Muni Prices Strengthen as Traders Look Ahead to $7.78B Slate

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Prices of top-shelf municipal bonds were higher across the board at mid-session, traders said, as the market once again awaits hefty upcoming new issuance.

Secondary Market

The yield on the 10-year benchmark muni general obligation was down two to four basis points from 2.23% on Thursday, while the yield on the 30-year GO fell as much as two basis points from 3.14%, according to a read of Municipal Market Data's triple-A scale.

Treasury prices were higher on Friday, with the yield on the two-year Treasury note falling to 0.68% from 0.73% on Thursday, while the 10-year yield dropped to 2.20% from 2.27% and the 30-year yield decreased to 2.90% from 2.96%.

The 10-year muni to Treasury ratio was calculated on Thursday at 98.4% versus 97.8% on Wednesday, while the 30-year muni to Treasury ratio stood at 106.4% compared to 105.6%, according to MMD.

Primary Market

Total volume for next week is estimated by Ipreo at $7.78 billion, consisting of $5.58 billion of negotiated deals and $2.20 billion of competitive sales.

Topping next week's competitive slate are five separate sales from the state of Minnesota totaling over $1 billion.

Scheduled to sell on Wednesday, the sales consist of $386.50 million of Series 2015D general obligation state various purpose refunding bonds; $376.11 million of Series 2015A GO state various purpose refunding bonds; $310 million of Series 2015B GO state trunk highway bonds; $14.89 million of Series 2015E GO state trunk highway refunding bonds; and $7.2 million of Series 2015C taxable GO state various purpose bonds.

The state last competitively sold comparable bonds on Aug. 12, 2014, when Bank of America Merrill Lynch won $429.67 million of Series 2014A GO state various purpose bonds with a true interest cost of 2.83%.

And Loudoun County, Va., plans a sale of $117.53 million of Series 2015 water and sewer system revenue and refunding bonds on Wednesday. The issue is rated triple-A by Moody's and Fitch.

Also on the competitive calendar are two separate sales from the state of Connecticut totaling $500 million.

Scheduled to sell on Tuesday, the issues consist of $250 million of Series 2015E GOs and $250 million of Series 2015B taxable GOs.

Both sales are rated Aa3 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.

The last time the state competitively sold comparable bonds was on Aug. 6, 2014, when JPMorgan won $300 million of Series 2014E GOs with a TIC of 3.03%.

Leading off the negotiated slate, is a $923.84 million green bond sale from Sound Transit, the Central Puget Sound Regional Transit Authority, Wash. The sales tax improvement bonds are slated to be priced by JPMorgan on Tuesday, and are initially structured as Series 2015S-1 green bonds and Series 2015S-2 green bonds. The issue is initially structured as serials running from 2018 through 2050.

The issue is rated Aa2 by Moody's and triple-A by S&P.

Citigroup is expected to price the New York State Environmental Facilities Corp.'s $370 million of Series 2015D state revolving funds revenue bonds on Wednesday after a one-day retail order period. The issue is initially structured as serials running from 2016 through 2035, with a term in 2040.

The bonds are rated triple-A by Moody's, S&P and Fitch.

And the Oakland Unified School District in Alameda, Calif., is selling $356.18 million of GOs on Wednesday. Siebert Brandford Shank is scheduled to price the bonds, which consist of $175 million of Series 2015A Election of 2012 GOs, $5 million of Series 2015B Election 02012 taxable GOs, and $176.18 million of GO refunding bonds.

Return to the Red: Municipal Bond Funds See Outflows

Municipal bond funds suffered a reverse and saw outflows in the latest week, according to the latest Lipper data.

Funds which report weekly saw $73.372 million of outflows in the week ended July 29, after seeing inflows of $125.410 million in the previous week, Lipper reported. The prior week's inflows were the first time in 12 weeks the funds had seen a cash infusion.

The latest outflow brings to 15 out of 31 weeks this year the funds have seen redemptions. However, for the year to date, inflows are still in the green, totaling $3.261 billion.

The four-week moving average remained negative at $70.731 million after being in the red at $352.090 million in the previous week. The moving average has now been negative for 10 weeks in a row. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

Long-term muni bond funds also experienced outflows, losing $10.511 million in the latest week, after seeing inflows of $39.114 million in the previous week. Intermediate-term funds saw outflows of $14.428 million after seeing inflows of $152.569 million in the prior week.

Exchange traded funds, however, saw inflows of $108.548 million, after experiencing inflows of $108.499 million in the previous week.

But high-yield muni funds saw outflows of $10.152 million in the latest reporting week, after seeing an outflow of $3.550 million the previous week.

In the past 13 weeks, high-yield funds have seen outflows 10 times totaling $1.717 billion and inflows three times totaling $78.785 million.

The Week's Most Actively Quoted Issues

California, Pennsylvania and Puerto Rico were some of the most actively quoted names in the week ended July 31, according to data released by Markit.

On the bid side, the Bay Area Toll Authority, Calif., toll bridge revenue 7.043s of 2050 were quoted by 14 unique dealers. On the ask side, the Lehigh County General Purpose Authority, Pa., hospital revenue 4 1/8s of 2040 were quoted by 18 dealers. And among two-sided quotes, the Puerto Rico Electric Power Authority power revenue 5s of 2042 were quoted by 17 dealers, Markit said.

The Week's Most Actively Traded Issues

Some of the most actively traded issues in the week ended July 31 were in New York, Puerto Rico and California, according to Markit.

In the revenue bond sector, the New York Metropolitan Transportation Authority 5s of 2035 were traded 76 times. In the GO bond sector, the Puerto Rico commonwealth 8s of 2035 were traded 58 times. And in the taxable bond sector, the California Earthquake Authority revenue 2.805s of 2019 were traded 13 times, Markit said.

MSRB Previous Session's Activity

The Municipal Securities Rulemaking Board reported 35,345 trades on Thursday on volume of $8.473 billion. The most active bond, based on the number of trades, was the Lehigh County General Purpose Authority, Pa., Series 2015A hospital revenue 4 1/4s of 2045, which traded 142 times at an average price of 99.918, an average yield of 4.248%. The bonds were initially priced at 97.352 to yield 4.41%.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar was unchanged at $10.09 billion on Friday. The total is comprised of $3.41 billion competitive sales and $6.68 billion of negotiated deals.

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