Muni Market Waits on Yellen Speech, New Calendar

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The municipal bond market is in waiting mode on Friday as Federal Reserve Chair Janet Yellen gets set to take the stage this morning at the central bank's meeting in Jackson Hole, Wyo.

Secondary Market

U.S. Treasuries were stronger on Friday. The yield on the two-year Treasury declined to 0.78% from 0.79% on Thursday, the 10-year Treasury yield dropped to 1.55% from 1.58% and the yield on the 30-year Treasury bond decreased to 2.23% from 2.27%.

Top-rated municipal bonds finished weaker on Thursday. The yield on the 10-year benchmark muni general obligation rose one basis point to 1.41% from 1.40% on Wednesday, while the yield on the 30-year increased one basis point to 2.12% from 2.11%, according to the final read of Municipal Market Data's triple-A scale.

The 10-year muni to Treasury ratio was calculated at 89.8% on Thursday compared to 90.0% on Wednesday, while the 30-year muni to Treasury ratio stood at 93.8% versus 94.2%, according to MMD.

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 35,747 trades on Thursday on volume of $15.12 billion.

Week's Most Actively Traded Issues

Some of the most actively traded issues by type in the week ended Aug. 26 were from Arizona, California and Illinois issuers, according to Markit.

In the GO bond sector, the Phoenix 5s of 2026 were traded 32 times. In the revenue bond sector, the California HFFA 3s of 2047 were traded 77 times. And in the taxable bond sector, the Illinois 5.1s of 2033 were traded 41 times.

Week's Most Actively Quoted Issues

Chicago and California issues were among the most actively quoted names in the week ended Aug. 26, according to Markit.

On the bid side, the Chicago taxable 5.432s of 2042 were quoted by 15 unique dealers. On the ask side, the California taxable 7.3s of 2039 were quoted by 17 unique dealers. And among two-sided quotes, the California taxable 7.55s of 2039 were quoted by 28 unique dealers.

Primary Market

Topping the competitive slate this week was the state of Massachusetts, which came to market with over $2 billion of bonds and notes. The Bay State competitively sold $1.5 billion of general obligation revenue anticipation notes in three separate offerings.

Eight groups with 13 bids won the $500 million of Series 2016A RANs. The winning bidders included JPMorgan Securities, Wells Fargo Securities, Bank of America Merrill Lynch, TD Securities, Citigroup, Goldman Sachs, Barclays Capital and Raymond James.

Seven groups with 11 bids won the $500 million of Series 2016B RANs. The groups included Williams Capital, Morgan Stanley, Goldman, JPMorgan, Jefferies, Barclays, Citi. And Morgan Stanley won all of the $500 million of Series 2016C RANs.

The note deals are rated MIG1 by Moody's Investors Service, SP1-plus by S&P Global Ratings and F1-plus by Fitch Ratings.

Massachusetts also competitively sold about $835 million of general obligation bonds in two separate sales.

Barclays Capital won the $550 million of Consolidated Loan of 2016 Series G general obligation bonds with a true interest cost of 3.196%. Morgan Stanley won the $284.55 million of Series 2016C GO refunding bonds with a TIC of 1.28%.

The bond deals are rated Aa1 by Moody's and AA-plus by S&P and Fitch.

The state of Illinois competitively sold about $573 million of sales tax revenue bonds in four separate offerings under the Build Illinois Bonds program.

Bank of America Merrill Lynch won the $198.62 million of junior obligation tax-exempt refunding bonds Series D of September 2016 with a TIC of 2.49%. PNC Capital Markets won the $164.31 million of junior obligation tax-exempt refunding bonds Series C of September 2016 with a TIC of 2.35%. RBC Capital Markets won the $150.03 million of junior obligation tax-exempt refunding bonds Series A of September 2016 with a TIC of 2.387%. JPMorgan Securities won the $60.01 million of junior obligation taxable refunding bonds Series B of September 2016 with a TIC of 2.75%.

The deals are rated triple-A by S&P and Fitch.

"We were pleased with strong interest from the public finance community that enabled the state to borrow at historically low interest rates," said Gov. Bruce Rauner's spokeswoman Catherine Kelly. "And by cutting interest rates in half on some of our outstanding Build Illinois bonds, we will provide taxpayers $56 million in savings without extending debt service payments."

Illinois last sold Build Illinois Bonds in March 2014. The sale of the bonds allows the state to finance projects initiated under the capital program.

The Pennsylvania Higher Educational Facilities Authority competitively sold about $292.41 million of state system of higher education revenue bonds in two separate sales.

JPMorgan won the $273.36 million of Series AT-1 tax-exempts with a TIC of 3.00%. Raymond James won the $19.07 million of Series AT-2 taxables with a TIC of 3.03%. The deals are rated Aa3 by Moody's and AA-minus by Fitch.

Portland, Ore., competitively sold about $318 million of first and second lien sewer system revenue refunding bonds in two separate sales.

Citi won the $162.47 million of Series 2016B second lien sewer system revenue refunding bonds with a true interest cost of 1.37%. Morgan Stanley won the $155.43 million of Series 2016A first lien sewer system revenue refunding bonds with a TIC of 2.03%. The first lien bonds are rated Aa2 by Moody's and AA by S&P while the second lien bonds are rated Aa3 by Moody's and AA-minus by S&P.

The Beaumont Independent School District, Texas, competitively sold $132.16 million of Series 2016 unlimited tax refunding bonds, which were won by BAML with a TIC of 2.61%. The deal is rated triple-A by Moody's and S&P and is insured by the Permanent School Fund guarantee program.

In the negotiated sector, Goldman priced the Birmingham, Ala.'s Waterworks Board's $435.39 million of senior water revenue refunding bonds Series 2016A and subordinate water revenue refunding bonds Series 2016B. The $157.19 million of Series 2016A bonds are rated Aa2 by Moody's and AA by S&P while the $278.2 million of Series 2016B bonds are rated Aa3 by Moody's and AA-minus by S&P.

JPMorgan priced the Maryland Department of Housing and Community Development's $325.8 million of Series 2016A taxable residential revenue bonds for the Community Development Administration. The deal is rated Aa2 by Moody's and AA by Fitch.

Siebert Brandford Shank received the official award on Dallas County, Texas' $167.9 million of Series 2016 combination tax and parking garage revenue certificates of obligation. The deal is rated triple-A by Moody's and S&P.

BAML priced the Eastern Muni Water District, Calif.'s $124.81 million of Series 2016B water and wastewater revenue bonds. The deal is rated Aa3 by Moody's, AA by S&P and AA-plus by Fitch.

Goldman priced the Illinois Finance Agency's $122.01 million of Series 2016A revenue refunding bonds for DePaul University. The deal is rated A2 by Moody's and A by S&P and Fitch.

Citigroup priced the Florida Housing Corp.'s $110.85 million of taxable special program homeowner mortgage revenue bonds. The deal is rated triple-A by Moody's.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar increased $2.02 billion to $12.04 billion on Friday. The total is comprised of $3.33 billion of competitive sales and $8.71 billion of negotiated deals.

Lipper: Muni Bond Funds See Inflows

For the 47th straight week, municipal bond funds reported inflows, according to Lipper data released on Thursday.

The weekly reporters saw $800.918 million of inflows in the week ended Aug. 24, after inflows of $1.059 billion in the previous week, Lipper said.

The four-week moving average remained positive at $878.639 billion after being in the green at $874.145 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

Long-term muni bond funds experienced inflows, gaining $437.707 million in the latest week after inflows of $650.811 million in the previous week. Intermediate-term funds had inflows of $199.927 million after inflows of $147.707 million in the prior week.

National funds had inflows of $671.285 million on top of inflows of $879.368 million in the previous week. High-yield muni funds reported inflows of $147.840 million in the latest reporting week, after inflows of $253.987 million the previous week.

Exchange traded funds saw inflows of $148.664 million, after inflows of $125.347 million in the previous week.

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