Top-rated municipal bonds finished steady to stronger on Friday, according to traders, who once again looked ahead to a healthy new-issue slate.
Total volume for the upcoming week is estimated by Ipreo at $8.17 billion, up from a revised total of $7.25 billion sold in the previous week, according to Thomson Reuters.
"It makes sense that volume is up week-over-week, given that we're on the 30th week of positive flows into municipal mutual funds and the Federal Reserve is putting off a rate hike," said Natalie Cohen, a managing director at Wells Fargo. "Persistent low rates are favorable for infrastructure borrowing and we saw this in a jump year-over-year in Q1 new money borrowing. Plus the flatter yield curve after the December rate hike is favorable for advanced refundings."
Cohen also said that there was an international angle that is now starting to factor in to a traditionally American market.
"Negative interest rates in most of the rest of the world invites foreign investors into U.S. markets and we see continuous growth in investment in U.S. municipals (after all, +2% yield is better than -1%)."
The calendar is composed of $6.45 billion of negotiated deals and $1.72 billion of competitive sales. Topping the new-issue slate is an almost $1 billion offering from a frequent issuer in Texas.
JPMorgan Securities is expected to price the North Texas Tollway Authority's $947 million of Series 2016A system first tier revenue refunding bonds on Wednesday.
The deal is rated A1 by Moody's Investors Service and A by Standard & Poor's.
Last September, the NTTA came to market with a $764.09 million issue of Series 2015B system first tier revenue refunding bonds which were priced by Barclays Capital Markets with top yields of 3.92% in 2040 and 4% in 2045.
And in April of 2015, the authority offered $862.92 million of Series 2015A system second tier revenue refunding bonds which were priced by JPMorgan with top yields of 4.07% and 3.62% in 2038 maturities. These second tier bonds were rated A3 by Moody's and BBB-plus by S&P.
New York issuers are also well represented on the supply calendar.
Citigroup is set to price the New York State Thruway Authority's $800 million of Series 2016A general revenue junior indebtedness obligations on Wednesday.
Proceeds of the sale are being used to fund part of the Tappan Zee Bridge replacement project, as well as various other expenses. The deal is rated A3 by Moody's and A-minus by S&P.
Ramirez is slated to price the Port Authority of New York and New Jersey's $475 million of 195th series of consolidated bonds on Thursday. The deal, which is subjects to the alternative minimum tax, is rated Aa3 by Moody's and expected to be rated AA-minus by S&P and Fitch.
RBC Capital Markets is set to price the Dormitory Authority of the State of New York's $219.29 million of Series 2016 A, B, C and D School Districts Revenue Bond Financing Program revenue bonds on Monday for retail investors ahead of the institutional pricing on Tuesday. The Series A DASNY bonds are rated A-plus by S&P and AA-minus by Fitch; the Series B bonds are rated Aa3 by Moody's and AA-minus by Fitch; the Series C bonds are rated AA-minus by S&P and Fitch; and the Series D bonds are rated A-plus by S&P and AA-minus by Fitch.
In the Midwest, Ziegler is expected to price the Illinois Finance Authority's $484.94 million of Series 2016 revenue bonds for the Mercy Health Corp. on Wednesday. The deal is rated A3 by Moody's.
In the competitive arena, the Virginia Transportation Board will sell $275.99 million of Series 2016 transportation capital projects revenue bonds on Wednesday. The deal is rated Aa1 by Moody's and AA-plus by S&P and Fitch.
The VTB last sold comparable bonds competitively on Nov. 19, 2014, when JPMorgan won $274.98 million of Series 2014 capital projects revenue bonds with a true interest cost of 3.38%.
Secondary Trading
The yield on the 10-year benchmark muni general obligation fell one basis point to 1.61% from 1.62% on Thursday, while the 30-year muni yield was unchanged from 2.58%, according to the final read of Municipal Market Data's triple-A scale. On Friday, April 22, the yield on the 10-year muni stood at 1.65% while the 30-year muni yield was at 2.60%.
U.S. Treasuries were narrowly mixed on Friday. The yield on the two-year Treasury declined to 0.77% from 0.79% on Thursday, while the 10-year Treasury yield was unchanged from 1.83% and the yield on the 30-year Treasury bond dropped to 2.68% from 2.70%.
The 10-year muni to Treasury ratio was calculated at 88.5% on Friday compared with 88.3% on Thursday, while the 30-year muni to Treasury ratio stood at 96.6% versus 95.9%, according to MMD.
The Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended April 29 were from California issuers, according to data released by Markit.
In the GO bond sector, the California 3s of 2036 traded 26 times. In the revenue bond sector, the California SCDA 5 1/4s of 2056 traded 56 times. And in the taxable bond sector, the Riverside USD, Calif. 4 1/4s of 2036 traded 27 times, Markit said.
The Week's Most Actively Quoted Issues
California issues were also among the most actively quoted names in the week ended April 29, according to Markit.
On the bid side, the California taxable 7 1/2s of 2034 were quoted by 14 unique dealers. On the ask side, California taxable 7.55s of 2039 were quoted by 15 unique dealers. And among two-sided quotes, California taxable 7.55s of 2039 were quoted by 12 dealers.
Muni Bond Funds See Inflows for 30th Straight Week
For the 30th week in a row, municipal bond funds reported inflows, according to Lipper data released Thursday. Weekly reporting funds saw $1.173 billion of inflows in the week ended April 27, after inflows of $555.910 million in the previous week, Lipper said.
The four-week moving average remained positive at $674.752 million after being in the green at $577.356 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
