More Muni Supply on the Way

Municipal bond volume continues to surge, with the biggest new issue slate of 2015 set to be priced next week.

Primary Market

Topping the negotiated calendar for the upcoming week is a $2.8 billion offering in two deals from the University of California.

Barclays Capital is set to price the bonds for retail investors on Tuesday followed by the institutional pricing on Wednesday. Raymond James is co-manager on the two series of limited project revenue bonds: a $1.2 billion tax-exempt 2015 Series I and $440 million taxable 2015 Series J. Stifel is the co-manager on the two general revenue bond series: the tax-exempt $770 million Series AO and taxable $370 million 2015 Series AP.

New York City will be selling $1 billion of general obligation bonds next week. RBC Capital Markets is scheduled to price $800 million of tax-exempt fixed-rate refunding bonds on Thursday following a two-day retail order period. NYC also plans to sell about $200 million of taxable fixed-rate bonds, consisting of $100 million of new money bonds and a conversion of around $100 million of VRDBs to fixed-rate on Thursday.

The N.Y. Metropolitan Transportation Authority's $300 million of transportation revenue bonds are expected to be priced by Bank of America Merrill Lynch on Wednesday.

In the competitive arena, Boston will sell $270 million of general obligation and GO refunding bonds in two separate sales on Tuesday.

New York State will sell $320 million of tax-exempt and taxable GOs in two separate competitive sales on Tuesday.

The Rhode Island Tobacco Settlement Finance Corp. is slated to sell $600 million of asset-backed bonds, to be priced by Citigroup Global Markets on Tuesday.

On Thursday, Bank of America Merrill Lynch priced the $507.74 million L.A. DEWAPs to yield from 2.72% with a 5% coupon in 2028 to 3.10% with a 5% coupon in 2036; a 2040 term bond was priced as 4s to yield 2.82%. The issue is rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's and Fitch Ratings.

Also on Thursday, Citigroup Global Markets priced tax-exempt and taxable deals totaling $182.61 million for the New Jersey Housing and Mortgage Finance Agency. Raymond James & Associates priced the Prosper Independent School District, Texas' $158.57 million of unlimited tax refunding bonds. FirstSouthwest priced the Birdville Independent School District, Tarrant County, Texas' $189.92 million offering. And Goldman, Sachs priced the Port of Portland, Ore.'s $109.94 million revenue refunding bonds for the Portland International Airport.

Secondary Market

Treasury prices were mixed on Friday. The yield on the two-year Treasury note fell to 0.63% from 0.64% on Thursday, while the 10-year yield was down to 2.10% from 2.11% and the 30-year yield was unchanged at 2.72%.

On Thursday, Prices of top-quality municipal bonds ended weaker. The yield on the 10-year benchmark muni general obligation rose one basis point to 2.09% from 2.08% on Wednesday, while the yield on 30-year GO was up one basis point to 2.93% from 2.92%, according to the final read of Municipal Market Data's triple-A scale.

The 10-year muni to Treasury ratio on Thursday was calculated at 99.4% versus 98.2% on Wednesday, while the 30-year muni to Treasury ratio stood at 108.1% compared to 107.4%.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar increased $7.025 billion to $16.045 billion on Friday. The total is comprised of $3.213 billion competitive sales and $12.832 billion of negotiated deals.

MSRB Previous Session's Activity

The Municipal Securities Rulemaking Board reported 41,039 trades on Thursday on volume of $12.445 billion.

Most active on Thursday, based on the number of trades, was the state of California Series 2015 GO 3s of 2029, which traded 364 times at an average price of 98.059, with an average yield of 3.163%; (initial offering price of 98.094/initial offering yield of yield of 3.17%).

Tax-Exempt Bond Funds See Inflows

Municipal bond funds which report weekly posted $408.481 million of inflows in the week ended March 4, after experiencing inflows of $429.330 million in the week ended Feb. 18, according to the latest Lipper data.

The four-week moving average remained positive at $339.278 million in the latest week after being in the green at $384.441 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 $5.636 billion.

Long-term muni bond funds saw inflows of $200.363 million in the latest week, after experiencing inflows of $308.995 million in the previous week.

High-yield muni funds recorded inflows of $124.114 million in the latest reporting week, after seeing inflows of $120.709 million in the prior week. Exchange-traded funds had inflows of $83.539 million, after recording inflows of $149.114 million in the previous week.

In contrast, long-term municipal bond mutual funds saw $1.03 billion of inflows in the week ended Feb. 25, according to the Investment Company Institute. ICI reported that inflows into long-term funds were $274 million in the previous week.

Tax-Exempt Money Market Fund Flows Reverse

Tax-exempt money market funds fell $1.79 billion, bringing total net assets to $259.35 billion in the period ended March 2, according to The Money Fund Report, a service of iMoneyNet.com. This follows an inflow of $1.98 billion to $161.14 billion in the previous week.

The average, seven-day simple yield for the 396 weekly reporting tax-exempt funds remained at 0.01% for a 96th straight week.

The total net assets of the 991 weekly reporting taxable money funds fell $4.06 billion to $2.437 trillion in the period ended March 3, after an inflow of $8.75 billion to $2.441 trillion in the prior week.

The average, seven-day simple yield for the taxable money funds remained at 0.02% for the seventh consecutive week.

Overall, the combined total net assets of the 1,387 weekly reporting money funds decreased $5.85 billion to $2.696 trillion in the period ended March 3, which followed an inflow of $10.73 billion to $2.702 trillion in the prior period.

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