The municipal bond market on Monday was ready to absorb this week's new supply, the first substantial new issuance in over two weeks.
Yields on high-quality municipal bonds were lower as Treasuries gained, traders said.
PRIMARY MARKET
About $3.24 billion of new volume is set to hit the screens this week, consisting of about $2.185 billion of negotiated deals and $1.055 billion of competitive sales.
Barclays Capital is expected to price the top deal of the week - the Dormitory Authority of the State of New York's $1 billion general purpose state personal income tax revenue bonds. The deal is slated to be priced for retail investors on Tuesday, followed by the institutional pricing on Wednesday. The DASNY bonds have been rated AA-plus by Fitch Ratings.
Citi is set to price the state of Oregon's Department of Administrative Services' $412 million lottery revenue bonds on Thursday. The deal is rated Aa2 by Moody's Investors Service and AAA by Standard & Poor's.
Citi is also expected to price the Broward County, Fla., School Board's $273 million certificates of participation on Wednesday. The COPs are rated A1 by Moody's, A by S&P and A-plus by Fitch.
Miami-Dade County, Fla., has three separate sales of general obligation bonds totaling $371.93 million going up for bid on Tuesday. All three competitive deals are rated Aa2 by Moody's and AA by S&P.
Shelby County, Tenn., will sell a $172.6 million general obligation refunding bond issue in a competitive sale on Thursday. This deal is rated Aa1 by Moody's and AA-plus by both S&P and Fitch.
SECONDARY MARKET
Prices of top quality municipal bond were stronger on Monday. The yield on the benchmark 10-year general obligation dropped five basis points to 1.96% from 2.01% on Friday, while the yield on 30-year GOs declined six basis points to 2.77% from to 2.83%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were higher on Monday, with the two-year note yield decreasing to 0.66% from 0.67% on Friday. The 10-year yield declined to 2.03% from 2.12%, while the 30-year yield dropped to 2.61% from 2.70% on Friday.
On Monday, the 10-year muni to Treasury ratio was at 95.6% compared to 94.8% on Friday, while the 30-year muni to Treasury ratio was at 106.4% versus 101.1% on Friday.
MSRB REPORTS PREVIOUS SESSION'S ACTIVITY
The Municipal Securities Rulemaking Board reported 18,034 trades on Friday on volume of $2.042 billion. Most active on Friday, based on the number of trades, was the New Jersey Transportation Trust Fund Authority transportation program bonds, Series AA 4 1/4s of 2044, which traded 114 times with an average price of 100.808 and an average yield of 4.14%.
LIPPER REPORTS MUNI BOND OUTFLOWS
Municipal bond funds which report weekly posted $9.414 million of outflows in the week ended Dec. 31, after experiencing inflows of $659.448 million in the previous week, according to the latest Lipper data.
It was the first time since July that the funds saw outflows. Investors have put money into the funds in 45 out of 53 weeks in 2014.
The four-week moving average remained positive at $489.142 million in the latest week after remaining in the green at $534.668 million in the prior week. A moving average is an analytical tool used to smooth out price moves by filtering out fluctuations.
Long-term muni bond funds saw outflows of $267.407 million in the latest week, compared to inflows of $156.995 million in the previous week. Exchange-traded funds had inflows of $55.834 million, after seeing inflows of $49.986 million in the prior week.
High-yield muni funds recorded outflows of $64.769 million in the week ended Dec. 31, after seeing outflows of $42.720 million in the week ended Dec. 24. High-yield funds saw inflows in the three prior weeks — $298.639 billion in the week ended Dec. 17, $286.277 billion in the week ended Dec. 10, and $117.377 billion in the week ended Dec. 3.
MONEY MARKET FUNDS
Tax-exempt money market funds increased $709.6 million, bringing total net assets to $260.29 billion in the week ended Dec. 30, according to The Money Fund Report, a service of iMoneyNet.com. The funds saw $2.730 billion of inflows in the prior week.
The average seven-day yield for the 396 weekly reporting tax-exempt money funds held steady at 0.1%, while the average maturity decreased by one day to 38 days compared to the previous week.
The 994 weekly reporting taxable money market funds, meanwhile, reported inflows of $11.86 billion, bringing total assets to $2.494 trillion. The average, seven-day yield for the taxable money funds remained unchanged at 0.01%, while the average maturity declined two days to 43 days.
Overall, the combined total net assets of the 1,390 weekly reporting money funds grew $12.57 billion in the week ended Dec. 30 to $2.754 trillion, marking the 11th straight week of reported inflows, according to The Money Fund Report.
