Demand for munis remains high

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Demand for tax-exempt income remains solid, particularly from high-taxed states, while supply remains muted, according to John Donaldson, director of fixed income at the Haverford Trust Co.

“The municipal market continues to feel the impact from so much of the new issue supply being rushed into the fourth quarter of 2017,” he said in an interview. “We continue to see better value from new issue pricing as there is little selling pressure in the secondary market.”

He said ratios returning to historic levels is keeping municipals from the volatility being experienced in other markets.

A recent development has been more attractive yields in the front end of the curve as munis have started to catch up to the rise in Treasury bill and London Interbank Offered Rate yields, he noted.

“For several weeks, taxable bonds had been more attractive on an after-tax basis,” Donaldson said. “That relationship has adjusted back closer to historical norms. Investor sentiment is OK, maybe because munis are less correlated to the equity markets and therefore somewhat removed from that volatility in recent weeks.”

Secondary market
Municipal bonds were stronger on Thursday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields fell as much as three basis points in the one- to 30-year maturities.

High-grade munis were also stronger with yields calculated on MBIS’ AAA scale falling by as much as three basis points all across the curve.

Additionally, municipals were stronger according to Municipal Market Data’s AAA benchmark scale, which showed yields falling two to four basis points in the 10-year general obligation muni and dropping four to six basis points in the 30-year muni maturity.

Treasury bonds were stronger too, as stocks moved sharply lower.

On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 84.0% while the 30-year muni-to-Treasury ratio stood at 97.6%, according to MMD.

Primary market
Wells Fargo Securities priced the Dormitory Authority of the State of New York’s $606 million of Series 2018A tax-exempt and Series 2018B taxable revenue bonds for New York University.

The deal is rated Aa2 by Moody’s Investors Service and AA-minus by S&P Global Ratings.

In the competitive arena, Milwaukee sold $172.395 million of general obligation promissory notes consisting of $165.345 million of Series 2018N4 and B5 tax-exempts and $7.05 million of Series 2018 T6 and T7 taxables.

JPMorgan Securities won the tax-exempts with a true interest cost of 2.699%.

The deals are rated AA by S&P and Fitch Ratings.

Milwaukee also sold $110 million of Series 2018 R3 revenue anticipation notes.

Barclays and JPMorgan won the notes with TICs of 1.8258% and 1.8298%, respectively.

The RANs are rated SP1-plus by S&P and F1-plus by Fitch.

Thursday’s bond sales

New York:
Click here for the DASNY $326M tax-exempt deal

Bond Buyer 30-day visible supply at $11.04B
The Bond Buyer's 30-day visible supply calendar increased $1.74 billion to $11.04 billion on Wednesday. The total is comprised of $3.91 billion of competitive sales and $7.13 billion of negotiated deals.

Previous session's activity
The Municipal Securities Rulemaking Board reported 47,887 trades on Wednesday on volume of $16.35 billion.

California, New York and Texas were the states with the most trades, with the Golden State taking 18.541% of the market, the Empire State taking 15.681% and the Lone Star State taking 8.757%

ICI: Long-term muni funds see $60M outflow
Long-term municipal bond funds saw an outflow of $60 million in the week ended April 25, the Investment Company Institute reported on Wednesday.

This followed an outflow of $830 million out of the tax-exempt mutual funds in the week ended April 18 and outflows of $696 million and $110 million in the two prior weeks.

Taxable bond funds saw an estimated inflow of $2.34 billion in the latest reporting week, after seeing an inflow of $9.32 billion in the previous week.

ICI said the total estimated inflows to long-term mutual funds and exchange-traded funds were $1.28 billion for the week ended April 25 after inflows of $7.32 billion in the prior week.

Tax-exempt money market funds saw inflows
Tax-exempt money market funds experienced inflows of $981.2 million, raising their total net assets to $131.72 billion in the week ended May 1, according to The Money Fund Report, a service of This followed an outflow of $682.1 million on to $130.74 billion in the previous week.
The average, seven-day simple yield for the 202 weekly reporting tax-exempt funds fell to 1.22% from 1.26% the previous week.

The total net assets of the 830 weekly reporting taxable money funds grew to $3.57 billion to $2.637 trillion in the week ended April 30, after an inflow of $22.7 million to $2.634 trillion the week before.

The average, seven-day simple yield for the taxable money funds increased to 1.35% from 1.33% from the prior week.
Overall, the combined total net assets of the 1,032 weekly reporting money funds increased $4.55 billion to $2.769 trillion in the week ended April 30, after outflows of $659.4 million to $2.764 trillion in the prior week.

Treasury announces auction details
The Treasury Department announced these auctions:

  • $42 billion of 182-day bills selling on May 7; and
  • $48 billion of 91-day bills selling on May 7.

Gary Siegel contributed to this report.

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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