The municipal bond market is taking a well-deserved break Friday after seeing two busy weeks of heavy new issuance. Traders' attention will now turn to next week's calendar, which features deals from Michigan, New York, Texas and Virginia.
Secondary Market
Treasury prices were mixed on Friday, with the yield on the two-year Treasury note remaining unchanged at 0.69% from Thursday, while the 10-year yield fell to 2.26% from 2.28% and the 30-year yield decreased to 2.96% from 2.98%.
The yield on the 10-year benchmark muni general obligation on Thursday closed off three basis points to 2.21% from 2.24% on Wednesday, while the yield on the 30-year GO was down four basis points to 3.16% from 3.20%, according to the final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated on Thursday at 97.2% versus 96.6% on Wednesday, while the 30-year muni to Treasury ratio stood at 106.3% compared to 105.4%, according to MMD.
Primary Market
On Thursday, JPMorgan will price the Michigan State Building Authority's $990 million of Series 2015 I revenue and revenue refunding bonds. The issue, tentatively structured as serials running from 2015 through 2050, is rated Aa3 by Moody's Investors Service, A-plus by Standard & Poor's and AA-minus by Fitch Ratings.
New York City's $750 million of Fiscal 2016 Series A&B general obligation bonds are set to be priced by Siebert Brandford Shank. A retail order period will be held on Tuesday and Wednesday ahead of the institutional pricing on Thursday. The issue is rated Aa2 by Moody's and AA by S&P and Fitch.
Citigroup is expected to price San Antonio, Texas' $422 million of general improvement and refunding combination tax and revenue certificates of participation. The issue is tentatively structured as $43 million of taxables due 2016 to 2035 and $379 million of tax-exempts due 2016 to 2035. The bonds, which are set to be priced on Tuesday, are rated triple-A by Moody's, S&P and Fitch.
Citi is also slated to price the New York City Industrial Development Agency's special facilities revenue bonds for American Airlines. The deal, which has a one-year hard put, is expected to be priced on Wednesday.
Leading the competitive calendar is $290 million Virginia College Building Authority Series 2015D educational facilities revenue bonds under the 21st Century College and Equipment Program. The issue is rated AA-plus by Fitch.
The last time the authority competitively sold comparable bonds was on May 1, 2014, when Bank of America Merrill Lynch won $27.99 million of Series 2014B educational facilities revenue refunding bonds with a true interest cost of 1.70%.
Back in the Black: Municipal Bond Funds See Inflows
For the first time in 12 weeks, municipal bond funds reported cash inflows.
The weekly reporting funds saw $125.410 million of inflows in the week ended July 22, after seeing outflows of $29.255 million in the previous week, according to the latest Lipper data.
This brings to 16 out of 30 weeks this year that the funds have seen cash infusions. For the year to date, muni bond funds have attracted a net inflow of $3.334 billion.
The four-week moving average remained negative at $352.090 million after being in the red at $409.882 million in the previous week. The moving average has now been negative for nine weeks in a row. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds also experienced inflows, gaining $39.114 million in the latest week, after seeing inflows of $34.223 million in the previous week. Intermediate-term funds again recorded inflows, of $152.569 million after seeing inflows of $20.109 million in the prior week.
And exchange traded funds saw inflows of $108.499 million, after experiencing inflows of $45.314 million in the previous week.
High-yield muni funds, however, saw outflows of $3.550 million in the latest reporting week, after seeing an inflow of $14.513 million the previous week. In the past 12 weeks, high-yield funds have seen outflows nine times totaling $1.707 billion and inflows three times totaling $78.785 million.
"Negative returns and the flight from Puerto Rico have driven high-yield muni mutual fund outflows," Bank of America Merrill Lynch said in a recent report. "The correlation between the total return of high-yield index and fund flows is high."
Barclays Municipal Research also said in a report that it was concerned about high-yield muni fund flows, which it said may continue to be affected by Puerto Rico woes.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,431 trades on Thursday on volume of $12.346 billion.
The most active bond, based on the number of trades, was the New York City Fiscal 2012 Series F GO 5s of 2026, which traded 278 times at an average price of 115.257, an average yield of 0.525%. The bonds were initially priced at 119.09.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $150.3 million to $11.57 billion on Friday. The total is comprised of $4.18 billion competitive sales and $7.39 billion of negotiated deals.
