Municipal market issuance is expected to lag behind investor demand in the coming week.
Ipreo estimates volume will increase to $4.3 billion, from a revised total of $2.6 billion in the holiday-shortened week ended Feb. 24, according to updated figures from Thomson Reuters. The calendar for the week ahead is composed of $2.9 billion of negotiated deals and $1.4 billion of competitive sales.
The calendar has only 11 sales scheduled to be greater than $100 million, seven on the negotiated side and four on the competitive end, with three of those from the same issuer.
Though water related deals top the calendar with the two largest scheduled deals, there still seems to be a kink in the hose when it comes to new municipal issuance – something that Jim Grabovac, senior portfolio manager at McDonnell Investment Management said may end soon.
"Supply has been light and it's expected to continue to be that way, but there is some anticipation that the calendar will pick up once we hit March," he said. "For now however it has forced investors to be more active in the secondary market, as right now in the primary there is too little supply and too much demand."
Grabovac also said that right now the market is in the process of "normalizing" and that it is becoming clear that that there is little momentum in Washington on tax reform and even less on the infrastructure front.
"It's just legislative reality, in that it takes longer to get things done then it does to talk about doing it," he said. "In terms of yields, we're little changed for the week, but on a year to date basis it's notable that the curve has steepened and the ratio curve has also done the same. So the short end has tightened and the longer end is cheap."
Morgan Stanley is expected to price California Infrastructure and Economic Development Bank's $450 million of clean water state revolving fund revenue green bonds on Wednesday, after a one-day retail order period on Tuesday. The deal has a top rating of triple-A by S&P Global Ratings and Fitch Ratings.
Siebert Cisneros Shank is scheduled to price New York City Municipal Water Finance Authority's $375 million of water and sewer second general resolution revenue bonds on Tuesday after a one-day retail order period on Monday. The deal is rated Aa1 by Moody's Investors Service and AA-plus by S&P and Fitch.
In the competitive arena Baltimore County, Md., is expected to sell three separate sales totaling roughly $545 million on Wednesday. It is scheduled to be $121 million of consolidated public improvement bond anticipation notes, $225 million of metro district BAN's and $199.1 million of metropolitan district and consolidated public improvement bonds. The notes are rated F1-plus by Fitch and the bonds are rated triple-A by Fitch.
Clark County, Nev. is slated to sell $317.78 million of general obligation limited tax bond bank refunding additionally secured pledged revenue bonds on Wednesday. The deal is rated Aa1 by Moody's and AA-plus by S&P.
Secondary Market
Top-quality municipal bonds finished stronger on Friday. The 10-year benchmark muni general obligation yield fell six basis points to 2.28% from 2.34% on Thursday, while the yield on the 30-year GO dropped five basis points to 3.04% from 3.09%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were also stronger on Friday. The yield on the two-year Treasury dropped to 1.14% from 1.19% on Thursday, while the 10-year Treasury yield declined to 2.32% from 2.38%, and the yield on the 30-year Treasury bond decreased to 2.96% from 3.02%.
On Friday, the 10-year muni to Treasury ratio was calculated at 98.5% compared to 98.1% on Thursday, while the 30-year muni to Treasury ratio stood at 102.9%, versus 102.3%, according to MMD.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Feb. 24 were from Ohio, New York, and Nebraska,
In the GO bond sector, the Berea City School District, Ohio, 4s of 2053 were traded 47 times. In the revenue bond sector, the New York Metropolitan Transportation Authority 2s of 2017 were traded 31 times. And in the taxable bond sector, the Omaha, Neb., Public Facilities Corp. 4.353s of 2047 were traded 22 times.
Week's Most Actively Quoted Issues
South Carolina, New York and California names were among the most actively quoted bonds in the week ended Feb. 24, according to Markit.
On the bid side, the S.C. Public Service Authority revenue 5s of 2048 were quoted by 51 unique dealers. On the ask side, the New York City GO 5s of 2028 were quoted by 212 unique dealers. And among two-sided quotes, the California taxable 6.2s of 2019 were quoted by 25 unique dealers.
Lipper: Muni Bond Funds Report Inflows
Municipal bond funds again attracted inflows, according to Lipper data released late Thursday. The weekly reporters saw $149.336 million of inflows in the week ended Feb. 22, after inflows of $480.072 million in the previous week.
The four-week moving average remained in the green at positive $236.914 million, after being positive at $201.325 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 $156.457 million in the latest week after gaining $464.295 million in the previous week. Intermediate-term funds had inflows of $82.507 million after outflows of $8.176 million in the prior week.
National funds had inflows of $207.266 million after inflows of $495.227 million in the previous week. High-yield muni funds reported inflows of $227.761 million in the latest reporting week, after inflows of $481.705 million the previous week.
Exchange traded funds saw outflows of $36.447 million, after inflows of $12.103 million in the previous week.