Municipal bond yields continued firming Friday afternoon, following a late-day rally in Treasuries Thursday.
Yields were as much as five basis points lower on long-term bonds, according to Municipal Market Data's AAA 5% scale. Treasuries were steady Friday morning, after strengthening by as much as six basis points Thursday.
"Strength has to do partly with how well the deals went this week now that that's over with, as well as following Treasuries a little bit now," Dawn Mangerson, managing director and senior portfolio manager at McDonnell Investment Management, said in an interview. "Munis are taking a nice sigh of relief."
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.
The 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.
