Top-rated municipal bonds sharply stronger in early trading on Thursday, traders said with yields on some maturities weakening by as much as seven basis points
Traders were watching as Treasuries surged as stocks slumped after global equities caught a case of the Bear Market flu.
Secondary Market
The yield on the 10-year benchmark muni general obligation was five to seven basis points weaker from 1.61% on Wednesday, while the 30-year muni yield was five to seven basis points weaker from 2.68%, according to a read of Municipal Market Data's triple-A scale.
Treasuries were higher on Thursday. The yield on the two-year Treasury dropped to 0.62% from 0.70% on Wednesday, while the 10-year Treasury yield decreased to 1.60% from 1.71% and the 30-year Treasury bond yield declined to 2.43% from 2.53%.
At the open, the Dow Jones Industrial Average fell almost 1.4%, the Nasdaq Composite Index decreased by around 1.2% and the S&P 500 Index was off by over 1.2%. The price of oil fell to under $30 a barrel to about $26.85.
"For the past week, the markets focused on an assortment of problems. Now the problems point to one major concern -- the central banks seemed powerless to buoy inflation and halt an economic slide," Municipal Market Data Senior Analyst Randy Smolik wrote in a morning comment. "Treasury trading resembled a panic as gains reached 14-17 basis points at one point."
The 10-year muni to Treasury ratio was calculated on Wednesday at 94.5% compared to 93.2% on Tuesday, while the 30-year muni to Treasury ratio stood at 106.0% versus 104.9%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,966 trades on Wednesday on volume of $11.45 billion.
Primary Market
Municipal bond traders were wrapping up the busiest new issue week of the year as the last few deals of size were slated to hit the market.
On Thursday, Bank of America Merrill Lynch priced Columbus, Ohio's $206 million of Series 2016-1 and Series 2016-2 various purpose general obligation refunding bonds. The bonds were priced for retail investors on Wednesday.
The $184.57 million of Series 2016-1 unlimited tax bonds were priced to yield from 0.48% with a 3% coupon in 2017 to 2.46% with a 4% coupon in 2031.
The $21.43 million of Series 2016-2 bonds limited tax bonds were priced to yield from 1.14% with a 3% in 2022 to 1.86% with a 5% coupon in 2027.
For retail, the Series 2016-1 unlimited tax bonds were priced to yield from 0.50% with a 3% coupon in 2017 to 2.48% with a 4% coupon in 2031 while the Series 2016-2 bonds limited tax bonds were priced to yield from 1.16% with a 3% in 2022 to 1.88% with a 5% coupon in 2027.
The issue was rated triple-A by Moody's Investors Service, Standard & Poor's and Fitch Ratings.
RBC Capital Markets is set to price the Regents of the University of New Mexico's $152.87 million issue consisting of Series 2016A tax-exempt subordinate lien system refunding and improvement bonds and Series 2016B taxable subordinate lien system refunding revenue bonds.
The deal is rated Aa2 by Moody's and AA by Standard & Poor's.
Stifel is expected to price Cleveland, Ohio's $150.50 million of airport system revenue bonds consisting of Series A bonds and Series B forward delivery bonds.
The issue is rated A2 by Moody's and AA by S&P.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $1.35 billion to $7.72 billion on Thursday. The total is comprised of $2.21 billion of competitive sales and $5.50 billion of negotiated deals.
Tax-Exempt Money Market Funds Post Outflows
Tax-exempt money market funds experienced outflows of $1.13 billion, bringing total net assets to $246.24 billion in the week ended Feb. 8, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $1.57 billion to $247.37 billion in the previous week.
The average, seven-day simple yield for the 354 weekly reporting tax-exempt funds remained at 0.01% for the 145th straight week.
The total net assets of the 946 weekly reporting taxable money funds decreased $5.35 billion to $2.518 trillion in the week ended Feb. 9, after an inflow of $8.55 billion to $2.523 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds increased to 0.10% from 0.09% in the previous week.
Overall, the combined total net assets of the 1,300 weekly reporting money funds fell $6.48 billion to $2.764 trillion in the period ended Feb. 9, which followed an inflow of $6.98 billion to $2.770 trillion in the prior week.
