Munis Weaken Ahead of $6.8B New Issue Slate

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Top-shelf municipal bonds were weaker at mid-session, according to traders, who were looking ahead to next week's new issue calendar.

Ipreo estimates volume for next week at $6.8 billion, up from a revised $4.8 billion sold this week, according to updated data from Thomson Reuters. Next week's slate consists of $4.7 billion of negotiated deals and $2.2 billion of competitive sales.

Secondary Market

The 10-year benchmark muni general obligation yield rose five to seven basis points from 2.26% on Thursday, while the yield on the 30-year GO increased three to five basis points from 3.01%, according to a read of Municipal Market Data's triple-A scale.

U.S. Treasuries were mixed on Friday. The yield on the two-year Treasury fell to 1.21% from 1.22% on Thursday, while the 10-year Treasury yield rose to 2.51% from 2.46%, and the yield on the 30-year Treasury bond increased to 3.08% from 3.03%.

On Thursday, the 10-year muni to Treasury ratio was calculated at 91.9% compared to 90.8% on Wednesday, while the 30-year muni to Treasury ratio stood at 99.2%, versus 97.8%, according to MMD.

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 48,609 trades on Thursday on volume of $12.80 billion.

Week's Most Actively Traded Issues

Some of the most actively traded issues by type in the week ended Jan. 20 were from Texas, New York and Wisconsin, according to Markit.

In the GO bond sector, the Klein ISD, Texas, 4s of 2046 were traded 44 times. In the revenue bond sector, the New York Triborough Bridge and Tunnel Authority 5s of 2047 were traded 108 times. And in the taxable bond sector, the Wisconsin 3.954s of 2036 were traded 91 times.

Week's Most Actively Quoted Issues

Puerto Rico, New Jersey and California names were among the most actively quoted bonds in the week ended Jan. 20, according to Markit.

On the bid side, the Puerto Rico Public Buildings Authority revenue 5.25s of 2042 were quoted by 40 unique dealers. On the ask side, the New Jersey Economic Development Authority revenue 4s of 2027 were quoted by 218 unique dealers. And among two-sided quotes, the California taxable 7.3s of 2039 were quoted by 17 unique dealers.

Primary Market

Even though it was a holiday week, the market saw a sizeable slate of new issues hit the screens.

Goldman Sachs priced Chicago's $1.16 billion general obligation bonds consisting of $888.76 million of Series 2017A tax-exempt GO project and refunding bonds and $274.24 million of Series 2017B taxable bonds. The deal is rated BBB-plus by S&P Global Ratings and Kroll Bond Rating Agency and BBB-minus by Fitch Ratings.

"The city continues to address our financial challenges and work to end bad financial practices of the past, and these bonds represent a critical milestone in this effort," said the city's CFO Carole Brown. "This deal represents our final borrowing for scoop and toss, following through on Mayor Emanuel's commitment to end this practice by 2019. This is also our last borrowing for routine settlements and judgments, continuing the mayor's commitment to end the legacy of using long-term debt to pay for operating expenses."

Barclays Capital priced the Texas Transportation Commission's $760.51 million of Series 2017 A and B general obligation mobility fund refunding bonds. The deal is rated triple-A by Moody's Investors Service, S&P and Fitch.

RBC Capital Markets priced the Los Angeles Department of Water and Power's $500 million of Series 2017A power system revenue bonds. The deal is rated Aa2 by Moody's and AA-minus by S&P and Fitch.

RBC Capital Markets priced the Denver City and County School District No. 1, Colo.'s $466.1 million of general obligation bonds. The deal is insured by the Colorado State Intercept Program and rated Aa2 by Moody's, AA by S&P and AA-plus by Fitch.

Citigroup priced the University of Massachusetts Building Authority's $352.81 million of tax-exempt and taxable project revenue bonds. The deal is rated Aa2 by Moody's and AA-minus by S&P and Fitch.

Bank of America Merrill Lynch priced the Hospital Authority of Hall County and the City of Gainesville, Ga.'s $312.43 million of Series 2017 A and B revenue anticipation certificates for the Northeast George Health System Inc. The deal is rated A by S&P and Fitch.

Loop Capital priced the Pennsylvania Turnpike Commission's $278.58 million of Series 2017A turnpike subordinate revenue bonds. The deal is rated A3 by Moody's and A-minus by Fitch except for the 2037 maturity which is insured by Assured Guaranty Municipal and rated A2 by Moody's and AA by S&P.

Bank of America Merrill Lynch priced the Philadelphia Authority for Industrial Development's $262.27 million of Series 2017A fixed-rate revenue bonds for Thomas Jefferson University. The deal is rated A2 by Moody's and A-plus by S&P.

JPMorgan Securities priced Denton, Texas' $214.89 million of Series 2017 utility system revenue bonds. The issue was priced as 5s to yield from 1.48% in 2019 to 3.46% in 2036. The deal is rated Aa-minus by S&P and A-plus by Fitch.

JPMorgan priced the Maryland Health and Higher Educational Facilities Authority's $150.05 million of Series 2017B tax-exempt and Series 2017C taxable revenue bonds for the University of Maryland Medical System. The deal is rated A2 by Moody's, A-minus by S&P and A by Fitch.

JPMorgan priced the Lone Star College System's $133.02 million of Series 2017A limited tax GOs for Harris, Montgomery and San Jacinto counties in Texas. The deal is rated AAA by S&P.

In the competitive arena, the University of Houston System Board of Regents sold two separate deals totaling $404.5 million. Bank of America Merrill Lynch won the $392.85 million of Series 2017A consolidated revenue and refunding bonds with a true interest cost of 3.41%. Robert W. Baird won the $11.64 million of Series 2017B taxable consolidated revenue and refunding bonds with a TIC of 3.62%. Both sales are rated Aa2 by Moody's and AA by S&P.

The city and county of San Francisco sold $174.11 million of GO public health and safety bonds. Raymond James won the bidding with a TIC of 2.99%. The deal is rated Aa1 by Moody's and AA-plus by S&P and Fitch.

Fulton County, Ga., sold $104.79 million of Series 2017 GO library bonds. Wells Fargo Securities won the bidding with a TIC of 3.51%.The deal is rated Aa1 by Moody's, AA-plus by S&P and AA by Fitch.

The Florida Board of Education sold $150.2 million of public education capital outlay refunding bonds, which were won by JPMorgan with a TIC of 3.03%.The deal is rated Aa1 by Moody's and triple-A by S&P and Fitch.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $1.30 billion to $10.57 billion on Friday. The total is comprised of $2.70 billion of competitive sales and $7.87 billion of negotiated deals.

Lipper: Muni Bond Funds Report Inflows

Municipal bond funds saw inflows again as investors continued their return to the market, according to Lipper data released late Thursday. The weekly reporters saw $511.739 million of inflows in the week ended Jan. 18, after inflows of $974.172 million in the previous week.

The four-week moving average remained in the red at negative $265.669 million after being negative $890.596 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 had inflows, gaining $421.726 million in the latest week after gaining $982.916 million in the previous week. Intermediate-term funds had inflows of $96.682 million after inflows of $61.462 million in the prior week.

National funds had inflows of $471.471 million after inflows of $933.337 million in the previous week. High-yield muni funds reported inflows of $442.286 million in the latest reporting week, after inflows of $796.091 million the previous week.

Exchange traded funds saw outflows of $33.755 million, after inflows of $183.828 million in the previous week.

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