Bonds from Puerto Rico's $3.5 billion March issuance have strengthened while the Puerto Rico Electric and Power Authority's bonds sell off.
Yields on Puerto Rico 8s of 2035 fell 18 basis points to 9.02% on Friday from 9.20% on Thursday, according to data provided by Bloomberg. This is 55 basis points lower than the 9.57% the bonds were trading at on Tuesday.
On Thursday both Moody's Investors Service and Fitch Ratings downgraded $8.7 billion of PREPA power revenue bonds. Fitch dropped its rating to CC from BB, and Moody's to Ba3 from Ba2. Standard & Poor's followed on Friday, cutting PREPA to BB from BBB-minus.
Trading on all PREPA bonds was 550.3% above its 100-day average, according to Bloomberg data. Yields for 5.25s of 2028, the maturity with the largest trading volume, have risen to 12.9%. They were 10.88% on Tuesday.
Supply will be light next week with the competitive sale of $555 million of Alabama Public School and College Authority capital improvement refunding bonds leading the way.
Massachusetts will also be in the competitive ranks, selling $450 million of double-A rated general obligation bonds on Tuesday.
Deals may take a back seat to vacations, as the few expected issuances could have trouble getting done next week because of the fourth of July holiday, investors said.
Many market participants will take vacation for all or part of the week, meaning there are less buyers around to purchase bonds.
"People are taking off that week, especially the higher-ups who make the decisions on the trading floor, how much and what to buy," a trader in Florida said. "The biggest problem is trying to have enough people actually at their desks."
Investors anticipate as the week goes on, trading desks will be more deserted.
"People want a holiday, they want to be at the beach, not checking their work email," a trader in Chicago said.
Demand for munis still remains strong with inflows for all municipal bond funds rising to $233.5 million for the week ending July 18, from $147.7 million last week, according to Lipper FMI.
The Lancaster Port Authority, Ohio, will issue $322.1 million of gas supply revenue refunding bonds on Tuesday, the largest deal in the negotiated market.
The Dallas Independent School District will bring $317.8 million of unlimited tax refunding bonds to the market on Tuesday.
The Los Angeles Department of Water and Power will issue $200 million of revenue bonds on Tuesday.
Houston will bring $105.3 million of Higher Education Finance Corporate revenue and refunding bonds on Tuesday.
Munis mostly strengthened Friday afternoon, with yields on bonds maturing in three to eight years falling as much as two basis points. Yields on bond maturing in nine to 29 years slipped as much as one basis point. Short term yields were steady, according to the Municipal Market Data's triple-A scale.
Treasuries were mixed Friday afternoon, with the 10-year benchmark and the two-year note losing one basis point each to 2.52% and 0.47%, respectively. The 30-year yield was unchanged from Thursday's market close.
