Top-shelf municipal bonds ended mixed on Friday ahead of a smaller-than-average new issue calendar that is dominated by a variety of offerings from the Dormitory of the State of New York.
Traders will also be looking at muni bond trades, which have shown recent weakness.
“Until this week, munis hadn’t kept up with the selloff in U.S. Treasuries,” Dan Heckman of U.S. Bank said on Friday. “But the short-end is still very expensive and it’s hard to make a case to buy shorter-term munis versus short-term corporates.”
Heckman added that his firm was very keen on yield positioning and currently sees more value in the intermediate- and long-term ends of the yield curve.
“We will begin to see more weakness when more supply starts to pick up,” he said.
Ipreo estimates total bond volume for the week at $4.97 billion, down from a revised total of $8.68 billion the prior week, according to data from Thomson Reuters. The upcoming slate is composed of $2.29 billion of negotiated deals and $2.68 billion of competitive sales.
The week’s headline act is DASNY, which will be offering buyers more than $2 billion of bonds in one negotiated deal and five competitive sales.
On Tuesday, DASNY will competitively sell $1.7 million of general purpose state personal income tax revenue bonds consisting of $530.94 million of Series 2017B bidding group 2 bonds, $530.065 million of Series 2017B bidding group 3 bonds, $529.595 million of Series 2017B bidding group 1 bonds, $86.8 million of Series 2017D taxable bonds and $21.845 million of Series 2017C tax-exempt bonds.
DASNY’s last deal in late June was rated Aa1 by Moody’s Investors Service and AAA by S&P Global Ratings.
On Thursday, RBC Capital Markets will price DASNY’s $301.48 million of school districts and financing program revenue bonds in five series.
The Series 2017 F, G, H, I and J carry various ratings ranging from Aa2 and Aa3 from Moody’s to A-plus from S&P and AA-minus from Fitch Ratings.
In the short-term competitive arena, New York’s Triborough Bridge and Tunnel Authority will sell $400 million of Series 2017A general revenue bond anticipation notes on Monday. The BANs are rated MIG1 by Moody’s and F1-plus by Fitch.
Also in the negotiated sector, two deals are coming out of San Diego.
On Tuesday, Goldman Sachs is expected to price the San Diego Unified School District’s $220 million of Series 2017 general obligation bonds.
The deal is rated Aa3 by Moody’s and AAA by Fitch.
And on Thursday, JPMorgan Securities is set to price the San Diego Association of Government’s Series 2017A South Bay Expressway first senior lien toll revenue bonds.
The deal is rated A by S&P and A-minus by Fitch.
The yield on the 10-year benchmark muni general obligation was unchanged from 2.00% on Thursday, while the 30-year GO yield fell one basis point to 2.84% from 2.85%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were narrowly mixed on Friday. The yield on the two-year Treasury rose to 1.48% from 1.45%, the 10-year Treasury yield gained to 2.32% from 2.31% and the yield on the 30-year Treasury bond decreased to 2.86% from 2.87%.
On Friday, the 10-year muni-to-Treasury ratio was calculated at 86.2% compared with 86.7% on Thursday, while the 30-year muni-to-Treasury ratio stood at 99.5% versus 99.3%, according to MMD.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 41,186 trades on Friday on volume of $12.69 billion.
Week's actively traded issues
Some of the most actively traded bonds by type in the week ended Sept. 29 were from Oregon, Colorado and Illinois issuers, according to Markit.
In the GO bond sector, the Oregon 5s of 2018 were traded 41 times. In the revenue bond sector, the city and county of Denver, Colo., 5s of 2032 were traded 76 times. And in the taxable bond sector, the Illinois 5.1s of 2033 were traded 23 times.
Week's actively quoted issues
Puerto Rico, Maryland and Illinois names were among the most actively quoted bonds in the week ended Sept. 29, according to Markit.
On the bid side, the Puerto Rico Commonwealth GO 5s of 2041 were quoted by 90 unique dealers. On the ask side, the Prince George’s County, Md., revenue 3.25s of 2047 were quoted by 304 dealers. And among two-sided quotes, the Illinois taxable 5.1s of 2033 were quoted by 28 unique dealers.
Lipper: Muni bond funds see inflows
Investors in municipal bond funds once again put cash into the funds, according to Lipper data released late Thursday.
The weekly reporters drew $378.211 million of inflows in the week of Sept. 27, after inflows of $573.978 million in the previous week.
Exchange traded funds reported inflows of $85.005 million, after inflows of $26.746 million in the previous week. Ex-EFTs, muni funds saw $293.206 million of inflows, after inflows of $547.231 million in the previous week.
The four-week moving average was positive at $360.985 million, after being in the green at $352.562 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 had inflows of $302.608 million in the latest week after inflows of $225.329 million in the previous week. Intermediate-term funds had inflows of $107.568 million after inflows of $113.402 million in the prior week.
National funds had inflows of $381.156 million after inflows of $561.769 million in the previous week.
High-yield muni funds reported inflows of $124.678 million in the latest week, after inflows of $133.982 million the previous week.