Market Post: Muni Prices Rise; Looking Ahead to Next Week

Municipal bond prices reversed course on Friday and looked stronger at mid-session, according to traders, after ending lower on Thursday. Yields of top-quality munis were off as much as four basis points on the longer-dated maturities.

Primary Market

The muni bond market will see $6.138 billion of new issuance come to market next week, according to Ipreo and The Bond Buyer.

Next week's negotiated deals total $3.884 billion versus a revised $4.915 billion that were sold this week, according to Thomson Reuters. Bonds scheduled for competitive sale total $2.254 billion, compared with $2.077 billion this week.

On the competitive side, there is a $1 billion general obligation bond offering from the commonwealth of Pennsylvania scheduled for bid on Tuesday. There is also a $289 million general obligation refunding bond offering from the city and county of San Francisco scheduled for sale on Wednesday.

Some of the big negotiated deals slated for the week of Jan. 26 include the $831.6 million offering from the Utah Transit Authority of sales tax revenue refunding bonds; the $385.2 million commonwealth of Kentucky State Property and Building Commission's revenue bonds to be priced by Citi on Wednesday; The $230 million Maryland Health & Higher Education Facilities Authority revenue bonds to be priced by JP Morgan; and $210 million Katy ISD, Texas, school building and revenue bonds also to be priced by JP Morgan.

Secondary Market

Prices of top-rated munis were weaker at midday. The yield on the 10-year benchmark general obligation was down much as two basis points from 1.80% on Thursday, while the yield on 30-year GO was down from two to four basis points from 2.59%, according to a midday read of MMD's triple-A benchmark scale.

Treasury prices were higher on Friday, with the two-year note yield down to 0.50% from 0.52% on Thursday. The 10-year yield decreased to 1.83% from 1.89%, while the 30-year yield fell to 2.39% from 2.47%.

On Thursday, the 10-year muni to Treasury ratio fell to 96.9% from 97.0% on Wednesday, while the 30-year muni to Treasury ratio rose to 106.5% from 106.0%.

MSRB Reports Previous Session's Activity

The Municipal Securities Rulemaking Board reported 39,859 trades on Thursday on volume of $13.056 billion. Most active on Thursday, based on the number of trades, was the Texas Transportation Commission Central Texas Turnpike System's second tier revenue refunding bond 5s of 2042, Series 2015-C, which traded 115 times with an average price of 111.976 and an average yield of 3.51%.

Tax-Exempt Bond Funds See Inflows

Municipal bond funds which report weekly posted $771.234 million of inflows in the week ended Jan. 21, after seeing inflows of $688.522 million in the previous week, according to the latest Lipper data.

The four-week moving average remained positive at $696.988 million in the latest week after remaining in the green at $669.041 million in the prior week. A moving average is an analytical tool used to smooth out price moves by filtering out fluctuations.

Long-term muni bond funds had inflows of $496.724 million in the latest week, after inflows of $588.754 million in the previous week.

High-yield muni funds recorded inflows of $272.931 million in the latest reporting week, after inflows of $259.074 million in the previous week.

Exchange-traded funds had inflows of $588.671 million, after reporting inflows of $128.344 million in the previous week.

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