Muni Market Takes a Breather

The municipal bond market will be looking at the recent rise in yields as the week's list of big ticket items dwindles down to few lesser-sized issues in the primary on Thursday.

On Wednesday, yields on top-rated munis rose by two basis points on most maturities. The yield on the 10-year benchmark muni general obligation closed up two basis points to 2.32% from 2.30% on Tuesday, while the yield on the 30-year GO rose two basis points to 3.30% from 3.28%, according to the final read of Municipal Market Data's triple-A scale.

Since May 1, yields on the 10-year muni have risen by 14 basis points, while yields on the 30-year are up by 22 basis points. But this only tells part of the story. Since Jan. 1, yields on the 10-year muni have risen by 31 basis points, while yields on the 30-year are up by 47 basis points.

However in historical context, yields on munis are still trading at fairly low levels. On May 21, 2010 the 10-year was at 2.82% while the 30-year was at 3.96%; on May 20, 2005 the 10-year stood at 3.51% while the 30-year was at 4.31%.

 

Secondary Market

Treasury prices were mixed on Thursday as the yield on the two-year Treasury note rose to 0.59% from 0.58% on Wednesday, while the 10-year yield was flat at 2.25% and the 30-year yield fell to 3.02% from 3.05%.

The 10-year muni to Treasury ratio was calculated on Wednesday at 103.1% versus 101.8% on Tuesday, while the 30-year muni to Treasury ratio stood at 108.1% compared to 108.0%, according to MMD.

 

Primary Market

On Thursday, Los Angeles is set to come to market with $206 million of wastewater system revenue bonds.

Siebert Brandford Shank is set to price the deal which is expected to consist of Series 2015-A green bonds and Series 2015-B refunding bonds.

The issue is rated AA-plus by Standard & Poor's, Fitch Ratings and Kroll Bond Rating Agency.

Late Wednesday, Bank of America Merrill Lynch priced Atlantic City's $41.705 million of Series 2015A taxable general obligation refunding bonds issued under the State of New Jersey's Municipal Qualified Bond Act, which is intended to facilitate distressed municipal issuers' access to the capital markets.

The bonds were priced as 7s to yield 7.25% in 2028 and as 7 1/2s to yield 7.75% in 2040. The deal was rated A-minus by S&P, which also assigns a stable outlook.

 

Tax-Exempt Money Market Funds Post Outflow

Tax-exempt money market funds experienced inflows of $842.5 million, bringing total net assets to $245.36 billion in the period ended May 18, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $1.32 billion to $244.53 billion in the previous week.

The average, seven-day simple yield for the 395 weekly reporting tax-exempt funds remained at 0.01% for a 107th straight week.

The total net assets of the 995 weekly reporting taxable money funds rose $16.58 billion to $2.393 trillion in the period ended May 19, after experiencing an outflow of $6.99 billion to $2.376 trillion in the prior week.

The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 16th consecutive week.

Overall, the combined total net assets of the 1,388 weekly reporting money funds increased $17.42 billion to $2.638 trillion in the period ended May 19, which followed an outflow of $8.32 billion to $2.621 trillion in the prior period.

 

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $304.6 million to $13.53 billion on Thursday. The total is comprised of $6.13 billion competitive sales and $7.39 billion of negotiated deals.

 

MSRB Previous Session's Activity

The Municipal Securities Rulemaking Board reported 46,964 trades on Wednesday on volume of $12.870 billion.

The most active bond, based on the number of trades, was the New York City Municipal Water Finance Authority's Fiscal 2015 Series HH water and sewer system second general resolution revenue bonds 3 3/8s of 2030, which traded 306 times at an average price of 98.139 with an average yield of 3.52%. The bonds were initially priced at 98.201 to yield 3.52%.

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