With the prospect of changes in tax treatment looming, another torrent of bond issuance awaits market participants in the coming week.

Ipreo estimates volume will come back down to earth to $11.14 billion from the revised total of $16.41 billion sold in the past week, according to updated figures from Thomson Reuters. The calendar for the week ahead is composed of $10.98 billion of negotiated deals and $163 million in competitive sales.

There are 35 deals on the calendar $100 million or larger in par amount, with all of them coming via the negotiated route.

The issuance this month has skyrocketed after the House version of the tax bill called for a ban on both advance refundings and PABs. As of Dec. 14th, the market has seen $40.43 billion flow into the market in the month so far. The market Friday was expecting the final bill to allow some PABs, while still ruling out advance refundings.

Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management.
Dan Heckman

“I am pleasantly surprised with how the muni market handled the supply in recent weeks,” said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management. “In totality, the market has performed amazingly well [through this short lived supply surge] as Investors recognized a buying opportunity, since we are most likely looking at less supply in 2018.”

Heckman said he expects demand will continue to be at least decent as there is still money on the sidelines.

“I think we could see a little more volatility in the upcoming week," he said. "Things get trickier right ahead of Christmas. This is the last week to really get these deals done so that they can close in time.”

Heckman said that the first week of December the issuers had no problem naming their price, but as the supply kept coming and tax reform got a little more clear, that this past week, those issuers had a tough time naming their price. He expects more of the same in the coming week.

“Whenever you get a tidal wave of supply, you are pleased to see it handled as well as it did,” said Heckman. “You want markets to preform good and bad and in this case, it was a win/win situation, for the issuers and then also the buyers in front of tax reform. “

Barclays is scheduled to price Houston, Texas’ $1.007 billion of pension obligation taxable bonds on Tuesday. The deal is rated Aa3 by Moody’s Investors Service and AA by S&P Global Ratings.

Jefferies is expected to price Railsplitter Tobacco Settlement Authority, Ill.’s $678.61 million on Wednesday.

Goldman Sachs is slated to price New York Metropolitan Transportation Authority’s $608.61 million of revenue refunding bonds on Monday. The deal is rated A1 by Moody’s and AA-minus by S&P and Fitch Ratings.

Secondary market
The MBIS municipal non-callable 5% GO benchmark scale was stronger in late trading on Friday.

The 10-year muni benchmark yield declined to 2.272% from Thursday’s final read of 2.285%, according to Municipal Bond Information Services. The MBIS 30-year benchmark muni yield decreased to 2.743% from 2.750%.

The MBIS benchmark index, which is comprised of investment-grade municipal securities, is updated hourly on the Bond Buyer Data Workstation.

Top-rated municipal bonds finished mixed on Friday. The yield on the 10-year benchmark muni general obligation was unchanged from 1.99% on Thursday, while the 30-year GO yield rose one basis point to 2.58% from 2.57%, according to the final read of MMD’s triple-A scale.

U.S. Treasuries were mixed on Friday. The yield on the two-year Treasury gained to 1.84% from 1.81%, the 10-year Treasury yield climbed to 2.36% from 2.35% and the yield on the 30-year Treasury dipped to 2.69% from 2.71%.

On Friday, the 10-year muni-to-Treasury ratio was calculated at 84.5% compared with 84.8% on Thursday, while the 30-year muni-to-Treasury ratio stood at 96.0% versus 94.8%, according to MMD.

Week's actively traded issues
Some of the most actively traded bonds by type in the week ended Dec. 15 were from Connecticut, Michigan and California issuers, according to Markit.

In the GO bond sector, the Connecticut 5s of 2018 were traded 57 times. In the revenue bond sector, the Michigan Finance Authority 5s of 2047 were traded 55 times. And in the taxable bond sector, the San Jose, Calif., Redevelopment Successor Agency 3.375s of 2034 were traded 78 times.

Week's actively quoted issues
Puerto Rico, New York and Chicago names were among the most actively quoted bonds in the week ended Dec. 15, according to Markit.

On the bid side, Puerto Rico Commonwealth GO 5s of 2041 were quoted by 70 unique dealers. On the ask side, New York Metropolitan Transportation Authority revenue 3.25s of 2036 were quoted by 222 dealers. And among two-sided quotes, Chicago taxables 6.314s of 2044 were quoted by 27 unique dealers.

Lipper: Muni bond funds saw inflows
Investors in municipal bond funds reversed course and put cash back into the funds in the latest week, according to Lipper data released on Thursday.

The weekly reporters saw $216.923 million of inflows in the week of Dec. 13, after outflows of $807.203 million in the previous week.

Exchange traded funds reported inflows of $146.556 million, after inflows of $127.808 million in the previous week. Ex-ETFs, muni funds saw $70.366 million of outflows, after outflows of $935.011 million in the previous week.

The four-week moving average was positive at $42.348 million, after being in the green at $92.547 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 $376.086 million in the latest week after outflows of $140.663 million in the previous week. Intermediate-term funds had outflows of $54.970 million after outflows of $285.696 million in the prior week.

National funds had inflows of $424.665 million after outflows of $637.093 million in the previous week.

High-yield muni funds reported inflows of $249.618 million in the latest week, after outflows of $236.365 million the previous week.

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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