Municipal bond market participants are seeing the last of the week’s healthy new issue slate hit screens as buyers snapped up paper as soon as it was priced.
New issues were well spoken for as hungry investors with available cash participated in the largest deals of the week — but one New York trader observed an otherwise flat tone to the overall market with municipals shadowing Treasuries’ month-long trading range and a general marketwide feeling of apathy.
“I think the market seemed to weather the supply this week fairly well,” the trader at a large Wall Street firm said, citing the New York Transitional Finance Authority and the New Jersey Transportation Trust Fund Authority deals, which were free to trade Thursday morning.
But, outside the primary market, he couldn’t ignore the feeling of indifference in the overall market. “The market is still flat and we have been stuck in this trading range for quite some time,” he explained. “Flows continue to come in to the market over the last five weeks, but the market still feels poised to move in either direction.”
The flatness is demonstrated by the benchmark 30-year triple-A general obligation bond, which was yielding 2.92% on Thursday morning — just one basis point higher than where it was a week ago, according to Municipal Market Data. In addition, MMD reported that maturities from 2019 to 2048 were steady Thursday morning compared to where they ended at the close of trading Wednesday.
Investors, he noted, have abundant cash but they are being patient and “not pushing at all.”
Depending on the state, the structure, and the credit, he said, the Street is “moderately heavy with new issues,” adding there is some paper from deals that priced two weeks ago overhanging the market.
“There are day-to-day flows and there’s business going on, but not a ton and not everyone is involved,” the trader said. “That’s indicative of the market right now … there’s a little apathy out there. It doesn’t seem like there’s any need to rush to sell or rush to buy.”
That indecisiveness is impacting a lot of investors and making them skittish, he noted. “People aren’t really sure,” he said. “People are staying short because of the uncertainty over the direction of rates in general.”
Citigroup priced the Monroe County Industrial Development Agency, N.Y.’s $197.295 million of Series 2018 school facility revenue bonds for the Rochester school modernization project.
The deal is rated Aa2 by Moody’s Investors Service and AA by S&P Global Ratings and Fitch Ratings.
Jefferies priced the Alaska Housing Finance Corp.’s $167.78 million of Series 2018 A&B general mortgage revenue bonds.
The deal is rated Aa1 by Moody’s and AA-plus by S&P.
RBC Capital Markets priced the Austin Community College District, Texas’ $127.3 million of Series 2018 limited tax bonds.
The deal is rated Aa1 by Moody’s and AA-plus by S&P and Fitch.
Bond Buyer 30-day visible supply at $7.6B
The Bond Buyer's 30-day visible supply calendar decreased $3.76 billion to $7.60 billion on Thursday. The total is comprised of $3.54 billion of competitive sales and $4.06 billion of negotiated deals.
Municipal bonds were mostly stronger on Thursday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields fell less than one basis point in the three- to 27-year maturities, rose less than a basis point in the one-year and 30-year maturities and remained unchanged in the two-year and 28- and 29-year maturities.
High-grade munis were stronger with yields calculated on MBIS’ AAA scale falling less than one basis point in the one- to 30-year maturities.
Municipals were steady on Municipal Market Data’s AAA benchmark scale, which showed both the 10-year muni general obligation yield and the yield on the 30-year muni maturity remaining unchanged.
Treasury bonds were weaker as stocks traded higher.
On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 83.5% while the 30-year muni-to-Treasury ratio stood at 97.6%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.
ICI: Long-term muni funds see $1.03B inflow
Long-term municipal bond funds saw an inflow of $1.03 billion in the week ended July 11, the Investment Company Institute reported.
This followed an inflow of $356 million into the tax-exempt mutual funds in the week ended July 3 and inflows of $525 million, $742 million, $326 million, $648 million, $661 million, $185 million and $450 million in the seven prior weeks.
Taxable bond funds saw an estimated inflow of $6.42 billion in the latest reporting week, after seeing an inflow of $4.23 billion in the previous week.
ICI said the total estimated inflows to long-term mutual funds and exchange-traded funds were $3.34 billion for the week ended July 11 after outflows of $9.61 billion in the prior week.
Tax-exempt money market funds saw outflows
Tax-exempt money market funds saw outflows of $1.01 billion, lowering total net assets to $137.55 billion in the week ended July 16, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $1.74 billion to $138.56 billion in the prior week.
The average, seven-day simple yield for the 201 weekly reporting tax-exempt funds fell to 0.60% from 0.81% the previous week.
The total net assets of the 831 weekly reporting taxable money funds fell $7.51 billion to $2.666 trillion in the week ended July 17, after an inflow of $22.64 billion to $2.674 trillion the week before.
The average, seven-day simple yield for the taxable money funds was steady at 1.54% from the prior week.
Overall, the combined total net assets of the 1,032 weekly reporting money funds fell $8.52 billion to $2.803 trillion in the week ended July 17, after inflows of $24.39 billion to $2.812 trillion in the prior week.
Treasury announces auction details
The Treasury Department announced these auctions:
- $30 billion of seven-year notes selling on July 26
- $36 billion of five-year notes selling on July 25
- $35 billion of two-year notes selling on July 24
- $18 billion of two-year floating rate notes selling on July 25
- $45 billion of 182-day bills selling on July 23; and
- $51 billion of 91-day bills selling on July 23.
Gary Siegel contributed to this report.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.