With tax season in the rear view mirror, municipal bond volume is set to rebound along with demand in the coming week.

Ipreo estimates volume will increase to $7.78 billion, from the revised total of $6.94 billion sold in the past week, according to updated figures from Thomson Reuters. The calendar for the week ahead is composed of $5.36 billion of negotiated deals and $2.42 billion in competitive sales.

Michael Pietronico, chief investment officer at Miller Tabak Asset Management said that the firm expects positive flows to gain steam as the market moves further away from tax season.

“We think supply [will] remain relatively light, and as such we expect some outperformance from municipals relative to Treasuries to occur over the summer months,” he said.

He added that he’s seen some high quality states with a preponderance of AAA rated credits trading on the sloppy side as the move to higher yields has picked up steam.

“We believe these type bonds are moving into the ‘buy zone’ as we suspect they will begin to outperform once it is apparent the Federal Reserve has slowed the economy with their short term interest rate hikes,” Pietronico said. “Of particular note we believe AAA rated issuers within the state of Maryland are looking interesting on a relative basis.”

Miller Tabak also believes poor technicals of the U.S. Treasury market will exert more influence over the municipal bond yield curve as Federal Government borrowing will remain elevated in the coming months.

“Tax-free bond investors should gravitate towards the areas of the municipal yield curve that offers more ‘ratio’ to Treasuries to help cushion any further drift higher in yields that may occur to help place the taxable supply," Pietronico said.

This upcoming slate is a chunky one, with 16 deals scheduled $100 million or larger, seven on the competitive side.

Citi will run the books on the largest deal of the week on Tuesday – a $1.4 billion offering from the New York Transportation Development Corp., for Delta’s redevelopment at LaGuardia Airport. The deal will include AMT bonds and is scheduled to mature serially from 2024 through 2034 with a term bond in 2038 and is rated Baa3 by Moody’s Investors Service and BBB-minus by Fitch Ratings.

JPMorgan is scheduled to price the Texas Water Development Board’s $804 million of state water implementation revenue fund for Texas revenue master trust bonds on Tuesday. The deal is rated triple-A by S&P Global Ratings and Fitch.

On the competitive side, two states are each selling a half-billion, also on Tuesday. The commonwealth of Massachusetts is selling general obligation bonds in two sales of $250 million. The deals are rated Aa1 by Moody’s, AA by S&P and AA-plus by Fitch.

The state of Illinois is also selling GO bonds, one sale for $450 million and the other for $50 million. Both transactions are rated Baa3 by Moody’s, BBB-minus by S&P and BBB by Fitch.

Week's actively traded issues
Some of the most actively traded bonds by type in the week ended April 20 were from Connecticut, Pennsylvania and California issuers, according to Markit.

In the GO bond sector, the University of Connecticut 4s of 2038 traded 37 times. In the revenue bond sector, the Montgomery County Higher Education and Health Authority, Pa., 4s of 2049 traded 57 times. And in the taxable bond sector, the California 4.6s of 2038 traded 117 times.

Week's actively quoted issues
Chicago, New York and Puerto Rico names were among the most actively quoted bonds in the week ended April 20, according to Markit.

On the bid side, the Chicago Boar of Education GO 5s of 2041 were quoted by 32 unique dealers. On the ask side, the New York City GO 3.375s of 2038 were quoted by 101 dealers. And among two-sided quotes, the Puerto Rico Commonwealth GO 8s of 2035 were quoted by 24 unique dealers.

Previous session's activity
The Municipal Securities Rulemaking Board reported 45,504 trades on Thursday on volume of $15.22 billion.

California, New York and Texas were the states with the most trades, with the Golden State taking 15.209% of the market, the Empire State taking 12.004% and the Lone Star State taking 9.521%

Lipper: Muni bond funds saw outflows
Investors in municipal bond funds continued to pull cash out of the funds, according to Lipper data released on Thursday.

The weekly reporters saw $515.154 million of outflows in the week ended April 18, after outflows of $244.735 million in the previous week.

Exchange traded funds reported outflows of $60.766 million, after inflows of $126.962 million in the previous week. Ex-ETFs, muni funds saw $454.389 million of outflows, after outflows of $371.967 million in the previous week.

The four-week moving average remained negative at -$242.552 million, after being in the red at -$2.401 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 outflows of $83.861 million in the latest week after inflows of $78.278 million in the previous week. Intermediate-term funds had inflows of $16.059 million after outflows of $10.979 million in the prior week.

National funds had outflows of $421.893 million after outflows of $184.593 million in the previous week. High-yield muni funds reported inflows of $45.728 million in the latest week, after inflows of $172.574 million the previous week.

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.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.
Aaron Weitzman

Aaron Weitzman

Aaron Weitzman is a markets reporter for The Bond Buyer, focusing on the sell side of the municipal bond market.
Chip Barnett

Chip Barnett

Chip Barnett is a journalist with more than 40 years of experience. Barnett is currently Senior Market Reporter for The Bond Buyer.