Munis closed the week out on a quiet note, finishing Friday unchanged, according to traders, as market participants anticipated a good dose of new supply, after the holiday-shortened session.
Primary Market
Total volume for the week of July 15 is estimated by Ipreo at $8.7 billion, after a revised total of $1.4 billion was sold in the four-day July 4 week, according to Thomson Reuters data. The calendar includes $6.4 billion of negotiated deals and $2.3 billion of competitive sales.
"This week was pretty much a throwaway," one Midwest trader said Friday. "Nothing major happened; that's what happens when you have a holiday on a Monday with a lot of empty desks the other days of the week."
The New York City Transitional Finance Authority will hit the market with $1.05 billion of bonds, including one negotiated deal for $800 million – the largest deal of the week – and two competitive sales totaling $250 million.
Siebert Brandford Shank is scheduled to price the future tax secured subordinate bonds on Wednesday, after a two-day retail order period. The deal is expected to mature serially from 2018-2042 and is rated Aa1 by Moody's Investors Service and triple-A by S&P Global Ratings and Fitch Ratings.
The two competitive deals are both taxable, future tax secured subordinate bonds to be sold on Wednesday. One sale totals $63.095 million and the other $186.905 million.
"The demand is there and isn't going away; I think the market has some extra appetite from the lack of offerings this past week," the trader said. "It should pick up right back up to where it was before [July 4th]."
Loop Capital Markets is expected to price the Michigan Department of Transportation's $613.9 million of grant anticipation refunding bonds on Wednesday. The deal is scheduled to mature serially from 2018-2027 and is rated A2 by Moody's and AA by S&P.
JPMorgan is slated to price the Louisville/Jefferson County Metro Government Health System's $538.045 million of revenue bonds for Norton Healthcare Inc. on Tuesday. The deal is expected to mature serially from 2017-2037 and is rated A-minus by S&P and A by Fitch.
The largest single competitive bond sale on the docket is a $285.405 million offering general obligation limited tax bond bank refunding bonds from Clark Co., Nev. on Wednesday. The deal is rated Aa1 by Moody's and AA by S&P.
"I believe next week's slate will be well spoken for, fortified by the strong fund flows (with Lipper correction) we've seen all year," said Alan Schankel, municipal strategist at Janney. He referred to Lipper fund flow figures that initially showed municipal bond funds reporting the first outflow in 40 weeks, but were corrected to show an inflow of $737.996 million, in the week ending July 6. "The credits selling next week are largely solid names and should receive a good reception," Schankel said.
Secondary Market
Top shelf municipal bonds finished flat on Friday. The yield on the 10-year benchmark muni general obligation was unchanged from 1.31% on Thursday, while the 30-year muni yield was steady at 1.95%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were narrowly mixed on Friday after the release of the June employment report. Non-farm payrolls rose 287,000 last month from a downwardly revised gain of 11,000 in May, originally reported as a 38,000 rise. Economists surveyed by IFR Markets had expected payrolls to rise 175,000 in June.
The yield on the two-year Treasury rose to 0.61% from 0.59% on Thursday as the 10-year Treasury yield dropped to 1.36% from 1.39% and the yield on the 30-year Treasury bond decreased to 2.11% from 2.15%.
The 10-year muni to Treasury ratio was calculated at 96.0% on Friday compared to 94.2% on Thursday, while the 30-year muni to Treasury ratio stood at 92.5% versus 91.1%, according to MMD.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended July 7 were from Washington state and South Carolina,
In the GO bond sector, the Washington 5s of 2023 were traded 29 times. In the revenue bond sector, the S.C. Public Service Authority 2.25s of 2051 were traded 59 times. And in the taxable bond sector, the S.C. PSA 2.388s of 2023 were traded 66 times.
Week's Most Actively Quoted Issues
California issues were among the most actively quoted names in the week ended July 7, according to Markit.
On the bid side, the California taxable 7.55s of 2039 were quoted by nine unique dealers. On the ask side, the University of California revenue 5s of 2051 were quoted by 18 unique dealers. And among two-sided quotes, the California taxable 7.6s of 2040 were quoted by 18 dealers.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $664 million to $12.43 billion on Friday. The total is comprised of $4.38 billion of competitive sales and $8.05 billion of negotiated deals.
Lipper Corrects Data: Muni Bond Funds See Inflows
For the 40th straight week, municipal bond funds reported inflows, according to corrected Lipper data released on Friday. On Thursday, Lipper erroneously reported that weekly reporting funds had experienced an outflow.
The error was made due to a data miscalculation of several American Funds single-state funds that had been consolidated into its national fund.
The weekly reporters saw $737.996 million of inflows in the week ended July 6, after inflows of $716.009 million in the previous week, Lipper said.
The four-week moving average remained positive at $950.126 million after being in the green at $978.741 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 $374.956 million in the latest week after inflows of $671.567 million in the previous week. Intermediate-term funds had inflows of $147.424 million after inflows of $124.510 million in the prior week.
National funds had inflows of $688.442 million on top of inflows of $614.091 million in the previous week. High-yield muni funds reported inflows of $200.676 million in the latest reporting week, after inflows of $380.466 million the previous week.
Exchange traded funds saw inflows of $197.821 million, after inflows of $66.835 million in the previous week.
