Looking Ahead to Next Week’s Holiday Slate

The municipal bond market is all set for next week's holiday-lite new issue calendar. Traders on Friday were looking ahead to several big negotiated and competitive sales even as municipal bond yields have started to rise again.

 

Secondary Market

Treasury prices were higher on Friday. The yield on the two-year Treasury note dropped to 0.59% from 0.62% on Thursday, while the 10-year yield decreased to 1.97% from 2.00% and the 30-year yield declined to 2.57% from 2.59%.

The yield on the 10-year benchmark muni general obligation on Thursday rose three basis points to 1.96% from 1.93% on Wednesday, while the yield on 30-year GO increased four basis points to 2.80% from 2.76%, according to the final read of Municipal Market Data's triple-A scale.

On Thursday, the 10-year muni to Treasury ratio was calculated at 96.3% versus 100.5% on Wednesday, while the 30-year muni to Treasury ratio stood at 107.0% compared to 110.3%.

 

Primary Market

Traders are now looking ahead to next week's abbreviated trading calendar. The market will be closed on Good Friday.

Leading off next week's new-issue slate is a $1.2 billion deal from the Posey County Economic Development Partnership, Ind., for the Midwest Fertilizer Co. The offering is scheduled to be priced by Citigroup Global Markets on Tuesday.

Also scheduled is the California Department of Water Resources' $765 million of power supply revenue bonds slated to be priced by J.P. Morgan Securities on Wednesday.

Citi is also expected to price the Illinois Municipal Electric Agency's $585 million revenue refunding bonds on Tuesday.

In the competitive arena, the state of Utah is slated to sell $224 million of Series 2015 general obligation refunding bonds on Tuesday. The bonds are rated triple-A by Moody's S&P and Fitch.

And Bellevue, Wash., will sell $96 million of limited tax GO and refunding bonds on Tuesday. The issue is rated Aa1 by Moody's and triple-A by S&P.

Additionally, the Orlando Utilities Commission will offer $95 million of Series 2015A utility system revenue bonds on Tuesday. The bonds are rated Aa2 by Moody's and AA by S&P and Fitch.

 

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar increased $3.613 billion to $11.990 billion on Friday. The total is comprised of $2.394 billion competitive sales and $9.596 billion of negotiated deals.

 

MSRB Previous Session's Activity

The Municipal Securities Rulemaking Board reported 40,463 trades on Thursday on volume of $13.058 billion.

Most active based on the number of trades was the Kentucky Municipal Power Agency's Series 2015A Prairie State project power system revenue refunding 4s of 2039, which traded 210 times at an average price of 99.811 with an average yield of 3.999%; (initial offering price of 97.858, an initial offering yield of 4.14%).

 

Tax-Exempt Bond Funds See Inflows

Municipal bond funds which report weekly posted $581.664 million of inflows in the week ended March 25, after experiencing inflows of $133.676 million in the week ended March 18, according to the latest Lipper data. It was the 11th straight week muni funds experienced inflows.

The four-week moving average remained positive at $319.195 million in the latest week after being in the green at $281.111 million in the prior week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

Muni bond funds so far have experienced inflows in each week of 2015, according to Lipper data. Inflows for the year total about $5.51 billion.

Long-term muni bond funds saw inflows of $569.870 million in the latest week, after experiencing inflows of $137.153 million in the previous week.

High-yield muni funds recorded an inflow of $306.515 million in the latest reporting week, after seeing inflows of $90.989 million in the previous week. Exchange-traded funds had inflows of $83.348 million, after recording inflows of $73.093 million in the previous week.

In contrast, long-term municipal bond mutual funds posted $190 million of inflows in the week ended March 18, according to the Investment Company Institute. ICI reported that inflows into long-term funds were $276 million in the previous week.

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