Municipal volume is forecast to rise in the coming week, in what may be a last gasp of issuance for the year.
Volume for the coming week is forecast to increase to $7.8 billion, according to Ipreo, from a revised $7.1 billion that priced in the past week, according to Thomson Reuters.
"During the past few months, municipal bond volume has been lower than last year," wrote Daniel Berger, Senior Market Strategist, Thomson Reuters/Municipal Market Data, in a weekly outlook. "This lighter calendar has led to muni bond outperformance. For example, the 10yr [muni to Treasury] ratio hit 86.9%, its lowest level since October 2014. However, this week's tax-exempt issuance could experience one last outburst for 2015."
The issuance will be made up of $4.9 billion of negotiated deals and $2.9 billion of competitive sales.
The Empire State Development Corp. will price four separate competitive sales on Tuesday, for a total of roughly $1.14 billion.
The largest of the four deals will be $404.725 million of New York state Urban Development Corp. state personal income tax revenue bonds, general purpose series 2015A group B bonds. The group A bonds are for $386.640 million, the taxable series 2015B bonds are for $237.560 million and the group C bonds are for $111.655 million. All four deals are rated Aa1 by Moody' Investors Service.
The last time the ESDC came to market, was Dec. 2, 2014, when JPMorgan won $414.860 million with a true interest cost of 1.82%.
Jumping to the negotiated side, Citi will be in charge of pricing Indiana Municipal Power Agency's $385 million of power supply system revenue bonds on Tuesday. The deal is rated A1 by Moody's and A-plus by both Standard and Poor's and Fitch Ratings.
RBC Capital Markets is expected to price the Illinois State Toll Highway Authority's $340 million of senior revenue refunding bonds on Tuesday. The deal is rated AA-minus by Fitch.
Morgan Stanley is expected to price the New Jersey Healthcare Facilities' $266.715 million of revenue and refunding bonds, university hospital bonds on Thursday. The deal is rated triple-B by Fitch.
Going back over to the competitive arena, Clemson University will be selling two separate issues totaling $210.8 million. The larger deal for $191 million of higher education revenue bonds and the other issue is $19.8 million of athletic facilities revenue bonds – the timing couldn't be perfect as the tigers football program is one of two undefeated teams left in college football, going into its conference championship game.
The university last sold bonds competitively on May 5, when Citi won $64.385 million with a TIC of 3.73%.
Secondary Market
Top-rated municipal bonds finished stronger on Friday, traders said, after the release of a better-than-expected employment report for November.
The yield on the 10-year benchmark muni general obligation was down one basis point to 2.01% from 2.02% on Thursday, while the 30-year yield was off one basis point to 2.96% from 2.97%, according to the final read of Municipal Market Data's triple-A scale.
For the week, yields wound up little changed. On Friday, Nov. 27, the yield on the 10-year muni stood at 2.03% while the 30-year muni yield was at 2.97%.
Treasury prices were stronger. The yield on the two-year Treasury fell to 0.94% from 0.98% on Thursday while the 10-year Treasury yield declined to 2.27% from 2.33% and the 30-year decreased to 3.00% from 3.07%.
The 10-year muni to Treasury ratio was calculated on Friday at 88.4% from 86.9% on Thursday, while the 30-year muni to Treasury ratio stood at 98.3% compared to 96.8%, according to MMD.
Non-farm payrolls grew 211,000 in November, higher than the forecast for a 200,000 gain. The jobless rate held at seven-year low of 5%. The positive report raised the odds the Federal Reserve will vote to raise interest rates when it next meets on Dec. 15-16.
Municipal volume for next week is estimated at $7.83 billion, according to Ipreo, consisting of $4.94 billion of negotiated deals and $2.89 billion of competitive sales.
Municipal Bond Funds See Inflows for 9th Week in a Row
Municipal bond funds reported inflows for the ninth straight week, according to Lipper data released on Thursday.
Weekly reporting funds experienced $364.051 million of inflows in the week ended Dec. 2, after inflows of $684.298 million in the previous week.
The latest inflow brings to 28 out of 49 weeks this year that the funds have seen cash flowing in. Flows for the year to date remain positive, totaling almost $4 billion.
The four-week moving average remained positive at $440.603 million after being in the green at $365.340 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 also experienced inflows, gaining $111.303 million in the latest week, on top of inflows of $582.103 million in the previous week. Intermediate-term funds had inflows of $290.874 million after inflows of $149.157 million in the prior week.
National funds saw inflows of $373.795 million after inflows of $588.182 million in the prior week. High-yield muni funds reported inflows of $122.236 million in the latest reporting week, after an inflow of $256.845 million the previous week.
Exchange traded funds saw inflows of $33.226 million, after inflows of $108.446 million in the previous week.
"It is important to remember that these numbers are from Wednesday evening," wrote Berger. "This past Thursday was a long and brutal day in the bond market as participants did not respond well to Draghi who was perceived as not pushing enough for more stimuli."
The Week's Most Actively Quoted Issues
California, New York and Puerto Rico were some of the most actively quoted names in the week ended Dec. 4, according to data released by Markit.
On the bid side, the California taxable 7.5s of 2034 were quoted by 10 unique dealers. On the ask side, the New Jersey revenue 4 3/4s of 2038 were quoted by 16 dealers. And among two-sided quotes, the Puerto Rico commonwealth GO 8s of 2035 were quoted by nine dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Dec. 4 were in New Jersey, Puerto Rico and Texas, according to Markit.
In the revenue bond sector, the New Jersey Transportation Trust Fund Authority 4 3/4s of 2038 were traded 59 times. In the GO bond sector, the Puerto Rico commonwealth 8s of 2035 were traded 55 times. And in the taxable bond sector, the University of Texas 3.78s of 2045 were traded 16 times, Markit said.
