The municipal bond market is looking ahead to next week's lighter calendar - and the last full trading week of the year.
Potential volume for next week is estimated at $3.737 billion, according to Ipreo and The Bond Buyer. This is down from total sales of $12.973 billion this week, according to Thomson Reuters.
On Friday, traders were taking a breather after seeing an estimated $25 billion in new supply come to market in the past two weeks. Municipal bond prices were higher at mid-session.
Next Week's Primary Market
There are $3.067 billion of negotiated deals scheduled for next week compared to $10.867 billion this week. Bonds scheduled for competitive sale total $670.1 million, compared with $1.987 billion this week.
Topping the negotiated calendar is a $464 million deal from the New York State Dormitory Authority. Bank of America Merrill Lynch will price the DASNY tax-exempt personal income tax revenue bonds on Tuesday after a one-day retail order period. The bonds are rated Aa1 by Moody's Investors Service and AAA by Standard & Poor's.
Citigroup Global Markets will price the Arizona Transportation Board's $380 million highway revenue refunding bonds on Tuesday. The bonds are rated Aa1 by Moody's and AAA by S&P.
Morgan Stanley is slated to price the Metropolitan Water Reclamation District of Greater Chicago's $296.43 million general obligation bond issue consisting of unlimited tax capital improvement green bonds, unlimited tax alternative revenue source green bonds, limited tax capital improvement green bonds and limited tax refunding bonds. The issue is rated AAA by S&P and Fitch Ratings.
The New York City Housing Development Corp.'s $235 million multi-family rental housing revenue bonds (NYCHA Triborough Preservation Development) will be priced by Morgan Stanley. The issue is rated triple-A by Moody's.
Siebert Brandford Shank is scheduled to price the Los Angeles Department of Water and Power's $229 million power system revenue bonds on Tuesday after a one-day retail order period. The issue is rated Aa3 by Moody's and AA-minus by S&P and Fitch.
In the competitive arena, Massachusetts has scheduled $205.235 million of SIFMA-indexed general obligation refunding bonds in two separate sales on Wednesday of $33.435 million Series D and $171.8 million Series E bonds.
Elsewhere, Pennsylvania's Commonwealth Financing Authority and the Office of the Budget have delayed a Dec. 19 sale of $198.7 million Series 2014 CFA revenue bonds, saying the audited financial data to be reported in the commonwealth's Comprehensive Annual Financial Report for fiscal 2014 was not yet available.
The commonwealth had expected to have its CAFR completed and published before the scheduled closing date for the CFA bond sale, but officials do not expect completion and publication of the CAFR by then, Jay Pagni, press secretary to Gov. Tom Corbett and state budget Director Charles Zogby, said late Thursday.
The terms of the bond purchase agreement between the CFA and PNC Capital Markets LLC required delivery of a complete, final official statement by the end of Thursday. Zogby expects completion of the CAFR by Dec. 31, Pagni said, after which the CFA expects to undertake a new offering.
Secondary Market
High-grade municipal bond prices were higher at midday. The yield on the benchmark 10-year general obligation was off as much as two basis points from 2.01% on Thursday, while the yield on 30-year GOs was down as much as two basis points from 2.90%, according to a preliminary read of Municipal Market Data's triple-A scale.
Treasury prices were higher on Friday, with the two-year note yield falling to 0.55% from 0.60% on Thursday. The 10-year yield fell to 2.09% from 2.17% while the 30-year decreased to 2.76% from 2.82% on Thursday.
The 10-year muni-to-Treasury ratio closed on Thursday at 92.3% versus 93.1% on Wednesday; the 30-year muni to Treasury ratio closed at 102.6%, compared with 102.6% on Wednesday.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 41,188 trades for Thursday on volume of $16.335 billion.
Most active on Thursday, based on the number of trades, were the New York City Housing Development Corp.'s multi-family housing revenue bonds 12/18/2014 Series G 3.9% of 05/01/2045, which traded 166 times with an average price of 99.747 and an average yield of 3.9%.
Muni Bond Funds See Inflows, Lipper Reports
U.S. municipal bond funds again reported cash inflows for the week ended Dec. 11, according to Lipper data released on Thursday.
Muni bond funds posted $695.479 million of net inflows in the latest reporting week after recording net inflows of $172.689 million in the previous week, according to Lipper FMI.
The four-week moving average was positive at $505.520 million in the latest week.
"The lower interest rates across the board in the muni market gave investors increased confidence. This week's fund inflow increase is also another encouraging sign of the state of the market especially when the heavy new issue calendar is considered," says MMD Senior Market Strategist Daniel Berger. "In fact, there was an abundance of cash available and we heard complaints about loan allocations for many deals that were heavily oversubscribed."
Long-term muni bond funds saw inflows of $407.260 million in the latest week, compared to inflows of $36.766 million in the previous week.
High-yield muni funds recorded inflows of $286.277 million after inflows of $117.377 million the previous week. Exchange-traded funds had inflows of $89.761 million, after inflows of $9.019 million the previous week.
Municipal bond funds are popular with individual investors and they have poured money into the funds in 43 of the 50 weeks of this year.
Muni Money Funds Grow by $2.06B Tax-exempt money market funds grew by $2.06 billion and total net assets increased to $254.71 billion in the week ended Dec. 8, according to The Money Fund Report, a service of iMoneyNet.com. The inflows are up from the $800,000 that trickled out of the industry in the prior week.
The average seven-day yield for the 400 weekly reporting tax-exempt money funds held steady at 0.1%, while the average maturity increased by one day to 40 days compared to last week.
The 997 weekly reporting taxable money market funds, meanwhile, reported inflows of $19.83 billion in the week ended Dec. 9, which is up from the $7.84 billion of inflows in the prior week. The average, seven day yield for the taxable money funds remained unchanged at 0.01%, while the average maturity remained at 45 days.
Bond Buyer Yield Indexes Fall
For the week ended Dec. 11, the weekly average yield to maturity of The Bond Buyer Municipal Bond Index, which is based on 40 long-term bond prices, fell three basis points to 4.32% from 4.35%.
The Bond Buyer's 20-Bond GO Index of 20-year general obligation yields dropped to its lowest level in more than a year as it fell 18 basis points in the week ended Dec. 11 to 3.65% from 3.83% in the previous week. The last time the index was lower was on May 16, 2013 when it stood at 3.61%.
The Bond Buyer's 11-Bond GO Index of higher-grade 20-year GO yields also lost 18 basis points, to 3.50% from 3.68% the prior week. It is also at its lowest level in over a year - it stood at 3.46% on May 23, 2013.
The Bond Buyer's 25-bond Revenue Bond Index dropped nine basis points to 4.41% from 4.50% the previous week. It is at its lowest level since May 30, 2013 when it was 4.39%.
Christine Albano and Paul Burton contributed to this report.
