Municipal bond market participants are looking ahead to next week's new-issue slate with a bit of trepidation as they keep a keen watch on yields.
On Thursday, prices of top-rated munis fell for the fourth straight day, with yields on some bonds up two basis points at the close.
Secondary Market
Treasury prices were lower after the release of Friday's positive employment report. The two-year note yield rose to 0.61% from 0.52% on Thursday; the 10-year yield increased to 1.90% from 1.81%, while the 30-year yield rose to 2.46% from 2.42%.
On Thursday, the yield on the muni 10-year benchmark general obligation rose two basis points to 1.86% from 1.84% on Wednesday, while the yield on 30-year GOs increased two basis points to 2.66% from 2.64%, according to the final read of Municipal Market Data's triple-A scale.
Since Monday, yields on the muni 10-year have risen by 12 basis points while yields on the 30-year have risen by 16 basis points.
On Thursday, the 10-year muni to Treasury ratio stood at 102.8%, while the 30-year muni to Treasury ratio was at 109.9%.
MSRB Reports Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,259 trades on Thursday on volume of $10.089 billion.
Most active on Thursday, based on the number of trades, was the Indiana State Finance Authority's CWA Authority Project 2015 Series A first lien wastewater utility revenue 3/12s of 2034, which traded 116 times with an average price of 100.155 and an average yield of 3.468%.
Primary Market
Traders are awaiting next week's supply calendar and looking at rates to see how they may impact volume for the rest of February.
Muni volume for next week is estimated at $7.211 billion, according to Ipreo and The Bond Buyer. This is up from up a revised $6.921 billion this week, Thomson Reuters said.
About $5.456 billion of negotiated deals are scheduled while around $1.755 billion of competitive sales are slated.
Topping next week's negotiated calendar is the South Carolina Public Service Authority's $1.06 billion of revenue obligations. The deal, for Santee Cooper, is scheduled to be priced by Barclays Capital on Wednesday after a one-day retail order period on Tuesday.
Leading the competitive slate are three separate sales from Washington state totaling about $484 million. All three series will go up for competitive bidding on Tuesday and consist of $133.48 million Series R-2015H general obligation refunding motor vehicle fuel tax bonds; $172.27 million Series R-2015G GO refunding various purpose bonds, and $177.865 million Series R-2015F GO refunding motor vehicle fuel tax bonds. Washington was just in the market last month, when it sold about $1 billion of bonds.
Also on tap are the $300 million Pennsylvania Higher Education Facilities Authority's fixed-rate revenue bonds for the Thomas Jefferson University to be priced by the Bank of America Merrill Lynch on Thursday after a one-day retail order period on Wednesday; and the competitive sale on Wednesday from the Maryland Department of Transportation of $280 million consolidated transportation bonds.
Tax-Exempt Bond Funds Report More Inflows
Municipal bond funds which report weekly posted $589.132 million of inflows in the week ended Feb. 4, after seeing inflows of $892.528 million in the week ended Jan. 28, according to the latest Lipper data.
The four-week moving average remained positive at $735.354 million in the latest week after staying in the green at $922.473 million in the prior week. A moving average is an analytical tool used to smooth out price moves by filtering out fluctuations.
Muni bond funds have experienced inflows in each week of 2015, according to Lipper data. Inflows totaled $771.234 million in the week ended Jan. 21; $688.522 million in the week ended Jan. 14; and $1.338 billion in the week ended Jan. 7, a two-year high.
Long-term muni bond funds saw inflows of $373.103 million in the latest week, after inflows of $549.093 million in the previous week.
High-yield muni funds recorded inflows of $164.196 million in the latest reporting week, after inflows of $207.914 million in the prior week.
Exchange-traded funds had inflows of $166.656 million, after reporting inflows of $91.239 million in the previous week.
In contrast, long-term municipal bond mutual funds saw $1.297 billion of inflows in the week ended Jan. 28, according to the Investment Company Institute.
ICI reported that inflows into muni funds were $1.045 billion in the week ended Jan. 21, $968 million in the week ended Jan. 14 and $1.326 billion in the week ended Jan. 7.
