Prices of top-rated municipal bonds closed unchanged on Monday, traders said, ahead of this week's new deals, which are just part of the new issuance propelling volume for the quarter toward the $100 billion mark.
Secondary Market
The yield on the 10-year benchmark muni general obligation ended flat at 1.96% from Friday, while the yield on 30-year GO remained at 2.80%, according to the final read of Municipal Market Data's triple-A scale. Last Monday, the yield on the 10-year stood at 1.94% and the yield on the 30-year was at 2.76%.
Treasury prices were mixed. The yield on the two-year Treasury note on Monday fell to 0.58% from 0.59% on Friday, while the 10-year yield increased to 1.96% from 1.95% and the 30-year yield rose to 2.55% from 2.53%.
The 10-year muni to Treasury ratio on Monday was calculated at 98.5% versus 100.8% on Friday, while the 30-year muni to Treasury ratio stood at 109.0% compared to 111.0%.
Volume in 2015 Up 59.3% over Last Year
Bank of America Merrill Lynch reported in its latest research note that for the month to date, new muni issuance is nearly $40 billion. This brings year-to-date issuance to more than $100 billion, which is up 59.3% from the same period last year, the firm said.
Looking ahead, BAML expects that, based on seasonal factors, April issuance will slow, with volume coming in at about $34 billion for the month. However, the firm estimates that if refundings continue to surge, volume for all of 2015 should total around $400 billion.
Performance matters and for the month-to-date muni returns are positive, according to BAML. The firm said the Muni Master Index returned 0.288% compared to 0.205% for the Government Master Index and negative 0.165% for the Corporate Master Index.
Top Traded Munis by Sector
Muni bonds from issuers in Puerto Rico, California and New York were the most actively traded bonds by market sector in the week ended March 27, according to data released by Markit.
Broken down by market sector, revenue bonds comprised 54.62% of new issuance, down from 55.78% in the prior week. General obligation bonds comprised 37.46% of total issuance, up from 36.93%, while taxable bonds made up 7.92%, up from 7.29%.
In the revenue bond sector for the week ended March 27, California's Golden State Tobacco Securitization Corp. 5s of 2045 were traded 92 times. In the GO bond sector, Puerto Rico 8s of 2035 were traded 37 times. And in the taxable bond sector, the New York City Transitional Finance Authority 5.508s of 2037 were traded 16 times, according to Markit.
Primary Market
Traders expect about $8 billion of negotiated offerings and $933.3 million of competitive sales to come to market in this holiday-shortened week. The market will close at noon, EDT, on Good Friday, after the release of the March employment report.
On Monday, Raymond James priced the New York City Municipal Water Finance Authority's $447.77 million of revenue bonds for retail investors ahead of the institutional pricing on Tuesday.
The Fiscal 2015 Series GG second general resolution water and sewer system revenue bonds were priced to yield from 2.20% with a 5% coupon in 2025 to 3.23% with a 3.125% coupon in 2032; a 2038 maturity was priced as 4s to yield 3.48%. No retail orders were taken in the 2037 or 2039 maturities. The deal is rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
Also scheduled for the week is the California Department of Water Resources' $765 million of power supply revenue bonds set to be priced by JPMorgan on Wednesday. The bonds are rated Aa2 by Moody's, AA by S&P and AA-plus by Fitch.
Barclays Capital is slated to price the Regents of the University of California's $500 million of Series 2015 AQ taxable general revenue bonds on Wednesday. This deal is rated Aa2 by Moody's and AA by S&P and Fitch.
In the competitive arena, all the largest issues are all scheduled for sale on Tuesday.
The state of Utah will sell $224 million of Series 2015 unlimited tax general obligation refunding bonds, expected to be structured with a 2019 maturity and serials ranging from 2022 to 2026. The bonds are rated triple-A by Moody's, S&P and Fitch. Utah last sold bonds competitively on July 11, 2013, when Morgan Stanley won $226 million of Series 2013 GOs with a true interest cost of 2.8711%.
Bellevue, Wash., will sell $96 million of limited tax GO and refunding bonds, expected to be structured as serials ranging from 2016 to 2034. The issue is rated Aa1 by Moody's and triple-A by S&P. Bellevue last sold bonds competitively on April 16, 2013, when US Bancorp won $70 million of Series 2013 limited tax GOs with a TIC of 2.6843%.
The Orlando Utilities Commission will offer $95 million of Series 2015A utility system revenue bonds, expected to be structured as serials ranging from 2028 to 2035. The bonds are rated Aa2 by Moody's and AA by S&P and Fitch. The OUC sold bonds in a negotiated transaction on Nov. 20, 2013, when Jeffries priced $243 million of Series 2013 utility system revenue refunding bonds. The commission has about $1.44 billion of utility system revenue and revenue refunding bonds outstanding.
