The municipal bond market saw the last of the week's big deals price on Thursday after as much as $8 billion of new supply poured into the market the day before. Prices of high-quality munis rose, according to Municipal Market Data.
Investor demand for new issues is expected to remain high, several market participants said, ahead of the dwindling supply in the last few weeks of 2014.
Primary Market
Nassau County, N.Y., came to market on Thursday with two separate issues totaling about $439 million, consisting of a competitive bond sale and a negotiated note deal.
JPMorgan Securities won the $238.87 million of general improvement bonds with a true interest cost of 2.9941%. The bonds were priced to yield from 0.50% with a 5% coupon in 2016 to 3.13% with a 5% coupon in 2029; the 2030 maturity wasn't reoffered. The issue is rated A2 by Moody's Investors Service, A-plus by Standard & Poor's and A by Fitch.
In the short-term sector, Bank of America Merrill Lynch priced the $200 million general obligation tax anticipation notes, Series A and B. The Series A notes were priced to yield 0.34% with a 2% coupon in September 2015; the Series B notes were priced to yield 0.35% with a 2% coupon on October 2015. The issue is rated SP1-Plus by S&P and F1 by Fitch.
Bank of America Merrill Lynch priced $336.53 million Massachusetts Federal Highway grant anticipation notes (accelerated bridge program). The issue was priced to yield from 0.27% with a 2% coupon in 2016 to 2.48% with a 5% coupon in 2027. The issue is rated Aa1 by Moody's and triple-A by S&P.
PNC Capital Markets priced $294.22 million Pennsylvania Turnpike Commission turnpike revenue bonds. The issue was priced to yield from 1.18% with a 4% coupon in 2018 to 3.74% with a 5% coupon in 2044. The bonds are rated A1 by Moody's and A-plus by S&P and Fitch.
Citigroup Global Markets priced $130.125 million El Paso, Texas, water and sewer revenue refunding bonds. The issue was priced to yield from 0.37% with a 3% coupon in 2016 to 3.63% with a 3.50% coupon in 2035. The bonds are rated AA-plus by S&P and Fitch.
Bank of America Merrill Lynch priced for institutions only an issue of $96 million Build New York City Resource Corp. solid waste disposal revenue bonds for the Pratt Paper Inc. project. The bonds were priced at par to yield from 3.75% in 2020, 4.50% in 2025 and 5% in 2035. The issue is not rated.
Secondary Market Trading
High-grade municipal bond yields were lower on Thursday. The yield on the benchmark 10-year general obligation fell two basis points to 2.06% from 2.08% at Wednesday's close while the yield on 30-year GOs was down by four basis points to 2.98% from 3.02% from Wednesday, according to the final read of MMD's triple-A scale.
"The muni secondary generally held its ground, letting the primary smoke clear and encouraged by narrow range-trade in Treasuries," said Randy Smolik, MMD senior market analyst.
Treasury yields were slightly lower on Thursday, with the two-year note yield falling to 0.54% from 0.55% on Wednesday. The 10-year yield fell to 2.26% from 2.29% while the 30-year declined to 2.96% from 2.99% on Wednesday.
On Thursday, the 10-year muni-to-Treasury ratio closed at 91.6% versus 91.1% on Wednesday; the 30-year muni to Treasury ratio closed at 101.0%, compared with 101.0% on Wednesday.
Long-Term Municipal Mutual Funds See Inflows
Long-term municipal bond mutual funds reported $769 million of inflows for the week ended Nov. 25, according to the Investment Company Institute. This compares to inflow of $771 million in the previous week.
Taxable bond funds saw inflows of $2.590 billion versus inflows of $1.758 billion for the previous week, ICI reported. This brought total bond fund inflows to $2.59 billion for the week ended Nov. 25 compared to inflows of $2.530 billion in the previous week, ICI said.
"Demand for tax-free bonds remains solid," Janney Capital Markets says in its latest research report.
Janney said however that while the new investment brought the annual inflow total to $23.7 billion, "It's notable, however, that muni funds still have not recouped 2013's net outflows of $56 billion."
Muni Money Funds Dip at Year End
Outflows, though modest, returned to tax-exempt money market funds in the week ended Dec. 1 when $800,000 exited the industry and total net assets fell slightly to $252.65 billion, according to The Money Fund Report, a service of iMoneyNet.com.
The outflows compared to the prior week;s arrival of $287.7 million as total net assets rose to $252.80 billion.
The average seven-day yield for the 407 weekly reporting tax-exempt money funds was unchanged at 0.01%, while the average maturity declined by one day to 39 days.
The total net assets of the 997 weekly reporting taxable money funds, meanwhile, grew by $7.84 billion to $2.441 trillion in the week ended Dec. 2, which is up from $2.426 trillion last week.
The average, seven-day yield for the taxable funds was steady at 0.01%, while the average maturity was unchanged at 45 days.
Overall the combined total net assets of the 1,404 weekly reporting money funds increased to $2.694 trillion after inflows of $7.84 billion in the week ended Dec. 2, which is up from a total of $2.679 trillion previously.
In contrast, the ICI reported that assets of tax-exempt money market funds rose 3.4% to $255.770 billion in the week ended Dec. 3. Retail assets rose 1.47% to $185.500 billion while institutional assets gained 1.87% to $70.270 billion, ICI said.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 44,152 trades on Wednesday for volume of $13.603 billion.
Most active on Wednesday, based on the number of trades, were the New Jersey State Trust Fund Authority Transportation Program's 2014 Series AA 4 ¼s of 2044 which traded 212 times with an average price of 99.323 for an average yield of 4.284%.
New Oak Introduces Comparative Fiscal Model for N.J., Ill.
A new analytic model that is designed to forecast the future fiscal conditions of New Jersey and Illinois was released on Thursday by NewOak, a credit and risk advisory firm.
The model is designed to provide analysts with a tool to run sensitivity scenarios for the two worst-rated states in the U.S. and will also let firms to design their own analysis.
"Given our expectations that Illinois and New Jersey will be among the major muni credit stories of 2015, we are pleased to share our latest analytical toolkit focusing on these two issuers," the firm said in a press release.
NewOak is an independent firm and has no political affiliation. It previously introduced a toolkit to help credit analysts look at Puerto Rico Electric Power Authority.
http://newoak.com/services/credit-risk-advisory/municipal-market-services-portfolio-solutions/
