Prices of municipal bonds closed out the week slightly weaker, traders said, with some yields closing a basis point higher.
Muni yields have been on the rise since Feb. 1, reversing the January trend of declines that brought yields down to near record lows.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose one basis point to 2.05% from 2.04% on Thursday, while the yield on 30-year GO was also up one basis point to 2.87% from 2.86%, according the final read of Municipal Market Data's triple-A scale.
Since the start of the month, the yield on the muni 10-year benchmark general obligation has risen 31 basis points, while yield on the 30-year GO is 37 basis points higher, according to MMD.
Treasury prices were mostly lower on Friday. The two-year Treasury note's yield remained unchanged from 0.63% on Thursday, while the 10-year yield rose to 2.02% from 1.99% and the 30-year yield increased to 2.63% from 2.57%.
The 10-year muni to Treasury ratio was calculated at 101.0% on Friday versus 103.0% on Thursday, while the 30-year muni to Treasury ratio stood at 109.1% compared to 111.6%.
Puerto Rico
Prices of Puerto Rico general obligation bonds were trading sharply lower on Monday, after Standard & Poor's downgraded Puerto Rico's general obligation rating to B from BB, citing concerns about liquidity, the implementation risk of a proposed value added tax and a continued weak economy.
According to Markit, which tracks secondary trading of active securities, Commonwealth of Puerto Rico GO bonds of 2014 series A were trading at 81.88, or a yield of 10.114% Friday, compared with a price of 82.58, of a yield of 10.019%, on Thursday.
The Puerto Rico aqueduct and sewer authority revenue bonds, series 2012A senior lien were trading at 70.75, a yield of 7.867% on Friday, compared to 72, a yield of 7.722% on Thursday.
The Puerto Rico sales tax financing corporation sales tax revenue bonds, first subordinate series 2010A were trading at 68.65, a yield of 8.7%, compared to Thursday when they were at 72.49, a yield of 8.2%.
Primary Market
Muni volume for next week is estimated at $4.582 billion, according to Ipreo and The Bond Buyer. This is down from up a revised $5.682 billion this week, Thomson Reuters said.
Among the past week's biggest deals, by Bank of America Merrill Lynch priced a Trinity Health Credit Group sale, which had been delayed from the previous week and was separated into three series. The first series was priced for the Michigan Finance Authority with the highest yield coming in at 4.04% in 2038. The second series was priced for the Idaho Health Facilities Authority with the highest yield of 3.38% in 2028. The last series was priced for Montgomery County, Md., with the highest yield of 3.98% in 2044.
Barclays Capital priced South Carolina Public Service Authority's $957.045 million of Series 2015 revenue obligations for Santee Cooper. The Series A $450.01 million of tax-exempt refunding and improvement bonds were priced with the highest yield of 4% in 2055. The Series B $64.935 million of tax-exempt refunding bonds were priced with the highest yield of 2.53% in 2024. The Series C $272 million of tax-exempt refunding bonds were priced with the highest yield of 2.53% in 2022.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $1.368 billion to $9.195 billion on Thursday. The total is comprised of $1.892 billion competitive sales and $7.303 billion of negotiated deals.
MSRB Reports Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,422 trades on Thursday on volume of $11.496 billion. Most active on Thursday, based on the number of trades, was the St. Charles County, Mo., Public Water Supply District No. 2 lessee certificates of participation series 2015 3.625s of 2037, which traded 176 times at an average price of 99.488, with an average yield of 3.658%.
Tax-Exempt Bond Funds Report Inflows
Municipal bond funds which report weekly posted $460.253 million of inflows in the week ended Feb. 11, after inflows of $589.132 million in the week ended Feb. 4, according to the latest Lipper data.
The four-week moving average remained positive at $687.287 million in the latest week after being in the green at $735.354 million in the prior week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Muni bond funds have experienced inflows in each week of 2015, according to Lipper data. Inflows for the year total $4.740 billion.
Long-term muni bond funds saw inflows of $132.296 million in the latest week, after experiencing inflows of $373.103 million in the previous week.
High-yield muni funds recorded outflows of $187.026 million in the latest reporting week, after seeing inflows of $164.196 million in the prior week. It was the first outflow since Dec. 31, 2014.
Exchange-traded funds had inflows of $109.534 million, after recording inflows of $166.656 million in the previous week.
In contrast, long-term municipal bond mutual funds saw $963 million of inflows in the week ended Feb. 4, according to the Investment Company Institute. ICI reported that inflows into long-term funds were $1.275 billion in the week ended Jan. 28.
