Weekly volume in the primary municipal bond market is expected to climb to a more normal level of almost $7.5 billion, as market participants return from a holiday-shortened week with lots of money to put to work and yields trending down.

Ipreo estimates volume will climb to $7.45 billion from the revised total of $2.39 billion sold in the the four sessions after Labor Day, according to updated figures from Thomson Reuters. The calendar for the week ahead is composed of $4.98 billion of negotiated deals and $2.4 million in competitive sales.

While it is a good time to issue bonds with yields close to this year’s lows, it can be difficult for issuers to speed up a sale to meet peek conditions, said Robert Wimmel, head of the municipal fixed income team at BMO.

“Unfortunately, municipal issuers typically can't accelerate deals that quickly,” he said. “I used to work for the City of Chicago, Office of the Comptroller, working on bond deals, and there is a lot of bureaucracy that slows down the issuance process. The most you can hope for as an issuer is that you can accelerate an issue by a week or so to catch these low yields.”

There are 19 deals scheduled that are $100 million or larger, with four coming from the competitive arena.

“You will continue to see strong demand in the muni market as there is still a decent amount of cash needing to be invested,” one portfolio manager said. “If we get a little widening of spreads due to increased supply, that will be even better. “

On the other hand, Wimmel said demand may be a little weak on the institutional side.

“Fund managers have seen yields fall on the flight-to-quality trade with North Korean tensions running high, and some of us market folks think yields should increase into the end of the year, as the situation hopefully settles and as issuance increases before the end of the year," he said. "We are not extending or spending all of our cash at this time. Yields are too low to keep chasing them.”

The largest deal of the week will come from New York City. Siebert, Cisneros Shank are set to run the books on the Big Apple’s $855.56 million of general obligation bonds on Thursday after a two-day retail order period. The deal is rated Aa2 by Moody’s Investors Service and AA by S&P Global Ratings and Fitch Ratings.

“I know there is strong demand out there, and I believe supply in the state [of New York] is down slightly from last year’s pace so I would anticipate that deal going well,” the portfolio manager said.

In addition to that deal, the city that never sleeps is bringing $250 million of taxable GOs, in two separate competitive sales on Thursday.

The second largest overall deal and largest competitive deal is set to come from the Maryland Department of Transportation when it sells $500 million of consolidated transportation bonds on Wednesday. The deal is rated Aa1 by Moody’s, triple-A by S&P and AA-plus by Fitch.

RBC Capital Markets is slated to price the Regents of the University of Minnesota’s $424 million of GO, GO refunding and GO taxable refunding bonds on Wednesday. The deal is rated Aa1 by Moody’s and AA by S&P.

Secondary market
Top-shelf municipal bonds ended mixed on Friday. The yield on the 10-year benchmark muni general obligation was unchanged from 1.81% on Thursday, while the 30-year GO yield dropped one basis point to 2.65% from 2.66%, according to the final read of Municipal Market Data's triple-A scale.

U.S. Treasuries were unchanged on Friday. The yield on the two-year Treasury was flat from 1.27% on Thursday, the 10-year Treasury yield was steady from 2.06% and the yield on the 30-year Treasury bond remained at 2.68%.

On Friday, the 10-year muni-to-Treasury ratio was calculated at 87.9%, compared with 87.9% on Thursday, while the 30-year muni-to-Treasury ratio stood at 98.9% versus 99.5%, according to MMD.

Lipper: Muni bond funds see inflows
Investors in municipal bond funds once again put cash into the funds, according to Lipper data released late Thursday.

The weekly reporters drew $250.368 million of inflows in the week of Sept. 6, after inflows of $344.518 million in the previous week.

Exchange traded funds reported inflows of $2.169 million, after inflows of $80.152 million in the previous week. Ex-EFTs, muni funds saw $248.199 million of inflows, after inflows of $264.366 million in the previous week.

The four-week moving average was positive at $483.038 million, after being in the green at $578.250 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 $105.638 million in the latest week after inflows of $248.440 million in the previous week. Intermediate-term funds had inflows of $74.141 million after inflows of $35.870 million in the prior week.

National funds had inflows of $290.814 million after inflows of $339.475 million in the previous week.

High-yield muni funds reported inflows of $165.070 million in the latest week, after inflows of $184.234 million the previous week.

Week's actively traded issues
Some of the most actively traded bonds by type in the week ended Sept. 8 were from California and Texas issuers, according to Markit.

In the GO bond sector, the California 4s of 2047 were traded 94 times. In the revenue bond sector, the Texas 4s of 2018 were traded 97 times. And in the taxable bond sector, the University of Texas 3.354s of 2047 were traded 33 times.

Week's actively quoted issues
New Jersey, California and New York & New Jersey names were among the most actively quoted bonds in the week ended Sept. 8, according to Markit.

On the bid side, the South Jersey Port Corp. taxable 7.365s of 2040 were quoted by 59 unique dealers. On the ask side, the California taxable 7.3s of 2039 were quoted by 120 dealers. And among two-sided quotes, the Port Authority of New York & New Jersey taxable 4.458s of 2062 were quoted by 31 unique dealers.

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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.