 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds experienced inflows, gaining $479.393 million in the latest week after inflows of $327.449 million in the previous week. Intermediate-term funds had inflows of $96.318 million after inflows of $89.747 million in the prior week.
National funds had inflows of $563.967 million on top of inflows of $429.444 million in the previous week. High-yield muni funds reported inflows of $204.956 million in the latest reporting week, after inflows of $69.736 million the previous week.
Exchange traded funds saw inflows of $53.849 million, after inflows of $111.876 million in the previous week.
