30-year muni yield sets record low at 1.79%

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A short week usually means less issuance and that holds true for this week. Issuance is set to seesaw, as new-issue volume was the heaviest of the year last week, at almost 40% larger than 2019 weekly average. And volume this week is expected to be among the lowest so far this year.

“But this week's expected volume of only $5.6 billion is 29% less than last year's average,” said Pat Luby, senior municipal strategist at CreditSights. “The shortened holiday week offers a respite from the brisk pace of early 2020 activity.”

He noted that taxable volume last week ended up at $3.2 billion and this week’s expected taxable borrowing totals less than $1 billion.

“Investor demand should get a boost from the $10.5 billion in maturing and called principal from Feb. 15th redemptions, $6.2 billion of which will be from issuers in Texas,” he said.

Also boding well for the asset class is continued inflows into munis, which has been case for well over one year.

“Mutual funds added $1.9 billion in net assets last week and muni exchange traded funds added $364 million. Long-term municipal bond mutual funds have now pulled in more than $16 billion in net new assets this year and municipal ETFs have added $2.4 billion," Luby said.

Secondary market
Munis were mixed on Tuesday on the MBIS benchmark scale, with yields falling eight basis points in the 10-year maturity and rising by three basis points in the 30-year maturity. High-grades were also mixed with yields on MBIS AAA scale decreasing by five basis points in the 10-year maturity and increasing by less than one basis point in the 30-year maturity.

On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield in the 10-year GO was two basis points lower to 1.16% and the 30-year GO was down three basis points to 1.79%, setting a new record low. The previous record was set back on Jan. 30 at 1.80%.

The 10-year muni-to-Treasury ratio was calculated at 74.6% while the 30-year muni-to-Treasury ratio stood at 89.1%, according to MMD.

Most stocks continued to grind lower but moved off session lows as COVID-19 continues to wreak havoc all over the world, as it has now spread to 25 countries beyond China with now more than 73,000 cases and 1,873 deaths.

Treasury yields were mostly lower.

The Dow Jones Industrial Average was down about 0.56%, the S&P 500 index was lower by 0.23% and the Nasdaq was up by 0.14%.

The 3-month Treasury was yielding 1.577%, the Treasury two-year was yielding 1.403%, the five-year was yielding 1.395%, the 10-year was yielding 1.559% and the 30-year was yielding 2.008%.

“Investment-grade munis continue in rally mode, with yields falling two to three basis points across the curve,” ICE Data Services said in a Tuesday market report. “High-yield is also better today on moderate volume. Taxables are three to as much as six bps lower on the day. Puerto Rico bonds are quieter today, with just a few prices higher on the day.”

Primary market
The issuance will commence on Wednesday and Thursday will the busiest day of the short week, as the top four largest negotiated deals are expected to price then.

In the competitive space, Massachusetts ( / /AA+) is set to sell a total of $650 million of general obligation bonds in three separate sales on Wednesday.

Barclays is scheduled to price New Jersey Educational Facilities Authority’s ( /BBB+/ / ) $171.92 million of revenue green bonds for the Stevens Institute of Technology on Wednesday.

Morgan Stanley is scheduled to price Ohio’s (Aa2/AA/AA/ ) $128.475 million of capital facilities lease appropriation taxable bonds on Wednesday.

Barclays is expected to price the largest deal of the week — District of Columbia’s (Aa1/AAA/AA+/ ) $961.460 million of income tax secured revenue and revenue refunding bonds on Thursday.

Jefferies is scheduled to price a total of $695.335 million for the Texas Transportation Commission (A3/A/A/NR) for the central Texas turnpike system on Thursday. It is expected to come in three tranches: $277.174 million of first-tier revenue refunding taxable bonds, scheduled to mature serially from 2023 through 2030 and include a term bond in 2040; $225 million of first-tier revenue refunding PUT taxable term bond in 2042; and $193.160 million of first-tier revenue refunding tax-exempt bond, scheduled to mature serially from 2040 through 2041.

Last week’s actively traded issues
According to IHS Markit, revenue bonds made up 50.98% of total new issuance in the week ended Feb. 14, down from 53.88% in the prior week. General obligation bonds were 44.20%, up from 41.41%, while taxable bonds accounted for 4.82%, up from 4.71%.

Some of the most actively traded munis by type in the week from Puerto Rico and Texas issuers, according to IHS Markit.
In the GO bond sector, the Puerto Rico Commonwealth 8s of 2035 traded 182 times. In the revenue bond sector, the Grand Parkway Transportation Corp., Texas, 4s of 2049 traded 78 times. In the taxable bond sector, the Grand Parkway Transportation Corp., Texas, 3.326s of 2052 traded 127 times.

Tobacco trading
One of the most actively traded securities on Tuesday was the Tobacco Settlement Financing Authority of West Virginia’s asset-backed/turbo and capital appreciation 2007 Turbo A 7.467% bonds of 2047 which traded 70 times at a price of 110 cents on the dollar, a yield of 5263% in 70 trades totaling $10.56 million. On Friday, the 7.467s traded at 108.25 cents, a yield of 5.637%, in four trades totaling $8 million.

Next week, the Buckeye Tobacco Settlement Financing Authority of Ohio will be coming to market with $5.24 billion of Series 2020 senior tobacco settlement asset-backed refunding bonds.
The issue, to be priced by Jefferies, will refund bonds sold in 2007. The deal consists of $3.39 billion of Series 2020B-2 Class 2 senior current interest bonds, $1.05 billion of Series 2020A-2 Class 1 senior current interest bonds, $376.899 million of Series 2020B-3 Class 2 senior capital appreciation bonds, $327.01 million of Series 2020A-1 Class 1 taxable senior current interest bonds and $100 million of Series 2020B-1 Class 2 taxable senior current interest bonds.

Previous session's activity
The MSRB reported 27,713 trades Friday on volume of $9.02 billion. The 30-day average trade summary showed on a par amount basis of $12.04 million that customers bought $6.09 million, customers sold $3.92 million and interdealer trades totaled $2.02 million.

Texas, California and New York were most traded, with the Lone Star State taking 16.465% of the market, the Golden State taking 14.975% and the Empire State taking 13.722%.

“Last week's shift in the spread between New York and the triple-A benchmark was driven, we believe, by a return to more normalized trading relationships after the recent bulge in supply,” Luby said.

The most actively traded security was the Puerto Rico Sales Tax Financing Corp., restructured COFINA A-1, zeros of 2051, which traded 35 times on volume of $64.911 million.

Treasury auctions discount rate bills
Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were mixed, as the $45 billion of three-months incurred a 1.545% high rate, unchanged from the prior week, and the $39 billion of six-months incurred a 1.510% high rate, unchanged from the week before.

Coupon equivalents were 1.577% and 1.547%, respectively. The price for the 91s was 99.609458 and that for the 182s was 99.236611.

The median bid on the 91s was 1.520%. The low bid was 1.490%.

Tenders at the high rate were allotted 41.02%. The bid-to-cover ratio was 2.91.

The median bid for the 182s was 1.490%. The low bid was 1.450%.

Tenders at the high rate were allotted 65.22%. The bid-to-cover ratio was 3.09.

Treasury bill announcement
The Treasury Department said Thursday it will auction $50 billion 28-day bills and $45 billion 56-day discount bills Tuesday.

The 28s settle Feb. 25, and are due April 21, and the 56s settle Feb. 25, and are due March 24.

Currently, there are $41.527 billion 28-days outstanding and zero 56s outstanding.

Treasury sells CMBs
The Treasury Department Tuesday sold $40 billion 21-day cash management bills, dated Feb. 20, due March 12, at a 1.585% high tender rate.

The bid to cover ratio was 2.71.

The coupon equivalent was 1.613%. The price was 99.907542.

The low bid was 1.540%. The median bid was 1.570%. Tenders at the high were allotted 62.27%.

Chip Barnett contributed to this report.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.

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