Prices of top-shelf municipal bonds finished flat on Friday ahead of an uptick in volume on the new issue calendar.
Total volume for the coming week is estimated by Ipreo at $6.24 billion. This is up from a revised total of $3.69 billion in the prior week, according to Thomson Reuters.
The week's total is made up of $4.81 billion of negotiated deals and $1.43 billion of competitive sales. This compares with a revised $2.65 billion of negotiated deals and $1.04 billion of competitive sales that came to market in the past week.
"Although the calendar is not very big, people like it better when you have a lot of those medium sized deals, which is exactly what we have on tap," said Dawn Mangerson, managing director and senior portfolio manager at McDonnell Investment Management. "There is a lot of demand and deals have been well received, 10 times over in some spots of the curve," she said.
The Clark County School District, Nev., leads off the calendar with two separate competitive sales totaling over $500 million.
On Tuesday, the district will sell $342 million of Series 2015C limited tax general obligation building and refunding bonds and $200 million of Series 2015B limited tax GO school bonds additionally secured by pledged revenues.
The bonds are rated A1 by Moody's Investors Service and AA-minus by Standard & Poor's.
A group including Citigroup and Bank of America Merrill Lynch as senior managers is set to price the Massachusetts Transportation Fund's $450 million of Series 2015A special obligation revenue bonds under the Rail Enrichment Program on Thursday after a one-day retail order period on Wednesday. The bonds are rated triple-A by Moody's and S&P.
The rail program was established to issue either general obligation or special obligation bonds to fund the capital expenditures of MassDOT for the MBTA. This issuance is the first special obligation sale under Chapter 79 of the state's general laws.
The proceeds of this sale will be used to fund six major projects, including the Green Line extension, Orange and Red Line vehicle replacements, the South Coast Rail Extension, the Knowledge Corridor improvements, South Station improvements, and Fairmount Line improvements.
Some proceeds will be used to cover partial cost of the Green Line extension project, which is currently under review after an analysis projected additional cost of between $700 million to $1 billion. The review is looking at possible changes to the project, such as whether additional funding may be needed or if it should be discontinued. The state said that while those costs could be financed with the issuance of more bonds, Chapter 79 could allow for the sale of GOs instead.
Proceeds of this sale are being used to pay for contracts for work that is already underway and expected to remain within budget.
Barclays Capital is slated to price the California Health Facilities Financing Authority's Series 2015 refunding revenue bonds for the Cedars-Sinai Medical Center on Thursday afternoon after a morning retail order period. The issue is rated Aa3 by Moody's and AA-minus by Fitch Ratings.
Jim Grabovac, managing director and senior portfolio manager at McDonnell said that we are never at a point where we are talking about low demand.
"I agree with Dawn that it is almost a blessing in disguise about the outflows prior in the year, as now they have turned positive and the demand has picked up, especially in the 5-7 year part of the curve, which seems to be the sweet spot right now," he said.
Secondary Market
The yield on the 10-year benchmark muni general obligation finished steady from 2.04% on Thursday, while the yield on the 30-year GO was unchanged from 3.07%, according to the final read of Municipal Market Data's triple-A scale.
On Friday, Oct. 23, the yield on the 10-year muni stood at 2.04% while the 30-year muni was at 3.07% while on Friday, Oct. 2, the 10-year was yielding 1.98% and the 30-year was yielding 3.02%. In contrast, on Friday, Jan. 2, the 10-year was at 2.01% and the 30-year was at 2.83%.
Treasury prices were mostly higher on Friday, with the yield on the two-year Treasury rising to 0.73% from 0.72% on Thursday, while the 10-year yield slipped to 2.15% from 2.17% and the 30-year yield decreased to 2.93% from 2.96%.
The 10-year muni to Treasury ratio was calculated on Friday at 93.8% versus 93.8% on Thursday, while the 30-year muni to Treasury ratio stood at 103.5% compared to 103.5%, according to MMD.
The Week's Most Actively Quoted Issues
Puerto Rico and Toledo were some of the most actively quoted names in the week ended Oct. 30, according to data released by Markit.
On the bid side, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 14 unique dealers. On the ask side, the University of Toledo, Ohio 5s of 2025 were quoted by 23 dealers. And among two-sided quotes, Puerto Rico commonwealth GO 8s of 2035 were quoted by 13 dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues in the week ended Oct. 30 were in New Jersey, Puerto Rico and California, according to Markit.
In the revenue bond sector, the New Jersey Turnpike Authority 5s of 2045 were traded 119 times. In the GO bond sector, the Puerto Rico commonwealth 8s of 2035 were traded 38 times. And in the taxable bond sector, the California 7.55s of 2039 were traded 27 times, Markit said.
