Munis Weaken as Traders Take Breather After Busy Week

Top quality municipal bonds were weaker in early activity on Friday, traders said, with yields on some maturities strengthening by as much as one basis point.

In the primary, traders are taking a break from the hectic new issue pace of the past week, which clocked in as the busiest so far this year.

Secondary Market

The yield on the 10-year benchmark muni general obligation was as much as one basis point stronger from 1.56% on Thursday, while the 30-year muni yield was as much as one basis point stronger from 2.63%, according to a read of Municipal Market Data's triple-A scale.

Treasuries were weaker on Friday. The yield on the two-year Treasury rose to 0.67% from 0.63% on Thursday, while the 10-year Treasury yield increased to 1.69% from 1.61% and the 30-year Treasury bond yield gained to 2.54% from 2.46%.

The 10-year muni to Treasury ratio was calculated on Thursday at 95.0% compared to 94.5% on Wednesday, while the 30-year muni to Treasury ratio stood at 105.2% versus 106.0%, according to MMD.

MSRB Previous Session's Activity

The Municipal Securities Rulemaking Board reported 37,477 trades on Thursday on volume of $9.58 billion.

Primary Market

Municipal bond traders saw a very busy new issue week, with deals coming in a variety of sizes.

The New York City Transitional Finance Authority led the pack with three sales totaling $1 billion.

Bank of America Merrill Lynch priced the TFA's $750 million of Fiscal 2016 Series E-1 future tax secured subordinate bonds for institutions after a two-day retail order period. The TFA approved about $250 million of retail orders, the NYC comptroller's office said.

The TFA also competitively sold $250 million of taxable fixed-rate new money bonds. Jefferies won the $196.32 million of Fiscal 2016 Series E-2 future tax secured subordinate bonds with a true interest cost of 2.32%. FTN Financial Capital won the $53.68 million of Fiscal 2016 Series E-3 future tax secured subordinate bonds with a TIC of 2.999%.

Additionally, the TFA also intends to offer $150 million of tax-exempt new money variable-rate demand bonds on Thursday, Feb. 25, bringing the total sale size to $1.15 billion, the comptroller's office said.

All the TFA deals are rated Aa1 by Moody's Investors Service and triple-A by Standard & Poor's and Fitch Ratings.

Wells Fargo Securities priced the city of Houston's $955.11 million of Series 2016B combined utility system first lien revenue and refunding bonds. The offering, which was upsized from $800 million, is rated Aa2 by Moody's and AA by Fitch.

Washington state competitively sold two deals totaling $522.11 million. Barclays Capital won the $321.58 million of Series 2016C various purpose GOs with a TIC of 3.22%. Citigroup won the $200.53 million of Series 2016D motor vehicle tax GOs with a TIC of 3.22%. Both sales are rated Aa1 by Moody's and AA-plus by S&P and Fitch.

Minnesota competitively sold two deals totaling $350.75 million. Morgan Stanley won the $247.43 million of Series 2016A state revolving fund revenue bonds with a TIC of 2.69%. BAML won the $103.35 million of Series 2016B state revolving fund revenue refunding bonds with a TIC of 1.61%. The bonds are rated triple-A by Moody's, S&P and Fitch.

The Dallas Independent School District competitively sold $304.98 million of Series 2016A unlimited tax school building bonds. BAML won the deal with a TIC of 2.77%. The offering, which is backed by the Permanent School Funding guarantee program, is rated triple-A by Moody's, S&P and Fitch.

Clark County, Nev., competitively sold $283.73 million of Series 2016A limited tax GO bond bank refunding bonds, additionally secured by pledged revenues. Citi won the deal with a TIC of 1.64%. The issue is rated Aa1 by Moody's and AA by S&P.

The Board of Trustees of the University of Illinois competitively sold $120.53 million of Series 2016A auxiliary facilities system refunding revenue bonds. Citi won the issue with a TIC of 3.47%. The deal is rated Aa3 by Moody's and AA-minus by S&P.

Citigroup priced the Pennsylvania Turnpike Commission's $365.14 million of Series of 2016 turnpike subordinate revenue refunding bonds. The deal is rated A3 by Moody's Investors Service and A-minus by Fitch Ratings.

BAML priced the state of Ohio's $233.35 million of Series 2016A hospital revenue bonds for the University Hospitals Health System. The deal is rated A2 by Moody's and A by S&P.

Goldman Sachs priced the Missouri Joint Municipal Electric Utility Commission's $242.55 million of Series 2016A power project revenue refunding bonds for the Prairie State Project. The bonds are rated A2 by Moody's and A by Fitch.

BAML priced Columbus, Ohio's $206 million of Series 2016-1 and Series 2016-2 various purpose general obligation refunding bonds. The issue is rated triple-A by Moody's, S&P and Fitch.

Citi priced the Guam Waterworks Authority's $143.31 million of Series 2016 water and wastewater revenue bonds. The deal is rated Baa2 by Moody's, A-minus by S&P and triple-B-minus by Fitch.

BAML priced the Connecticut Housing Finance Authority's $145 million of housing mortgage finance program bonds. The issue is rated triple-A by Moody's and S&P.

Raymond James priced the Lamar Consolidated Independent School District, Texas' $114.62 million of Series 2016A unlimited tax refunding bonds. The bonds are backed by the PSF and rated triple-A by Moody's and S&P.

Citigroup priced the Indiana Municipal Power Agency's $149.03 million of Series 2016C power supply system refunding revenue bonds. The deal is rated A1 by Moody's and A-plus by S&P and Fitch.

RBC Capital Markets priced the Regents of the University of New Mexico's $168.51 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 issue is rated Aa2 by Moody's and AA by S&P.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar fell $1.17 billion to $6.55 billion on Friday. The total is comprised of $2.57 billion of competitive sales and $3.98 billion of negotiated deals.

Municipal Bond Funds See Inflows for 19th Week

Municipal bond funds reported inflows for the 19th straight week, according to Lipper data released on Thursday.

Weekly reporting funds saw $940.697 million of inflows in the week ended Feb. 10, after inflows of $673.322 million in the previous week, Lipper said.

So far this year, muni mutual funds have seen about $4.73 billion of inflows.

The four-week moving average remained positive at $684.623 million after being in the green at $698.176 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 experienced inflows, gaining $746.051 million in the latest week after inflows of $309.068 million in the previous week. Intermediate-term funds had inflows of $331.761 million after inflows of $302.935 million in the prior week.

National funds saw inflows of $770.988 million after inflows of $557.545 million in the prior week. High-yield muni funds reported inflows of $284.065 million in the latest reporting week, after inflows of $78.600 million the previous week.

Exchange traded funds saw inflows of $124.647 million, after inflows of $87.774 million in the previous week.

The Week's Most Actively Quoted Issues

Puerto Rico, New York and New Jersey were among some of the most actively quoted names in the week ended Feb. 12, according to data released by Markit.

On the bid side, the Puerto Rico Commonwealth GO 8s of 2035 were quoted by 12 unique dealers. On the ask side, the Liberty Development Corp. N.Y.'s revenue 5 1/4s of 2035 were quoted by 16 unique dealers. And among two-sided quotes, the New Jersey State Turnpike Authority revenue 7.102s of 2041 were quoted by 13 dealers.

The Week's Most Actively Traded Issues

Some of the most actively traded issues by type in the week ended Feb. 12 were in Puerto Rico, New York and California, according to Markit.

In the GO bond sector, the Puerto Rico Commonwealth 8s of 2035 traded 30 times. In the revenue bond sector, the New York City Transitional Finance Authority 4s of 2041 traded 110 times. And in the taxable bond sector, the state of California 7.6s of 2040 traded 14 times, Markit said.

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