Market Close: Munis End Slightly Weaker But Quiet On the Day

Municipals ended steady to a smidge weaker in a trading day marked by the lack of major market-moving events in the tax-exempt arena, and the disappearance of early gains in Treasuries.

"The market sort of has that end of a long week feel," said a New York trader, who described the tone as "very quiet" Thursday afternoon.

"It's may be moderately down from first thing this morning," he said. "There were not a lot of trades." He said dealers wanted to lighten their inventories ahead of a growing primary market calendar next week rumored to be close to $8 billion.

At the close of trading, municipals due between 2015 and 2019 remained unchanged on the day, while maturities due between 2020 and 2044 rose by just one basis point, according to Municipal Market Data.

The 30-year triple-A general obligation bond due in 2044, for instance, ended at a 2.98%, while the 10-year ended at a 2.04% -- both down one basis point from the previous day, according to MMD.

Treasuries ended at a 2.31% in 10 years and 3.04% in 30 years, up from opening at 2.29% and 3.01%, respectively, according to Bloomberg.

The largest deal of the day, the $400 million sale by the Illinois State Toll Road Authority, was well-received and helped the issuer achieve lower costs, according to a press release from the authority.

"Borrowing rates achieved in today's market are well below the costs originally assumed for our 15-year capital program," said Illinois Tollway Executive Director Kristi Lafleur. "These low financing costs should further enhance the sound financial footing of the Move Illinois Program, which is the largest in our agency's history and the largest of any toll road agency in the nation."

Tollway board chair Paula Wolff was quoted saying it was "an opportune time for the Tollway to have taken advantage of these favorable market conditions as we look ahead to record capital spending in 2015." She added: "Our strong credit and coverage ratios - bolstered by cost-effective project management by our leadership team - have helped keep the costs of borrowing in line with our agency's financial plan, and we are pleased with today's results."

Fitch Ratings assigned a AA-minus rating to the agency's Series 2014C senior revenue bonds and affirmed its AA-minus rating on the Tollway's approximately $4.7 billion outstanding senior revenue bonds with a stable outlook. In addition, Standard & Poor's and Moody's Investors Service assigned ratings to Series 2014C and affirmed their ratings on the outstanding bonds at AA-minus and Aa3, respectively, both with stable outlooks.

Meanwhile, in one the larger news items announced late in the day, the bankrupt city of Stockton, Calif., received a green light in federal court to end its more than two-year foray in bankruptcy protection.

U.S. Federal Bankruptcy Judge Christopher Klein said in court he approved the bankruptcy exit plan in lieu of other more costly and time-consuming alternatives.

The plan means that the city can restructure its debts and employee pensions administered by California Public Employees Retirement System would not have to take a haircut.

Traders expected an equally quiet Friday and said they were already looking ahead at next week's calendar, which is growing in size compared to the weekly average.

The activity will be led by a $700 million New York City Transitional Finance Authority offering of future tax secured subordinate bonds expected to be priced by Barclays Capital Inc. on Wednesday after a two-day retail order period.

Also on the upcoming calendar is a $500 million sale of first and second tier revenue bonds from the North Texas Tollway Authority slated for pricing by Bank of America Merrill Lynch & Co. on Wednesday.

 

Outflows Plague Muni Money Funds

Tax-exempt money market funds reported outflows of $2.93 billion as total net assets declined to $252.65 billion in the week ended Oct. 27, according to The Money Fund Report, a service of iMoneyNet.com.

The outflows accelerated from the $495.2 million of losses in the previous week.

The average seven day yield for the 409 weekly reporting money market funds was unchanged at 0.01%, while the average maturity was unchanged at 41 days.

The total net assets of the 1,005 weekly reporting taxable money market funds, meanwhile, grew by $3.89 billion to $2.401 trillion in the week ended Oct. 28, which is down from $14.82 million of gains last week.

The average, seven-day yield for the taxable money funds also held steady, while the average maturity was steady at 47 days.

Overall, the combined total net assets of the 1,414 weekly reporting money market funds increased by $962.6 million in the week ended Oct. 28 to $2.654 trillion, which is down from last week's inflows of $14.33 billion.

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