Municipal bonds steadied on Friday with little trading activity following two days of strengthening.
"There's not a whole lot going on," a New York trader said. "Treasuries are mixed and munis are going to be off. I think everyone is just watching the world cup right now."
Munis were steady Friday for shorter and longer maturities, while yields on bonds maturing from 2022 to 2031 rose one basis point, according to the Municipal Market Data 5% scale. Yields were steady across the curve, according to Municipal Market Advisors.
Treasuries strengthened Friday, with the 30-year yields falling two basis points to 3.45% and the 10-year benchmark sliding one basis point to 2.62%. The two-year was unchanged at 0.46% from Thursday's market close.
After opening on a strong note Monday as tensions in Iraq drove some investors to safer assets, the release of positive economic data on Tuesday caused a brief sell-off in the muni market.
The Federal Open Market Committee's announcement on Wednesday that the Federal Reserve's economic outlook is slightly less positive for the future caused munis to pick back up for two days straight.
Los Angeles will take the lead on new issuance volume next week, offering nearly $1.4 billion of tax and revenue anticipation notes expected to be priced on Wednesday.
"I think we're going to do quite well," Miguel Santana, the city administrative officer of Los Angles said in an interview. "A lot of it has to do with L.A.'s economy. The fundamentals are there even though we have a new mayor. The government is staying flat and every year we're getting stronger and stronger."
L.A.'s 2014-2015 budget has grown 5.56% and is anticipated to continue growing through 2018.
The notes mature June 25, 2015.
"We'll be paying attention to L.A., but the risk is so short," a trader based in New York said. "It will be well received though, because people just want somewhere to park their cash."
Ramirez & Co. is the lead underwriter. The deal received a MIG 1 rating from Moody's Investors Service, SP-1-plus from Standard and Poor's and F1-plus from Fitch Ratings. Santana said they recently requested a rating from Kroll Bond Rating Agency.
Santana along with other representatives from L.A.'s finance team have been touring the east coast this past week and are in town Friday promoting the TRANs.
"Most of our investors are east coast investors," Santana said. "We also have some retail investors from all over the country."
The Los Angeles note isn't the only billion dollar deal scheduled for next week.
"Supply is picking up next week, so there could be a little bit of pressure in the market," a New York trader said.
Not far behind Los Angeles, the New York State Dormitory Authority is expected to sell $1.1 billion of revenue bonds in the competitive market next Tuesday and the state of Washington will sell $1 billion of general obligation bonds by competitive bid on Wednesday.
"We'll also be keeping eye on the Dormitory deal since it's recently been upgraded by Moody's from Aa2 to Aa1," a New York trader said. "We'll be looking to it for spread tightening."
Other large deals for next week include $631 million of Texas Public Finance Authority refunding GOs and $500 million of GOs from the commonwealth of Massachusetts.
"There's not a whole lot going on," a New York trader said. "Treasuries are mixed and munis are going to be off. I think everyone is just watching the world cup right now."
