There will be a little something for everyone, as a diverse calendar of municipal bond deals is scheduled to hit screens in the upcoming week, which also features a Federal Reserve policy maker meeting that will culminate with an announcement on interest rates on Wednesday.
Primary Market
Volume for the week of Sept. 23 is forecast to fall $8.45 billion from a revised total of $11.31 billion in the past week, according to revised data from Thomson Reuters. The upcoming slate is composed of $6.29 billion of negotiated bond deals and $2.16 billion of competitive bond sales.
The volume is still greater than the 2016 weekly average of $7.6 billion, according to Dan Berger, senior market strategist at TM3/MMD.
"It is a diverse and very manageable calendar; it's always nice to have steady supply during a strong market," said Dawn Mangerson, managing director and senior portfolio manager at McDonnell Investment Management. In the past week "demand for new issues was crazy strong. I think the backup attracted more investors longer our in the curve, as there was more yield," she said. She noted that two of the top four scheduled negotiated deals on the calendar are taxable.
The Dormitory Authority of the State of New York is expected to issue the most bonds this week, with a total of $1.12 billion in three separate competitive sales on Thursday. The state sales tax revenue bonds will come in chunks of $310.94 million, $396.83 million and $409.16 million.
"It was good to see all that New York paper come in last week and we will get more, good, high quality N.Y. paper this week again," said Mangerson.
The other only competitive sale of note, will take place on Tuesday, when the New York City Municipal Water Finance Authority is scheduled to sell $200 million of water and sewer system second general resolution revenue bonds.
Bank of America Merrill Lynch is slated to price the largest negotiated deal of the week, Providence St. Joseph Health Obligated Groups' $700 million of taxable bonds on Monday. The deal is rated Aa3 by Moody's Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.
The largest tax-exempt negotiated deal of the week, Pennsylvania Turnpike Commission's $649.885 million of subordinate revenue refunding bonds, is on the docket to be priced by Goldman Sachs on Tuesday. It is expected to have three parts: $391.52 million of sub series A bonds, $82.165 million of sub series B taxable bonds and $176.2 million of motor license fund enhanced bonds. The two sub series are rated A3 by Moody's and A-minus by Fitch, while the motor license series is rated A2 by Moody's and A-minus by Fitch.
BAML is also expected to price the Texas Water Development Board's $575 million of State Water Implementation Revenue fund for Texas revenue bonds master trust on Tuesday, following a one-day retail order period. The SWIRFT bonds are rated triple-A by S&P and Fitch Ratings.
"The market was so tightly wound up with quiet trades for a long time during the summer doldrums," said Jim Grabovac, senior portfolio manager at McDonnell. "Now we had that back up that was desperately wanted and it could back up some more but there is still a underlying dynamic, where investors are having a hard time replacing lost income," he said.
"It is a difficult task; people are less concerned about rising rates and more concerned about diminishing re-investment rates."
Secondary Market
Top quality municipal bonds ended unchanged on Friday, according to traders. The yield on the 10-year benchmark muni general obligation was steady from 1.57% on Thursday, while the yield on the 30-year was flat from 2.31%, according to the final read of Municipal Market Data's triple-A scale.
Muni yields moved up on the week. On Friday, Sept. 9, the 10-year muni yield stood at 1.49% while the 30-year was at 2.20%.
Treasuries were mixed on Friday. The yield on the two-year Treasury rose to 0.77% from 0.73% on Thursday, the 10-year Treasury yield was unchanged from 1.70% and the yield on the 30-year Treasury bond decreased to 2.45% from 2.48%.
The 10-year muni to Treasury ratio was calculated at 92.5% on Friday compared to 92.6% on Thursday, while the 30-year muni to Treasury ratio stood at 94.4% versus 93.6%, according to MMD.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Sept. 16 were from California and Michigan issuers, according
In the GO bond sector, the Los Angeles, Calif. 2s of 2017 were traded 29 times. In the revenue bond sector, the Michigan Finance Authority 4s of 2046 were traded 52 times. And in the taxable bond sector, the Calif. Department of Water Resources 2s of 2022 were traded 61 times.
Week's Most Actively Quoted Issues
Puerto Rico and California issues were among the most actively quoted bonds in the week ended Sept. 16, according to Markit.
On the bid side, the Puerto Rico Commonwealth GO 8s of 2035 were quoted by 12 unique dealers. On the ask side, the California HFFA revenue 3s of 2047 were quoted by 2` unique dealers. And among two-sided quotes, the California GO 5s of 2026 were quoted by 16 unique dealers.
Lipper Reports More Inflows
For the 50th straight week, municipal bond funds reported inflows, according to Lipper data released on Thursday. The weekly reporters saw $485.522 million of inflows in the week ended Sept. 14, after inflows of $985.786 million in the previous week, Lipper said.
The four-week moving average remained positive at $675.129 million after being in the green at $818.423 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 $419.949 million in the latest week after inflows of $617.231 million in the previous week. Intermediate-term funds had inflows of $176.075 million after inflows of $182.862 million in the prior week.
National funds had inflows of $360.119 million on top of inflows of $912.909 million in the previous week. High-yield muni funds reported inflows of $175.483 million in the latest reporting week, after inflows of $264.215 million the previous week.
Exchange traded funds saw outflows of $14.231 million, after outflows of $71.151 million in the previous week.
