This week's issuance reached a revised $11.38 billion on Friday as the municipal market maintained its fifth straight week of rising volume, with a total potential sales dropping to $3.29 billion next week.
This week's issuance, which included $10.02 billion of negotiated, was a weekly high for 2014, partly because of Puerto Rico's highly anticipated general obligation issuance that was upsized to $3.5 billion from the $3 billion originally scheduled. The state of California also completed a $1.79 billion GO bond sale which sold $1.11 billion of the bonds (62% of the total issuance) during the retail order period. Next week, $2.52 billion is scheduled for negotiated sale and $764 million for competitive.
"Munis finished this week on a strong note, buoyed by a heavy, but well placed, new issue slate, noteworthy for the successful sale of an upsized $3.5 billion Puerto Rico GO issue," noted Janney Capital Markets in its March 14 Daily Fix report.
The municipal market has been starved for paper the first two months of 2014. This week's heavy issuance slightly boosted total assets of weekly reporting municipal mutual funds to $282.2 billion from $281.69 billion, according to data provided by Lipper.
"We just made it through a very big week and yet the Muni Market Data scale didn't adjust upward," said a managing director based in New York. "My feeling is that the market took the supply very well. The demand seems to be there. Muni yields crept lower through the week. There has been a resilient demand for munis even with an increase of supply."
Friday opened quietly in terms of issuance. Goldman, Sachs & Co.-led $319 million of Southern California Public Power bond pricing was released Friday morning. The bonds, rated AA-negative by Standard & Poor's and Fitch Ratings, ranged in yield from 3.51% with a 5% coupon in 2030 to 3.96% with a 5% coupon in 2038.
The city of Houston Combined Utility System's revenue refunding bond issuance of $605.195 million entered its free-to-trade period this morning. J.P. Morgan Securities is the lead underwriter for the issuance, and was rated AA by S&P and Fitch.
"As people do their taxes they will realize that munis are a good investment. Over the next few months we'll go back to moderate supply probably until October. This week the market handled supply pretty well," said the managing director based in New York.
Municipal bond yields were as much as four basis points lower on long-term bonds, according to Municipal Market Advisors.
Compared to last month, yields were unchanged to marginally lower throughout the yield curve, said managing director John Dillon and chief bond strategist at Morgan Stanley in a report.
Treasury yields remained mostly steady, with the two-year up one basis point to 3.60%, the 10-year up one basis point to 2.66%, while the 30-year flat at 3.59%.
