Maryland’s high-grade paper leads $6.7B week

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Primary municipal bond market volume is expected to increase to $6.7 billion in the coming week with a variety of deals, including triple-A rated paper from Maryland.

Ipreo estimates volume will climb to $6.73 billion, from the revised total of $5.57 billion sold in the past week, according to updated figures from Thomson Reuters. The calendar for the week ahead is composed of $4.29 billion of negotiated deals and $2.44 billion of competitive sales.

There are 15 sales scheduled larger than $100 million, with four coming on the competitive route.

Demand has been strong and Michael Pietronico, chief executive officer at Miller Tabak Asset Management doesn’t expect that to change.

“Reasons to be positive on upcoming performance from the municipal bond asset class are stable inflation, positive technicals, and ongoing geopolitical tensions which tend to gravitate cash towards fixed-income on the margin,” Pietronico said. “We suspect that 4% and 3% coupons will begin to tighten relative to 5% coupons as the dollar price on many high quality issuers debt seems to be getting quite unattractive to individual investors on ‘premium’ bonds.”

There has been a recent trend of an influx of lower coupons, as market sources indicated that investors reaching for yield have had an impact on the structure of deals, leading to strong performance for lower coupon structures.

Maryland plans the biggest sale in the coming week. The Old Line State is expected to issue $1.34 billion in two competitive sales. The general obligation state and local facilities loan of 2017 bonds will include $550 million of Series A and $792.825 million of Series B bonds. They carry the highest rating possible – triple-A by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings.

Bank of America Merrill Lynch is scheduled to run the books on the largest negotiated deal of the week, – the City and County of Honolulu, Hawaii’s $411 million of GO bonds that will feature tax-exempts, tax-exempt refundings, taxable refunding and a taxable green bond. The deal is rated Aa1 by Moody’s and AA-plus by S&P and is scheduled to price on Wednesday after a one-day retail order period.

Citi is scheduled to price the State of Louisiana’s $368 million of gasoline and fuels tax revenue refunding bonds on Wednesday. The Series B bonds for $61 million are rated Aa2 by Moody’s and then $307 million of second lien Series C bonds are rated Aa3 by Moody’s.

Citi is also expected to price the Commonwealth of Kentucky Property and Buildings Commission’s $233.5 million of revenue and refunding and taxable bonds on Tuesday. The deal is rated A1 by Moody’s and A-plus by Fitch.

Citi will round out the hat trick when they price the Colorado Health Facilities Authority’s $226 million of health facilities revenue and revenue refundings bonds for the Evangelical Lutheran Good Samaritan Society Project on Thursday. The deal is rated BBB by S&P.

Secondary market
Top shelf municipal bonds finished unchanged on Friday. The yield on the 10-year benchmark muni general obligation was flat from 1.88% on Thursday, while the 30-year GO yield was steady from 2.73%, according to a read of Municipal Market Data's triple-A scale.

Treasuries were mixed on Friday. The yield on the two-year Treasury dropped to 1.29% from 1.33% on Thursday, the 10-year Treasury yield declined to 2.19% from 2.21% and the yield on the 30-year Treasury bond was unchanged from 2.79%.

The 10-year muni-to-Treasury ratio was calculated at 86.0% on Friday, compared with 85.1% on Thursday, while the 30-year muni-to-Treasury ratio stood at 98.0% versus 97.3%, according to MMD.

MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 37,278 trades on Thursday on volume of $10.68 billion.

Week's actively traded issues
Some of the most actively traded bonds by type in the week ended Aug. 11 were from Massachusetts and Ohio issuers, according to Markit.

In the GO bond sector, the Massachusetts 2s of 2018 were traded 85 times. In the revenue bond sector, the Ohio 3.25s of 2035 were traded 62 times. And in the taxable bond sector, the Ohio 3.7s of 2043 were traded 39 times.

Week's actively quoted issues
Nevada, California and Indiana names were among the most actively quoted bonds in the week ended Aug. 11, according to Markit.

On the bid side, the North Las Vegas, Nev., taxable 6.572s of 2040 were quoted by 86 unique dealers. On the ask side, the Bay Area Toll Authority, Calif., revenue 3.25s of 2036 were quoted by 232 unique dealers. And among two-sided quotes, the Indiana Finance Authority revenue 5s of 2028 were quoted by five unique dealers.

Lipper: Muni bond funds see inflows
Investors in municipal bond funds put cash into the funds in the latest week, according to Lipper data.

The weekly reporters saw $631.216 million of inflows in the week of Aug. 9, after inflows of $143.847 million in the previous week.

The four-week moving average was positive at $349.152 million, after being in the green at $148.209 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

Long-term muni bond funds had inflows of $406.426 million in the latest week after inflows of $118.150 million in the previous week. Intermediate-term funds had inflows of $137.827 million after inflows of $19.414 million in the prior week.

National funds had inflows of $615.734 million after inflows of $203.351 million in the previous week. High-yield muni funds reported inflows of $148.092 million in the latest reporting week, after inflows of $73.549 million the previous week.

Exchange traded funds saw inflows of $160.401 million, after inflows of $54.212 million in the previous week.

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Primary bond market Sell side Secondary market Municipal bond funds State of Maryland Honolulu City & County State of Louisiana Kentucky State Property & Buildings Commission Colorado Health Facilities Authority