With the last full week of Winter drawing to a close, the municipal bond market saw a spate of new deals price after buyers increased their support of long-term muni funds.

A New York trader said that while the day was mostly quiet, he noticed a bit of a shift in buyer sentiment going into the close.

“Munis in general are psychologically turning the corner, from everything is for sale and no interest on the bid side to there’s money to be spent, although it’s cautious money,” he said.

“This morning there was a decent amount of long-end activity, which is contrary to what we have been seeing, but it’s gotten very cheap,” with Treasuries building a new base to a tighter range, he said. “The general consensus of the sky is falling in Treasuries is mitigated a bit.”

The market was not getting much follow through Thursday afternoon, as result of a lack supply at the appropriate levels, the trader suggested.

“It definitely feels like there has been psychological change between the bid side of the muni market and the supply and demand side. The market has been on the defensive for the better part of this year because of the follow through demand everyone anticipated coming into January,” he continued.

Since then, as rates have risen, municipals have outperformed, thought mostly on shorter end, he said.

“The bid side is now moving out on the curve as it feels a little more comfortable -- and investors realize rates aren’t going up forever,” he said. “There’s a better bid for the longer duration marketplace.”

Overall, he said there is more money to be spent than bonds available.

“With all projections of supply being down, there will be net negative supply in the market for all of 2018,” he said. “The caveat to that is the buying community is shrinking a little bit due to tax reform and corporate tax rates declining.

“Mom and pop still have to spend money, but they have been parking it in the front end of the curve, with a solid guaranty of principal and interest.”

He said change is occurring slowing in the municipal market, but sometimes it takes the opposite scenario from what investors are expecting to bring out a bid side, such as this week’s decent size new issues that presented price discovery.

ICI: Long-term muni funds see $214M inflow
Long-term municipal bond funds saw an inflow of $214 million in the week ended March 7, the Investment Company Institute reported on Wednesday.

This followed inflows of $110 million into the tax-exempt mutual funds in the week ended Feb. 14 and $481 million in the week ended Feb. 21 and outflows of $640 million in the week ended Feb. 14 and $588 million in the week ended Feb. 7.

Taxable bond funds saw estimated inflows of $1.31 billion in the latest reporting week, after experiencing inflows of $5.07 billion in the previous week.

ICI said the total estimated outflows to long-term mutual funds and exchange-traded funds were $5.26 billion for the week ended March 7 after inflows of $16.74 billion in the prior week.

Tax-exempt money market funds saw outflows
Tax-exempt money market funds experienced outflows of $600.6 million, lowering total net assets to $135.39 billion in the week ended March 13, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $1.61 billion to $135.99 billion in the previous week.

The average, seven-day simple yield for the 198 weekly reporting tax-exempt funds increased to 0.67% from 0.64% the previous week.

The total net assets of the 831 weekly reporting taxable money funds decreased $4.76 billion to $2.672 trillion in the week ended March 12, after an outflow of $2.64 billion to $2.677 trillion the week before.

The average, seven-day simple yield for the taxable money funds increased to 1.09% from 1.06% from the prior week.

Overall, the combined total net assets of the 1,029 weekly reporting money funds decreased $5.36 billion to $2.807 trillion in the week ended March 12, after outflows of $4.24 billion to $2.813 trillion in the prior week.

Primary Market
JPMorgan took the New York Local Government Assistance Corp.’s $257.82 million of Series 2018A senior lien refunding bonds with a true interest cost of 1.5293%.

In the negotiated sector, Morgan Stanley priced the Miami-Dade County Educational Facilities Authority, Fla.’s $233.57 million of Series 2018A revenue bonds for the University of Miami.

Wells Fargo Securities priced the Public Finance Authority’s $147.12 million pf Series 2018A and Series 2018B taxable refunding revenue bonds for the Hawai'i Pacific Health Obligated Group.

Bank of America Merrill Lynch priced Alameda County, Calif.’s $240 million of Series 2018A taxable general obligation bonds (Measure A1) dedicated unlimited ad valorem property tax bonds.

Ramirez & Co. received the written award on the New York State Energy Research and Development Authority’s $18.5 million of Series 2018A climate bond certified residential solar financing green revenue bonds.

Jefferies priced the Golden State Tobacco Securitization Corp., Calif.’s $110.78 million of Series 2018A enhanced tobacco settlement asset-backed bonds.

Thursday’s bond sales
N.Y. LGAC sale
Click here for the LGAC winning bid

U. of Miami deal
Click here for the Fla. pricing wire

Alameda County deal
Click here for the California pricing

Public Finance Authority
Click here for the PFA deal

NYS Energy deal
Click here for the NYS ERDA deal

Golden State tobacco deal
Click here for the tobacco pricing

Previous session's activity
The Municipal Securities Rulemaking Board reported 41,785 trades on Wednesday on volume of $12.83 billion.

California, New York and Texas were the states with the most trades, with the Golden State taking 19.161% of the market, the Empire State taking 11.868% and Lone Star State taking 7.675%.

Bond Buyer 30-day visible supply at $7.3B
The Bond Buyer's 30-day visible supply calendar decreased $289.9 million to $7.30 billion on Friday. The total is comprised of $2.98 billion of competitive sales and $4.32 billion of negotiated deals.

Treasury releases auction details
The Treasury Department on Thursday announced the following auctions for next week:

  • $45 billion of 182-day bills selling on March 19;
  • $51 billion of 91-day bills selling on March 19; and
  • $11 billion of 9-year 10-month TIPs selling on March 22.

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.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.
Christine Albano

Christine Albano

Christine Albano is a reporter in the Investor’s & Investing beat, which she has covered for the past two decades. She has a wide range of buy side sources in the municipal market.
Chip Barnett

Chip Barnett

Chip Barnett is a journalist with more than 40 years of experience. Barnett is currently Senior Market Reporter for The Bond Buyer.
Aaron Weitzman

Aaron Weitzman

Aaron Weitzman is a markets reporter for The Bond Buyer, focusing on the sell side of the municipal bond market.