The municipal bond market is already looking ahead to next week — when the state of Pennsylvania will return to head the new issue calendar as it sells the $1 billion general obligation bond offering which was snowed under this week.
Primary Market
Volume for next week is estimated at $8.834 billion, according to Ipreo and The Bond Buyer, This is up from a revised total of $4.108 billion this week, according to Thomson Reuters.
About $6.079 billion negotiated deals are scheduled for next week while bonds scheduled for competitive sale next week total around $2.756 billion.
Pennsylvania's unlimited tax general obligation bonds will top the new issue slate and go up for bidding on Tuesday. The issue will be structured as serials ranging from 2016 to 2035. The bonds are rated Aa3 by Moody's Investors Service and AA-minus by both Standard & Poor's and Fitch Ratings.
The Keystone state last came to market on April 29, 2014, when it sold $834.945 million of GOs to Bank of America Merrill Lynch with a true interest cost of 3.2542%.
Also on the competitive slate is the Virginia Public School Authority's $459 million school financing refunding bonds. The issue, set for sale on Tuesday, is rated Aa1 by Moody's and AA-plus by S&P and Fitch.
Topping the negotiated calendar is a $955 million composite issue from the Trinity Health Credit Group. The bonds will be priced on Tuesday by Bank of America Merrill Lynch in three series from Michigan, Idaho and Maryland. The issue is rated Aa3 by Moody's, AA-minus by S&P and AA by Fitch.
Also on tap is the $499 million Los Angeles Department of the Airports, Calif., offering. Morgan Stanley is expected to price the issue in three series: senior revenue bonds, Series A (AMT); senior revenue bonds Series B (non-AMT); and subordinate refunding revenue bonds, Series C.
On Thursday, the Florida State Board of Education sold $236.495 million of full faith and credit public education capital outlay refunding bonds, 2015 Series A, in a competitive sale. Wells Fargo Securities won the bonds with a true interest cost of 2.0119%. The bonds were priced to yield from 0.25% with a 5% coupon in 2016 to 2.75% with a 3% coupon in 2029. The issue is rated Aa1 by Moody's and AAA by S&P and Fitch.
Secondary Market
Treasury prices were higher on Friday, with the two-year note yield falling to 0.48% from 0.52% on Thursday. The 10-year yield dropped to 1.67% from 1.77%, while the 30-year yield declined to 2.25% from 2.33%.
Prices on top-quality muni bonds ended unchanged on Thursday. The yield on the 10-year benchmark general obligation remained at 1.75% from Wednesday, while the yield on 30-year GOs was flat at 2.54%, according to a final read of MMD's triple-A benchmark scale.
On Thursday, the 10-year muni to Treasury ratio decreased to 99.4% from 101.7% on Wednesday, while the 30-year muni to Treasury ratio fell to 109.0% from 110.9%
MSRB Reports Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,457 trades on Thursday on volume of $11.245 billion.
Most active on Thursday, based on the number of trades, was the Elk River Independent School District No. 728, Minn., Series 2015 A, school building bon 3s of 2033, which traded 70 times with an average price of 98.459 and an average yield of 3.112%.
Tax-Exempt Bond Funds See Inflows
Municipal bond funds which report weekly posted $892.528 million of inflows in the week ended Jan. 28, after seeing inflows of $771.234 million in the previous week, according to the latest Lipper data.
The four-week moving average remained positive at $922.473 million in the latest week after remaining in the green at $696.988 million in the previous week. A moving average is an analytical tool used to smooth out price moves by filtering out fluctuations.
"This month's extraordinary positive flows into the muni market were fueled by strong seasonal reinvestment demand and lower interest rates," says Daniel Berger, MMD Senior Market Strategist. "Although absolute rates are painfully low retail investors probably looked at their muni holdings and viewed these investments as a safe haven."
Long-term muni bond funds had inflows of $549.093 million in the latest week, after inflows of $496.724 million in the previous week.
High-yield muni funds recorded inflows of $207.914 million in the latest reporting week, after inflows of $272.931 million in the previous week.
Exchange-traded funds had inflows of $91.239 million, after reporting inflows of $58.671 million in the previous week.
Muni Money Market Fund Outflows Rise to $1.53B
Tax-exempt money market fund assets dropped to $260.86 billion after $1.53 billion fled the funds in the week ended Jan. 26, according to The Money Fund Report, a service of iMoneyNet.com. The assets fell from $262.39 billion in the prior week.
The average, seven-day yield for the 396 weekly reporting tax-exempt money funds held steady at 0.01%.
The total net assets of the 994 weekly reporting taxable money funds fell $6.99 billion to $2.457 trillion in the week ended Jan. 27, down from $2.464 trillion in the prior week.
The average seven-day yield for the taxable funds was unchanged at 0.02% for the second consecutive week -- after spending 87 weeks at 0.01%.
Overall the combined total net assets of the 1,390 weekly reporting money funds declined by $8.52 billion after losses of $2.718 billion in the week ended Jan. 27. That was down slightly from last week's total net assets of $2.727 trillion.
Christine Albano contributed to this report.
