Long end looks 'fatigued', while short end is 'improved' post FOMC

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A day after the Fed decided to hold interest rates at current levels, the muni market was “fatigued,” at least on the long end, while the short end saw improvement after a more dovish tone from the Federal Open Market Committee.

“The long-end seems to have run out of gas,” said one southern trader. “The muni market seems to have started to not move completely lockstep with Treasuries. Ratios have moved from a low of 71% to 82% in 10s and from 82% to 93% in 30s, which might help the case for munis as these rates move lower.”

The primary market saw some decent supply today to close out the week.

On Thursday, the Dormitory Authority of the State of New York (Aa1/ /AA+) sold $1.63 billion of state personal income tax general purpose revenue bonds.

The offerings consisted of: $419.31 million of Series 2019A Bidding Group 2 tax-exempts, $423.45 million of Series 2019A Bidding Group 4 tax-exempts won by Citi with a true interest cost of 3.6618%; $395.235 million of Series 2019A Bidding Group 1 tax-exempts won by Jefferies with a TIC of 3.4926%;, $396.145 million of Series 2019A Bidding Group 3 tax-exempts won by JPMorgan with a TIC of 1.3987%; and $11.975 million of Series 2019B taxables won by Morgan Stanley with a TIC of 1.8482%.

Bank of America priced Montgomery County Higher Education and Health Authority’s (A2/A/ ) $449.41 of revenue bonds for Thomas Jefferson University.

Morgan Stanley priced the States of Connecticut’s (Aaa/AAA/AAA) $279.85 million of state revolving fund general revenue green and refunding bonds.

“Demand is fairly robust today as municipals have cheapened nicely relative to Treasuries, so the relative value of tax-exempts is easy to see,” Michael Pietronico, CEO of Miller Tabak Asset Management said. “The municipal yield curve is steepening as shorter maturity bonds are in greater demand due to the impending rate cut by the Federal Reserve.”

Thursday’s bond sales

Montgomery County HEHA pricing

Montgomery County HEHA final pricing

State of Connecticut pricing

DASNY’s deal won by Jefferies

DASNY’s deal won by Citi

Secondary market
Munis were stronger on the MBIS benchmark scale on Thursday, with yields falling no more than two basis points in the 10-year maturity and falling less than one basis point in the 30-year maturity. High-grades were also stronger, with MBIS’ AAA scale showing yields no more than three basis points in the 10-year maturity and falling less than two basis points in the 30-year maturity.

On Refinitiv Municipal Market Data’s AAA benchmark, the yield on the 10-year GO was three basis points lower and the 30-year dropped two basis points at 1.63% and 2.32%, respectively.

The 10-year muni-to-Treasury ratio was calculated at 80.8% while the 30-year muni-to-Treasury ratio stood at 91.4%, according to MMD.

Treasuries were stronger as stocks traded higher. The Treasury three-month was yielding 2.139%, the two-year was yielding 1.722%, the five-year was yielding 1.735%, the 10-year was yielding 2.001% and the 30-year was yielding 2.527%.

BB index yields little changed in either direction
In the week ended June 20, the weekly average yield to maturity of the Bond Buyer Municipal Bond Index, which is based on 40 long-term bond prices, was up a tad to 3.72% from 3.71% the previous week.

The Bond Buyer's 20-bond GO Index of 20-year general obligation yields dipped one basis point to 3.51% from 3.52% the week before. It is at its lowest level since June 6, when it was at 3.48%.

The 11-bond GO Index of higher-grade 11-year GOs slipped one basis point to 3.05% from 3.06% the previous week. It is at its lowest level since June 6, when it was at 3.02%.

The Bond Buyer's Revenue Bond Index was one basis point lower to 4.00% from 4.01% the week before. It is at its lowest level in two weeks, when it was at 3.97%.

The yield on the U.S. Treasury's 10-year note dropped to 2.01% from 2.10%, while the yield on the 30-year Treasury dipped to 2.53% from 2.61%.
Muni money market funds see outflows again
Tax-exempt municipal money market fund assets fell $666.3 million, with total net assets dropping to $134.52 billion in the week ended June 17 according to the Money Fund Report, a publication of Informa Financial Intelligence.


The average seven-day simple yield for the 187 tax-free and municipal money-market funds jumped to 1.25% from 1.06% in the previous week.

Taxable money-fund assets increased $4.11 billion in the week ended June 18, bringing total net assets to $3.002 trillion, marking the first time the taxable total has reached or exceeded $3 trillion since the week ending Sept. 22, 2009, when the total was $3.010 trillion.

The average, seven-day simple yield for the 808 taxable reporting funds slipped to 1.99% from 2.01% in the prior week.

Overall, the combined total net assets of the 995 reporting money funds rose $3.45 billion to $3.137 trillion in the week ended June 18.

Previous session's activity
The MSRB reported 40,468 trades Wednesday on volume of $14.18 billion. The 30-day average trade summary showed on a par amount basis of $12.71million that customers bought $6.32 million, customers sold $4.28 million and interdealer trades totaled $2.11 million.

California, New York and Texas were most traded, with the Golden State taking 15.389% of the market, the Empire State taking 12.329% and the Lone Star State taking 9.072%.

The most actively traded security was the Commonwealth of Puerto Rico GOs 8s of 2035, which traded 23 times on volume of $64.5 million.

Treasury auctions bills
The Treasury Department Thursday auctioned $40 billion of four-week bills at a 2.240% high yield, a price of 99.833556.

The coupon equivalent was 2.179%. The bid-to-cover ratio was 2.86.

Tenders at the high rate were allotted 73.17%. The median rate was 2.110%. The low rate was 2.080%.

Treasury also auctioned $35 billion of eight-week bills at a 2.105% high yield, a price of 99.672556.

The coupon equivalent was 2.147%. The bid-to-cover ratio was 2.98.

Tenders at the high rate were allotted 69.11%. The median rate was 2.090%. The low rate was 2.050%.

Treasury auctions announced
The Treasury Department announced these auctions:

  • $32 billion seven-year notes selling on June 27;
  • $41 billion five-year notes selling on June 26;
  • $40 billion two-year notes selling on June 25;
  • $18 billion 1-year 10-month 0.139% floating rate notes selling on June 26;
  • $36 billion 182-day bills selling on June 24; and
  • $36 billion 91-day bills selling on June 24.

TIPS auctioned
The Treasury Department Thursday auctioned $15 billion of four-year 10-month inflation-indexed notes with a 1/2% coupon, at a 0.152% high yield, an adjusted price of 102.955042.

The bid-to-cover ratio was 2.55.

Tenders at the high yield were allotted 30.97%. All competitive tenders at lower yields were accepted in full.

The median yield was 0.100%. The low yield was 0.057%.

Gary E. 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 Ziad Saba at 212-803-6079 for more information.

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Primary bond market Secondary bond market Interest rates Federal Reserve FOMC State of California State of New York State of Texas State of Connecticut New York State Dormitory Authority
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