While at first glance the upcoming calendar doesn't look to be very large, but it does however offer a little something for everybody and the largest deal of the week includes something that everyone has been looking for: yield.
Primary Market
Total volume for the week of Aug. 15 is estimated by Ipreo at $5.30 billion, after a revised total of $8.18 billion was sold in the past week, according to Thomson Reuters data. The calendar consists $3.65 billion of negotiated deals and $1.65 billion of competitive sales.
After seeing two deals larger than $1 billion, the upcoming week's calendar does not feature any deals of that size, with the largest deal $482 million.
Talks of the typical muni summer doldrums get brought up around this time of year but Dawn Mangerson, senior portfolio manager at McDonnell Investment Management thinks differently.
"I don't think we will see an extremely low volume week between now and Labor Day," she said. "I think things will remain pretty steady. While we won't see a big week like we had last week, we also shouldn't see a week like we saw during July 4."
That week had a revised estimate of $4.8 billion, one of the lowest issuance weeks of the year.
"Despite the summer seasonality, people are still very interested in the muni market," she said. "I don't see a dropoff coming."
Goldman Sachs is expected to price that deal for the Brooklyn Area Local Development Corporation's 481.965 million of bonds to refinance debt issued for the Barclays Center in December of 2009. The PILOT deal is anticipated to have a taxable portion and a tax-exempt portion, which are scheduled to price on Tuesday.
Buyers looking for yield may very well find it in this deal, which is rated Baa3 by Moody's Investors Service and BBB-minus by S&P Global Ratings.
"If this past week was any indication, the Barclays deal should do well," said Mangerson. "Deals that have any yield to them were way oversubscribed, while deals that were your plain vanilla GO's were just getting done."
Mangerson emphasized anything with yield attached is getting a lot of attention.
"The short end [of the curve]there is more demand, except when the deals have yield, then you will see investors go out on the long end," she said.
The largest competitive deal and second largest deal of the week will come from the Los Angeles Unified School District, who will be auctioning off $455.44 million of general obligation refunding dedicated unlimited ad valorem property tax bonds on Thursday. The deal is rated Aa2 by Moody's and triple-A by Fitch Ratings.
Bank of America Merrill Lynch is slated to price the city and county of Honolulu's $421 million of wastewater system revenue bonds and first bond resolution senior series refunding bonds, which will also include a taxable portion on Wednesday, following a one-day retail order period on Tuesday. The deal is rated Aa2 by Moody's and AA-minus by Fitch.
"Honolulu is a good trading name and it is usually well received," Mangerson said. "It should go relatively similarly to how the Honolulu highway deal did recently."
Secondary Market
Top-rated municipal bonds were stronger on Friday, according to traders, with yields on some maturities falling by as much as three basis points. Treasuries also strengthened after the release of weaker-than-expected economic data.
The Labor Department on Friday reported the producer price index for July dropped 0.4%; economists surveyed by IFR Markets had expected a 0.1% rise. The Commerce Department reported that July retail sales were unchanged; economists polled by IFR Markets had expected a gain of 0.4%.
The yield on the 10-year benchmark muni general obligation fell three basis points to 1.40% from 1.43% on Thursday, while the yield on the 30-year muni dropped three basis points to 2.13% from 2.16%, according to the final read of Municipal Market Data's triple-A scale.
The yield on the two-year Treasury fell to 0.71% from 0.75% on Thursday, the 10-year Treasury yield dropped to 1.52% from 1.57% and the yield on the 30-year Treasury bond decreased to 2.24% from 2.28%.
The 10-year muni to Treasury ratio was calculated at 92.5% on Friday compared to 90.9% on Thursday, while the 30-year muni to Treasury ratio stood at 95.3% versus 94.5%, according to MMD.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Aug. 12 were from California and Missouri issuers,
In the GO bond sector, the Oakland Unified School District, Calif., 3s of 2041 were traded 59 times. In the revenue bond sector, the University of California Medical Center 3s of 2042 were traded 79 times. And in the taxable bond sector, the Missouri HEFA 3.09s of 2051 were traded 66 times.
Week's Most Actively Quoted Issues
California and Illinois issues were among the most actively quoted names in the week ended Aug. 12, according to Markit.
On the bid side, the California taxable 7.6s of 2040 were quoted by 12 unique dealers. On the ask side, the California taxable 7.55s of 2039 were quoted by 13 unique dealers. And among two-sided quotes, the Illinois taxable 5.1s of 2033 were quoted by nine unique dealers.
Lipper: Muni Bond Funds See Inflows
For the 45th straight week, municipal bond funds reported inflows, according to Lipper data released on Thursday.
The weekly reporters saw $871.013 million of inflows in the week ended Aug. 10, after inflows of $783.930 million in the previous week, Lipper said.
The four-week moving average remained positive at $862.893 billion after being in the green at $950.662 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 experienced inflows, gaining $582.341 million in the latest week after inflows of $476.187 million in the previous week. Intermediate-term funds had inflows of $124.288 million after inflows of $122.531 million in the prior week.
National funds had inflows of $754.059 million on top of inflows of $666.956 million in the previous week. High-yield muni funds reported inflows of $287.447 million in the latest reporting week, after inflows of $267.286 million the previous week.
Exchange traded funds saw inflows of $90.117 million, after inflows of $76.659 million in the previous week.
