Top quality municipal bonds finished weaker on Friday, traders said, with yields on some maturities rising by as much as five basis points ahead of a holiday-shortened week.
Municipal bond volume for the four day week is estimated at $5.2 billion, according to Ipero, a drop from the revised total of $7.8 billion in the past week, according to Thomson Reuters.
Primary Market
Following the Presidents Day holiday on Monday, the majority of the larger deals are pricing either on Wednesday or Thursday.
Topping the calendar is the New York Metropolitan Transportation Authority's $500 million of revenue green bonds that are climate bond certified. Ramirez & Co. are the bookrunners on the deal that is scheduled to have a retail order period on Wednesday, preceding the institutional pricing on Thursday. The deal is rated A1 by Moody's Investors Service, AA-minus by Standard and Poor's, A by Fitch Ratings and AA-plus by Kroll Bond Rating Agency.
This issue will not only be the MTA's inaugural green bond issuance but is also the first U.S. municipal bond to be certified under new international criteria for investment in transport infrastructure compatible with a 2 degrees Celsius warming outcome.
Climate Bonds Initiative, a London-based, not-for-profit organization, has certified the bonds. The group supports financing worldwide for projects that help reduce climate-change effects. The Transportation Revenue Green Bonds, Series 2016A, mark the first issuance CBI has certified in the U.S. under its low carbon transport standard.
"This MTA bond issuance is a milestone in the inclusion of rail transport in the burgeoning green bond market," said the group's chief executive, Sean Kidney.
Bank of America Merrill Lynch is expected to price the Florida Municipal Power Agency's $425 million of All-Requirements Power Supply projects refunding revenue bonds on Wednesday. The deal is rated A2 by Moody's and A-plus by Fitch.
The largest competitive sale of the week will come from the Silver State, as Nevada is set to sell $290.79 million of highway revenue motor vehicle fuel tax improvement and refunding bonds on Wednesday.
The bonds received Aa2, AA-plus and AAA ratings from Moody's, Fitch and S&P, respectively. All three rating agencies gave stable outlooks and affirmed similar ratings on the state's $441 million in outstanding state highway revenue bonds.
"The stable outlook reflects our view of the state bonds' strong debt service coverage and our expectation of stable, albeit gradual, pledged revenue growth," S&P credit analyst Sussan Corson said.
The Series 2016 bonds will fund highway improvements and refund outstanding parity debt. Roughly $200 million of bond proceeds will fund the $900 million Project NEON, which will increase capacity of a section of I-15 in Las Vegas and is expected to be completed in 2020.
The Los Angeles County MTA will be selling $188.27 million of Proposition A first tier senior sales tax revenue refunding bonds via a competitive sale on Thursday. The deal is rated Aa1 by Moody's and triple-A by S&P.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose four basis points to 1.60% from 1.56% on Thursday, while the 30-year muni yield gained five basis points stronger to 2.68% from 2.63%, according to the final read of Municipal Market Data's triple-A scale.
Yields have moved lower on the week. On Friday, Feb. 5, the yield on the 10-year muni stood at 1.66% while the 30-year muni yield was at 2.72%.
Treasuries were weaker on Friday. The yield on the two-year Treasury rose to 0.69% from 0.63% on Thursday, while the 10-year Treasury yield increased to 1.75% from 1.61% and the 30-year Treasury bond yield gained to 2.60% from 2.46%.
The 10-year muni to Treasury ratio was calculated on Friday at 91.7% compared to 95.0% on Thursday, while the 30-year muni to Treasury ratio stood at 103.0% versus 105.2%, according to MMD.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $1.38 billion to $7.92 billion on Tuesday. The total is comprised of $2.75 billion of competitive sales and $5.17 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,
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.
