Top-shelf municipal bonds were steady on Thursday morning, according to traders who were still at their desks. The primary market is nearing shut-down mode as the holidays approach.
Secondary Market
U.S. Treasuries were mostly weaker on Thursday morning. The yield on the two-year Treasury was steady at 1.20% from Wednesday, while the 10-year Treasury yield rose to 2.56% from 2.54%, and the yield on the 30-year Treasury bond increased to 3.13% from 3.12%.
The yield on the 10-year benchmark muni general obligation was two basis points lower to 2.43% from 2.45% on Tuesday, while the yield on the 30-year decreased three basis points to 3.15% from 3.18%, according to a final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated at 95.7% on Wednesday, compared with 95.6% on Tuesday, while the 30-year muni to Treasury ratio stood at 101.0%, versus 101.0%, according to MMD.
Tax-Exempt Money Market Fund Inflows
Tax-exempt money market funds experienced inflows of $690.2 million, bringing total net assets to $131.29 billion in the week ended Dec. 19, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $360.4 million to $130.60 billion in the previous week.
The average, seven-day simple yield for the 237 weekly reporting tax-exempt funds was increased to 0.21% from 0.17% from previous week.
The total net assets of the 862 weekly reporting taxable money funds decreased $37.81 billion to $2.554 trillion in the week ended Dec. 20, after an inflow of $19.94 billion to $2.592 trillion the week before. The average, seven-day simple yield for the taxable money funds increased to 0.22% from 0.17% from the previous week.
Overall, the combined total net assets of the 1,099 weekly reporting money funds fell $37.12 billion to $2.686 trillion in the week ended Dec. 20 after inflows of $19.58 billion to $2.723 trillion in the prior week.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 53,925 trades on Wednesday on volume of $15.442 billion.
Revenue Vs. General Obligation
There have been recent debates within the industry about the "fading strength" of general obligation bonds. Some market participants now prefer revenue bonds, as one trader said "once you identify a revenue stream, it never goes away. I would call revenue bonds more dependable than GOs, as once you build tolls, people don't stop driving but with GOs, they cannot stay true to their 'full faith of credit' word."
Over the past two years, there has been more issuance of revenue bonds than GOs. In 2016 to date $246.8 billion of revenue bonds were issued, compared to $223.8 billion in 2015. Those numbers are well above the GO total of $175.9 billion this year and $153.8 billion in 2015, according to data from Thomson Reuters.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $609.7 million to $5.91 billion on Thursday. The total is comprised of $1.13 billion of competitive sales and $4.78 billion of negotiated deals.
Primary Market
There are no deals larger than $100 million scheduled for the rest of the calendar year.
