Prices of top-rated municipal bonds were unchanged at mid-session, traders said, ahead of more new deals that are propelling volume for the month up to nearly $40 billion, according to some estimates.
Secondary Market
The yield on the 10-year benchmark muni general obligation was flat from 1.96% on Friday, while the yield on 30-year GO remained at 2.80%, according to a midday 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 on Monday. The yield on the two-year Treasury note fell to 0.57% from 0.59% on Friday, while the 10-year yield was flat at 1.95% and the 30-year yield rose to 2.54% from 2.53%.
On Friday, the 10-year muni to Treasury ratio was calculated at 100.8% versus 96.3% on Thursday, while the 30-year muni to Treasury ratio stood at 111.0% compared to 107.0%.
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 near $40 billion. This brings issuance for 2015 past $100 billion, up 59.3% compared to the same period last year, BAML said.
Looking ahead, BAML expects April supply to slow, based on seasonal factors, with issuance totaling about $34 billion for the month. However, the firm estimates that if refundings continue to surge, total volume for 2015 should come in at 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.
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.
Topping the calendar 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 Investors Service, AA by Standard & Poor's, and AA-plus by Fitch Ratings.
Citi is expected to price the Illinois Municipal Electric Agency's $585 million revenue refunding bonds on Tuesday. The bonds are rated A1 by Moody's, A by S&P, and A-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. The university is coming back to the market only weeks after having sold over $1 billion of bonds on March 11. This deal is rated Aa2 by Moody's and AA by S&P and Fitch.
Raymond James is expected to price the New York City Municipal Water Finance Authority's $447.77 million of second resolution water and sewer revenue refunding bonds. A retail order period is set for Monday followed by the institutional pricing on Tuesday. The deal is rated Aa2 by Moody's and AA-plus by S&P and Fitch.
In the competitive arena, the three 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 OU Commission sold bonds in a negotiated transaction on Nov. 20, 2013, when Jeffries priced $243 million of Series 2013 utility system revenue refunding bonds.
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 Cop. 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.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $696.6 million to $11.293 billion on Monday. The total is comprised of $2.887 billion competitive sales and $8.406 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 31,831 trades on Friday on volume of $9.679 billion. Most active based on the number of trades was the Kentucky Municipal Power Agency's Series 2015A Prairie State project power system revenue refunding 4s of 2039, which traded 126 times at an average price of 99.851 with an average yield of 3.993%; (initial offering price of 97.858, an initial offering yield of 4.14%).
