Prices of top-rated municipal bonds finished weaker on Friday, according to traders, leaving yields on the week as much as four basis points higher.
Meanwhile, the market saw about $5 billion of new supply priced in the week, according to Thomson Reuters. April issuance was $39.5 billion, according to Bank of America Merrill Lynch Global Research. This brought volume for the year to $145.9 billion, or over $400 billion on an annualized basis, up 60.1% versus the same period last year. BAML expects May issuance to total about $36 billion.
Secondary Market
The yield on the 10-year benchmark muni general obligation on Friday rose four basis points to 2.16% from 2.12% on Thursday, while the yield on the 30-year GO increased three basis points to 3.08% from 3.05%, according to the final read of Municipal Market Data's triple-A scale.
Yields rose in most trading sessions as the Federal Open Market Committee met in Washington to decide on monetary policy and on fears after the release of economic data indicated continued uncertainty surrounding the health of the U.S. economy.
For the week, the yield on the 10-year muni was up by 16 basis points while the 30-year yield was up by 18 basis points. On Friday, April 24, the 10-year stood at 2.00% and the 30-year was at 2.90%.
Treasury prices were also lower on Friday with the yield on the two-year Treasury note rising to 0.60% from 0.58% on Thursday, while the 10-year yield rose to 2.12% from 2.07% and the 30-year yield increased to 2.83% from 2.78%.
The 10-year muni to Treasury ratio was calculated on Friday at 102.2% versus 104.1% on Thursday, while the 30-year muni to Treasury ratio stood at 108.9% compared to 111.2%, according to MMD.
The Week's Most Actively Quoted Issues
California, Ohio and Puerto Rico names were among some of the most actively quoted issues in the week ended May 1, according to data released by Markit.
On the bid side, the San Diego County Regional Transportation Commission's sales tax revenue 5.911s of 2048 were quoted by 13 unique dealers. On the ask side, the Allen County, Ohio, hospital facilities revenue 4s of 2044 were quoted by 16 dealers. And among two-sided quotes, the Puerto Rico commonwealth 8s of 2035 were quoted by 11 dealers, Markit said.
The Week's Most Actively Traded Issues
Among some of the most actively traded issues in the week ended May 1, were issuers from Puerto Rico, Ohio and California, according to Markit.
In the revenue bond sector, the Allen County, Ohio, hospital facilities 4s of 2044 were traded 86 times. In the GO bond sector, the Puerto Rico commonwealth 8s of 2035 were traded 80 times. And in the taxable bond sector, the Pasadena, Calif. 4 3/4s of 2045 were traded 29 times, according to Markit.
Tax-Exempt Bond Funds See Inflows
Municipal bond funds which report weekly, posted $481.253 million of inflows in the week ended April 29, after experiencing inflows of $534.645 million in the week ended April 22, according to the latest Lipper data.
The four-week moving average turned positive at $124.194 million in the latest week after being in the red at $71.264 million in the prior week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds saw inflows, gaining $304.651 million in the latest week, after experiencing inflows of $551.993 million in the previous week.
High-yield muni funds recorded an inflow of $104.189 million in the latest reporting week, after seeing inflows of $374.224 million in the previous week. Exchange-traded funds had inflows of $80.295 million, after recording inflows of $43.787 million in the previous week.
In contrast, long-term municipal bond mutual funds posted $683 million of inflows in the week ended April 22, according to the Investment Company Institute. ICI reported outflows from long-term funds of $943 million in the previous week.
Primary Market
More than $3.2 billion of negotiated deals came to market while about $1.78 billion of competitive offerings were sold, according to Thomson Reuters.
The biggest hit of the week came from Massachusetts, which competitively sold two separate general obligation bond offerings totaling $550 million. Traders reported there was good demand for the issues and that the bonds flew off the shelves.
Bank of America Merrill Lynch won the $450 million issue with a true interest cost of 3.9009% and JPMorgan Securities won the $100 million issue with a TIC of 2.1685%. The bonds are rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
One of the larger negotiated deals came from one of the nation's most prolific issuers - the New York State Dormitory Authority. DASNY has ranked among the top 10 muni issuers in each of the past 10 years, coming in at number three in 2014.
DASNY sold two separate issues totaling $336 million. Siebert, Brandford, Shank priced the $267 million offering for the State University of New York, which was rated Aa3 by Moody's and A-plus by S&P and Fitch. And JPMorgan priced a separate DASNY deal for $69 million for the Orange Regional Medical Center Obligated Group, which was rated Ba1 by Moody's and BB-plus by Fitch.
In the competitive arena, the Humble Independent School District in Texas sold $218 million of school building and refunding bonds. Bank of America Merrill won the deal with a TIC of 3.0663%. The bonds are backed by the Texas Permanent School fund guarantee and rated triple-A by Moody's and S&P.
In the negotiated sector, Goldman, Sachs priced the Grossmont Healthcare District, Calif.'s $227 million of GOs. The bonds are rated Aa2 by Moody's. Goldman also priced the Illinois Housing Development Authority's $102 million of multifamily housing revenue floating-rate notes for the Marshall Field Garden Apartment Homes. The notes were FNMA-backed and rated triple-A by Moody's.
Bank of America Merrill Lynch priced the Nebraska Public Power Generation Agency's $187 million of revenue refunding bonds for the Whelan Energy Center's Unit 2. The issue was rated A2 by Moody's, BBB-plus by S&P and A-minus by Fitch. BAML also priced Tallahassee, Fla.'s $107 million of health facilities revenue refunding bonds for the Tallahassee Memorial Healthcare, Inc., Project. The bonds are rated Baa1 by Moody's.
And JPMorgan priced the New Hampshire Health and Educational Facilities Authority's $116 million of revenue bonds for the state's University System. The bonds were rated Aa3 by Moody's and A-plus by S&P.