Prices of top-rated municipal bonds finished stronger, traders said, with yields on some maturities falling by as much as four basis points after the release of the April employment report.
The unemployment rate fell to 5.4% last month from 5.5% in March while non-farm payrolls rose 223,000. Economists polled by IFR Markets correctly predicted the jobless rate decline to 5.4% but had forecast a rise of 280,000 in non-farm payrolls for April.
However, the March jobs report was revised downward to show non-farm payrolls rose 85,000, instead of the 126,000 rise that was initially reported. Muni prices moved higher along with Treasuries on the news.
The yield on the 10-year benchmark muni general obligation closed down three basis points to 2.18% from 2.21% on Thursday, while the yield on the 30-year GO was off two basis points to 3.13% from 3.15%, according to the final read of Municipal Market Data's triple-A scale. Other maturities were from unchanged to four basis points lower along the curve.
"It was notable that the past three releases have seen downward revisions in the prior month payrolls," Randy Smolik, MMD Senior Market Analyst, wrote in a market comment. "This means that the first quarter got off to such a slow start that the Fed will likely wait longer to react to stronger data in the second quarter."
On Friday, May 1, the yield on the 10-year muni was at 2.16% while the 30-year muni yields stood at 3.08%.
Treasury prices were higher as well with the yield on the two-year Treasury note decreasing to 0.58% from 0.63% on Thursday, while the 10-year yield declined to 2.15% from 2.19% and the 30-year yield dropped to 2.90% from 2.92%.
The 10-year muni to Treasury ratio was calculated on Friday at 101.7% versus 101.3% on Thursday, while the 30-year muni to Treasury ratio stood at 108.0% compared to 108.3%, according to MMD.
The Week's Primary Market
A revised $6.6 billion slate of deals priced in the week, according to Thomson Reuters, consisting of $3.52 billion of negotiated deals and $3.08 billion of competitive offerings. The week's volume was originally estimated to be $9.2 billion.
The state of Louisiana was in focus as it was able to successfully pull off a bond sale despite a lot of negative news about the state's budget deficit and the recent aborted sale of muni bonds by Louisiana State University.
The Louisiana State Bond Commission found that market conditions were acceptable and was able to go ahead with the competitive sale. Wells Fargo Securities won the $335 million of general obligations with the lowest bid among the six firms vying for the bonds. The issue was rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings. Moody's and S&P both assign negative outlooks to the credit.
Goldman Sachs priced the Indiana Finance Authority's $297 million of Series 2015A stadium project lease appropriation refunding bonds. The bonds were rated Aa2 by Moody's and AA-plus by S&P and Fitch. The sale let the IFA to restructure the debt and replace it with traditional fixed-rate bonds, according to Dennis Bassett, the IFA's public finance director.
Also in the stadium financing sector, Citi priced the Atlanta Development Authority's $219.66 million of senior lien and second lien tax-exempt and taxable bonds for the new downtown Atlanta stadium project. The senior lien tax-exempts and taxable bonds were rated Aa3 by Moody's and A-plus by S&P while the second lien bonds are rated A1 by Moody's and A by S&P.
Loop Capital Markets priced the New York Triborough Bridge and Tunnel Authority's $225 million of Series 2015A general revenue bonds for MTA bridges and tunnels. The issue was rated Aa3 by Moody's, AA-minus by S&Ps and Fitch and AA by Kroll Bond Rating Agency.
In the negotiated sector, Goldman, Sachs priced the Los Angeles Community College District's $310 million of Series 2015 C GOs. The bonds are rated Aa1 by Moody's and AA-plus by S&P.
A large number of competitive offerings were sold in the primary, led by the state of Ohio's three-pronged general obligation bond sale. The Buckeye State sold three separate competitive issues totaling $345 million. All three issues are rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
JPMorgan won Ohio's $300 million of Series 2015B common schools GOs; Goldman, Sachs won the $35 million of Series T natural resources GOs; and Robert W. Baird won the $10 million of Series 2015B taxable higher education GOs.
The Los Angeles Unified School District sold $330 million of Series 2015A GO refunding bonds. JPMorgan won the deal which was rated Aa2 by Miidy's and AA-minus by S&P.
Seattle competitively sold two issues totaling $323 million. Both sales are rated Aa1 by Moody's, triple-A by S&P and AA-plus by Fitch. Bank of America Merrill Lynch won the $156.88 million of Series 2015 unlimited tax GO improvement bonds while Citi won the $166.34 million of Series 2015A limited tax GO improvement and refunding bonds.
Also in the competitive arena, the Massachusetts School Building Authority sold $300 million of Series 2015 senior dedicated sales tax bonds. Citi won the issue which was rated Aa2 by Moody's and AA-plus by S&P and Fitch.
Clemson University in South Carolina competitively sold two issues of revenue bonds totaling $161.82 million. Citi won the $97.43 million of Series 2015 higher education revenue bonds. The bonds were rated Aa2 by Moody's, AA-minus by S&P and AA by Fitch. Citi also took the $64.39 million of Series 2015 athletic facilities revenue bonds. These bonds were rated Aa3 by Moody's.
And the New Jersey Educational Facilities Authority competitively sold $150 million of Series 2015 D revenue bonds for Princeton University. Bank of America Merrill Lynch won the issue with a TIC of 3.4034%. The bonds were priced as 5s to yield 0.62% in 2017 and 0.95% in 2018; and from 1.39% with a 5% coupon in 2020 to 3.32% with a 4% coupon in 2035; a 2045 term was priced as 4s to yield 3.50%. The issue is rated triple-A by Moody's and S&P.
Citi priced the Athens-Clarke County, Ga.'s $211.44 million of Series 2015 water and sewerage revenue bonds. The issue was priced to yield from 0.57% with a 5% coupon in 2017 to 3.76% with a 4% coupon in 2038; a 2016 maturity was offered as a sealed bid. The bonds are rated Aa1 by Moody's, AA by S&P and AA-plus by Fitch.
The Week's Most Actively Quoted Issues
Puerto Rico and California names were among some of the most actively quoted issues in the week ended May 8, according to data released by Markit.
On the bid side, the Puerto Rico commonwealth GO 5s of 2041 were quoted by 10 unique dealers. On the ask side, the California Department of Water and Power revenue 5s of 2044 were quoted by 13 dealers. And among two-sided quotes, the Puerto Rico commonwealth GO 8s of 2035 were quoted by nine dealers, Markit said.
The Week's Most Actively Traded Issues
Among some of the most actively traded issues in the week ended May 8, were issuers from Maryland, Massachusetts, and Chicago, according to Markit.
In the revenue bond sector, the Maryland Health and Higher Educational Facilities Authority 4s of 2041 were traded 185 times. In the GO bond sector, the Massachusetts 4s of 2038 were traded 188 times. And in the taxable bond sector, the Chicago Board of Education 6.519s of 2040 were traded 37 times, according to Markit.
Tax-Exempt Bond Funds See Outflows
Municipal bond funds which report weekly posted $211.078 million of outflows in the week ended May 6, after experiencing inflows of $481.253 million in the week ended April 29, according to the latest Lipper data.
The four-week moving average remained positive at $79.627 million in the latest week after being in the green at $124.194 million in the prior week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds also saw outflows, losing $396.088 million in the latest week, after experiencing inflows of $304.651 million in the previous week.
High-yield muni funds recorded an outflow of $308.950 million in the latest reporting week, after seeing inflows of $104.189 million in the previous week. Exchange-traded funds, however, had inflows of $21.243 million, after recording inflows of $80.295 million in the previous week.
In contrast, long-term municipal bond mutual funds posted $1.042 billion of inflows in the week ended April 29, according to the Investment Company Institute. ICI reported of inflows of $683 million into long-term funds in the previous week.
