




Muni yields were on the rise again on Friday, climbing as much as five basis points for some maturities, according to traders, as the market looked ahead to paltry offerings during Thanksgiving week.
Volume for the week ending Nov. 25 is forecast by Ipreo to plummet to $1.04 billion, from a revised total of $6 billion in the past week, according to revised data from Thomson Reuters.
Primary Market
The upcoming slate is composed of $897 million of negotiated bond deals and $145 million of competitive bond sales.
"The lack of volume isn't surprising, giving the holiday week plus the jump in yields we saw this past week," said Dawn Mangerson, managing director and senior portfolio manager at McDonnell Investment Management. "The deals that did price, there was plenty of demand as money still needs to be invested."
The week will be shorted to essentially two days, with Thanksgiving coming on Thursday. After the spike in yields this past week, most issuers will start coming after Thanksgiving and more rapidly into December with a possible interest rate hike looming in mid-December.
"Anyone that wants to bring deals or that might be on the fence about coming to market will end up getting in there before the Fed makes their announcement on monetary policy," she said. There is only one scheduled negotiated deal larger than $90 million for the week ahead, plus a handful of other larger deals that were bumped on to the day-to-day calendar during the past week.
JPMorgan is scheduled to price the state of New York Mortgage Agency's $97.615 million of homeowner mortgage revenue bonds, consisting of both alternative minimum tax and non-AMT for institutions on Tuesday after a retail order period on Monday. The deal is rated Aa1 by Moody's Investors Service.
The deals on the day-to-day calendar were originally expected to price the week of Nov. 14, but market volatility from post-presidential election jitters rocked the market as yields shot up 22 basis points on Monday.
Among those deals were $1.024 billion of New York's Tobacco Settlement bonds, Public Hospital District No. 1 of King County, Wash.'s $186 million of limited tax general obligation bonds, Montgomery County Municipal Utility District No. 13, Texas' $141 million of road and limited tax refunding bonds and Mississippi's $223 million of GO refunding bonds.
There are no scheduled competitive deals larger than $100 million.
"Although we like many others expect the meeting will result in a move in rates in December, it is so well telegraphed and factored into the market but I think the bigger thing to think about is the new wild card on the table with the new administration early in the New Year," said Jim Grabovac, senior portfolio manager at McDonnell. "I also think that the markets in general have reacted to the election with certainty, but the truth is we honestly don't know what will happen and there is a lot of uncertainty heading into the future."
While Chicago and the Chicago Board of Education are opting to push off planned general obligation sales until the new year, Chicago still plans to bring its $1.1 billion new-money O’Hare International general airport revenue bond issue to market in the coming weeks. Morgan Stanley is the lead manager on the deal tentatively slated to price the week Nov. 28.
The city sold $1 billion of refunding O’Hare GARBs early this month. The A-rated paper goes down more smoothly with investors than the city’s battered GOs. The 10-year on a $463 million series of bonds not subject to the alternative minimum tax offered a coupon of 5% and yield of 2.28%, 58 basis points over the AAA and just 6 basis points over the single-A benchmark. The city erased much of the penalty imposed on its last O'Hare sale – for $2 billion – in October 2015. The spread to MMD triple-A was 124 basis points on the 25-year bond with spreads on shorter maturities in the 90 basis point range. The spread to a single-A credit on the 2040 bond was 62 basis points.
Secondary Market
Munis were weaker on Friday, as the yield on the 10-year benchmark muni general obligation was five basis points higher to 2.26% from 2.21% on Thursday, while the yield on the 30-year increased by two basis points to 3.03% from 3.01%, according to a final read of Municipal Market Data's triple-A scale.
Since Election Day, muni yields have risen as much as 55 basis points. On Tuesday, Nov. 8, the 10-year muni yield stood at 1.71% while the 30-year yield was at 2.54%.
U.S. Treasuries were weaker at the close on Friday. The yield on the two-year rose to 1.06% from 1.03% from Thursday, the 10-year Treasury was higher at 2.33% from 2.28%, while the yield on the 30-year Treasury bond increased to 3.02% from 2.99%.
The 10-year muni to Treasury ratio was calculated at 96.9% on Friday compared to 97.2% on Thursday, while the 30-year muni to Treasury ratio stood at 100.5% versus 100.7%, according to MMD.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Nov. 17 were from California and North Carolina,
In the GO bond sector, the California state 4s of 2035 were traded 20 times. In the revenue bond sector, the University of North Carolina at Chapel Hill Hospital 4s of 2046 were traded 64 times. And in the taxable bond sector, Los Angeles Department of Airports 3.887s of 2038 were traded 45 times.
Week's Most Actively Quoted Issues
Illinois issues were among the most actively quoted bonds in the week ended Nov. 17, according to Markit.
On the bid side, the Illinois state revenue 5.1s of 2033 were quoted by 77 unique dealers. On the ask side, the Chicago taxable 6.207s of 2036 were quoted by 90 unique dealers. And among two-sided quotes, the Illinois state taxable 5.1s of 2033 were quoted by 23 unique dealers.