Top-quality municipal bonds were stronger at mid-session, according to traders, with yields on some maturities weakening by as much as four basis points. Treasury prices surged while U.S. equities plunged.
In the primary, the market is set to see the busiest week of the year, as over $9 billion of new muni supply is set to be priced.
Secondary Market
The yield on the 10-year benchmark muni general obligation was two to four basis points weaker from 1.66% on Friday, while the 30-year muni yield one to three basis points weaker from 2.72%, according to a read of Municipal Market Data's triple-A scale.
Treasuries were stronger on Monday. The yield on the two-year Treasury fell to 0.66% from 0.72% on Friday, while the 10-year Treasury yield dropped to 1.74% from 1.84%, and the 30-year Treasury bond yield decreased to 2.57% from 2.68%.
U.S. stocks moved sharply lower, with the Dow Jones Industrial Average off about 2.2%, the Nasdaq down around 2.8% and the S&P 500 falling almost 2.2%.
The 10-year muni to Treasury ratio was calculated on Friday at 86.7% compared to 89.2% on Thursday, while the 30-year muni to Treasury ratio stood at 99.7% versus 100.9%, according to MMD.
Primary Market
The calendar this week consists of $6.2 billion of negotiated deals and $2.9 billion of competitive sales.
The New York City Transitional Finance Authority leads the pack with several sales totaling $1 billion.
On Monday, Bank of America Merrill Lynch priced for retail investors $750 million of the TFA's Fiscal 2016 Series E-1 future tax secured subordinate bonds. The issue was priced to yield from 0.71% with a 3% coupon in 2019 to 2.93% with a 5% coupon in 2042; a 2018 maturity was offered as a sealed bid.
The bonds, which will be priced for institutions on Tuesday, are rated Aa1 by Moody's Investors Service and triple-A by Standard & Poor's and Fitch Ratings.
The TFA will also competitively sell $250 million of taxable fixed-rate new money bonds in two sales on Tuesday consisting of $195.42 million of Fiscal 2016 Series E-2 future tax secured subordinate bonds and $54.58 million of Fiscal 2016 Series E-3 future tax secured subordinate bonds. Both sales are rated triple-A by S&P and Fitch.
Also on Tuesday, Wells Fargo Securities is set to price Houston's $800 million of Series 2016B combined utility system first lien revenue and refunding bonds. The offering from the Houston Combined Utility System, is backed by customer revenues and is rated Aa3 by Moody's and AA by S&P and Fitch.
Officials told The Bond Buyer that the size of the deal could go as high as $960 million if the market presents the right opportunity.
"A large chunk of this -- about 75% -- is refunding, so it's a moving target," said Jennifer Olenick, deputy director of finance for the city.
Finance officials expect savings of about 10% on serial bonds maturing through 2040 and a term bond maturing in 2045.
In the competitive arena on Tuesday, Washington state will sell two deals totaling $522.11 million. The offerings consist of $321.58 million of Series 2016C various purpose general obligation bonds and $200.53 million of Series 2016D motor vehicle tax GOs. Both sales are rated Aa1 by Moody's and AA-plus by S&P and Fitch.
Minnesota will competitively sell on Tuesday two deals totaling $350.75 million. The offering is made up of $247.43 million of Series 2016A state revolving fund revenue bonds and $103.35 million of Series 2016B state revolving fund revenue refunding bonds. The deals are rated triple-A by Fitch.
The Dallas Independent School District will competitively sell $304.98 million of Series 2016A unlimited tax school building bonds. The deal, which is backed by the Permanent School Funding guarantee program, is rated triple-A by Moody's, S&P and Fitch.
Clark County, Nev., on Tuesday will competitively sell $283.73 million of Series 2016A limited tax GO bond bank refunding bonds, additionally secured by pledged revenues. The issue is rated Aa1 by Moody's and AA by S&P.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 29,039 trades on Friday on volume of $5.35 billion.
Last Week's Most Active Sectors
Revenue bonds comprised 53.24% of new issuance in the week ended Feb. 5, up from 52.95% in the previous week, according to Markit. General obligation bonds comprised 39.91% of total issuance, up from 39.01%, while taxable bonds made up 6.85%, down from 8.04%.
Some of the most actively traded issues by type in the week ended Feb. 5 were in Puerto Rico, New York and California, according to Markit. In the GO bond sector, the Puerto Rico Commonwealth 8s of 2035 traded 63 times. In the revenue bond sector, the New York state Thruway Authority 5s of 2019 traded 28 times. And in the taxable bond sector, the state of California 7.6s of 2040 traded 26 times,
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $202.4 million to $11.73 billion on Monday. The total is comprised of $4.05 billion of competitive sales and $7.68 billion of negotiated deals.
Richard Williamson contributed to this report
