Bond yields at a glance

MBIS benchmark (~AA)

MBIS AAA

MMD AAA

U.S. Treasuries

10 year

2.669

2.559

2.46 (+0-1)

2.85

30 year

3.121

3.017

3.00 (+0-1)

3.12

MBIS indices are updated hourly on the Bond Buyer Data Workstation.

Muni market participants are ready for yet another week of low volume and high volatility. JIm Colby, senior municipal strategist and author of the Muni Nation blog at VanEck said he and others are surprised the market did not experience the “January effect,” after enormous issuance in December.

"I do believe several factors played into what happened in January: First, there was uncertainty over the details of the new tax act and which constituents were going to be directly or indirectly impacted," he said. "From banks, insurance companies and foreign buyers, investment in munis was — and still is — somewhat uncertain. The new corporate rates and the repatriation of overseas cash has yet to define new parameters for those entities. As we know, banks and insurance companies have significantly grown their tax exempt portfolios over the past few years. Their departure from, or reduction of municipal holdings, made clear to the entire market a possibility that rates would have to rise to accommodate new metrics for suitability under the new rules."

He said, the press touted the comments of some very large and influential investment platforms and portfolio managers suggesting that as long as they viewed the possibility of continued upward pressure on rates in 2018, they’d likely stay on the sidelines until they see a better opportunity with a new strategy.

"I believe the combination of the two has had a significant dampening effect upon the muni market. And the evidence of a growing economy, from several aspects, has legitimized the rate hikes by the Federal Reserve. Now there is less resistance to the notion that three, maybe four rate hikes are appropriate for 2018. So January’s negative returns were a surprise, but as you reflect on some of the undercurrents there is an understandable narrative here," he said.

The action will be more pronounced starting on Tuesday, but there is a combined $115.2 milliion of competitive offerings from Richfield, Minn., Independent School District No. 280 selling early Monday afternoon.

Bond Buyer 30-day visible supply at $6.07B
The Bond Buyer's 30-day visible supply calendar increased $30.3 million to $6.07 billion on Monday. The total is comprised of $1.69 billion of competitive sales and $4.38 billion of negotiated deals.

Prior week's actively traded issues
Revenue bonds comprised 55.66% of new issuance in the week ended Feb. 2, down from 56.23% in the previous week, according to Markit. General obligation bonds made up 38.82% of total issuance, up from 38.26%, while taxable bonds accounted for 5.52%, up from 5.51% a week earlier.

Some of the most actively traded bonds by type in the week ended Feb. 2 were from New York, Georgia and California issuers, according to Markit.

In the GO bond sector, the New York City zeroes of 2038 traded 21 times. In the revenue bond sector, the Main Street Natural Gas Inc. of Ga.’s 4s of 2048 traded 42 times. And in the taxable bond sector, the California 2.193s of 2047 traded 42 times.

Treasury auction
Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were higher, as the three-months incurred a 1.500% high rate, up from 1.425% the prior week, and the six-months incurred a 1.650% high rate, up from 1.625% the week before.

Coupon equivalents were 1.527% and 1.687%, respectively. The price for the 91s was 99.620833 and that for the 182s was 99.165833.

The median bid on the 91s was 1.470%. The low bid was 1.440%.

Tenders at the high rate were allotted 64.64%. The bid-to-cover ratio was 2.78.

The median bid for the 182s was 1.610%. The low bid was 1.580%.

Tenders at the high rate were allotted 0.29%. The bid-to-cover ratio was 2.93.

Four-week bills announced
The Treasury Department said it will sell $15 billion of four-week discount bills Tuesday. There are currently $75.003 billion of four-week bills outstanding.

MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 40,715 trades on Friday on volume of $8.031 billion.

California, Texas and New York were the three states with the most trades on Friday, with the Golden State taking 15.656% of the market, the Lone Star State taking 12.136% and the Empire State taking 10.48%.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.

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Aaron Weitzman

Aaron Weitzman

Aaron Weitzman is a markets reporter for The Bond Buyer, focusing on the sell side of the municipal bond market.