Municipal bonds finished stronger on Monday in quiet dealings, according to traders, as yields on some top-rated maturities fell by as much as two basis points.
Many workers returned to their desks only to see a very quiet week loom ahead in the primary, with no bond deals of more than $1 million on the calendar until 2016. The market will also see another holiday-shortened trading week, with an early close set for Thursday ahead of the full close on Friday for New Year's.
Secondary Market
The yield on the 10-year benchmark muni general obligation fell one basis point to 1.92% from 1.93% on Thursday, while the 30-year yield dropped two basis points to 2.80% from 2.82%, according to the final read of Municipal Market Data's triple-A scale.
"January re-investment typically creates a fair amount of demand for munis at the start of the month, especially when primary issuance is slow to get ramped up for the new year," MMD Senior Market Analyst Randy Smolik wrote in a Monday market comment.
In trading on Monday, the Puerto Rico Commonwealth Series 2014A general obligation 8s of 2035 were yielding 11.62% compared to 11.65% on Thursday, according to Markit data.
Treasury bonds were narrowly mixed on Monday. The yield on the two-year yield rose to 1.01% from 1.00% on Thursday, while the 10-year Treasury yield fell to 2.23% from 2.25% and the 30-year Treasury yield decreased to 2.94% from 2.97%.
The 10-year muni to Treasury ratio was calculated on Monday at 86.3% compared to 85.0% on Thursday, while the 30-year muni to Treasury ratio stood at 95.3% versus 94.7%, according to MMD.
"It is hard to expect much dynamism in the next few days, even though this week (and last) have sometimes provided a jump start to January trading," according to a Monday market comment from Municipal Market Analytics.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 8,721 trades on Thursday on volume of $1.06 billion.
Last Week's Most Active Sectors
Revenue bonds comprised 55.11% of new issuance in the week ended Dec. 24, down from 55.46% in the previous week, according to Markit. General obligation bonds comprised 36.72% of total issuance, up from 36.32%, while taxable bonds made up 8.17%, down from 8.22%.
Some of the most actively traded issues by type were in New York, Connecticut and North Carolina.
In the revenue bond sector, the New York City Transitional Finance Authority 5s of 2039 were traded 34 times. In the GO bond sector, the Connecticut 4s of 2028 were traded 23 times. And in the taxable bond sector, the Duke University, N.C.'s 5.85s of 2037 were traded 10 times, Markit said.
Municipal Bond Funds See Inflows
Municipal bond funds reported inflows for the 12th week in a row, according to Lipper data released late Thursday.
Weekly reporting funds experienced $809.476 million of inflows in the week ended Dec. 23, after inflows of $303.495 million in the previous week, Lipper said.
The latest inflow brings to 31 out of 52 weeks this year that the funds have seen cash flowing in. Flows for the year to date remain positive, totaling around $4 billion.
The four-week moving average remained positive at $554.747 million after being in the green at $523.453 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 $529.995 million in the latest week, on top of inflows of $200.533 million in the previous week. Intermediate-term funds had inflows of $288.196 million after inflows of $155.613 million in the prior week.
National funds saw inflows of $779.774 million after inflows of $273.837 million in the prior week. High-yield muni funds reported inflows of $291.366 million in the latest reporting week, after an inflow of $26.694 million the previous week.
Exchange traded funds saw inflows of $31.351 million, after outflows of $4.642 million in the previous week.
In the week ended Dec. 16, long-term, long-term municipal bond funds saw inflows, according to the Investment Company Institute. Muni funds saw $647 million of inflows after $825 million of inflows in the previous week, ICI reported.
