Prices of top-quality municipal bonds finished stronger on Monday, according to traders, with yields on some maturities declining by as much as three basis points.
Traders were eyeing the week's hefty new supply, which began coming to market on Monday.
Secondary Trading
The yield on the 10-year benchmark muni general obligation on Monday closed three basis points lower at 2.06% from 2.09% on Friday, while the yield on the 30-year GO was off three basis points at 3.07% from 3.10%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were higher, with the yield on the two-year Treasury note falling to 0.67% from 0.69% on Friday, while the 10-year yield fell to 2.09% from 2.16% and the 30-year yield decreased to 2.86% from 2.95%.
The 10-year muni to Treasury ratio was calculated on Monday at 98.4% versus 96.5% on Friday, while the 30-year muni to Treasury ratio stood at 107.0% compared to 104.8%, according to MMD.
Primary Market
The new issue calendar is composed of $4.85 billion of negotiated deals and $1.39 billion of competitive sales.
Washington state will be offering about $983 million of bond issues, made up of four competitive sales and one negotiated deal, which came to market on Monday.
Bank of America Merrill Lynch priced the state's $39 million of Series 2016A-2 various purpose general obligation green bonds.
The bonds were priced to yield from 0.27% with a 2% coupon in 2016 to 2.33% with a 5% coupon in 2025. A 2030 maturity was priced as 3s to yield 3.23%; a 2035 maturity was priced as 3 3/8s to yield 3.56%; and a 2040 maturity was priced as 3 3/4s to yield 3.76%.
On Wednesday, the Evergreen State will be selling four competitive issues consisting of $60.71 million of Series 2016T GO taxable bonds, $191.99 million of Series 2016B motor fuel tax GOs, $193.77 million of Series R-2016A various purpose GO refunding bonds, and $497.80 million of Series 2015A-1 various purpose GOs.
All of the issues are rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings and carry stable outlooks from all three agencies.
New Issuance & Many Happy Returns
Municipal bond issuance for the month as of Sept. 24 is $17.3 billion, down 20.6% compared to the same period last year, according to Bank of America Merrill Lynch Global Research.
However, muni issuance for the year-to-date is $307.1 billion, up 33.8% compared to the same time last year, BAML said, which is in line with its updated forecast of $440 billion to $450 billion total issuance for 2015.
Of the year-to-date total supply, 64.3% has been refundings versus 54.3% during the same period in 2014, BAML said.
Muni returns have been positive for the year, BAML said in a market note.
The BofAML Muni Master Index has returned 1.545% as of Sept. 24 and has outperformed BAML's Treasury Master Index and the U.S. Corporate IG Master Index which had total returns of 1.473% and 0.111%, respectively.
BAML said the best performance for munis in 2015 has been in the over 22-year maturities and in the BBB-rated credit sector.
Previous Week's Most Actively Traded Issues
Revenue bonds comprised 56.88% of new issuance in the week ended Sept. 25, up from 54.12% in the previous week, according to Markit. General obligation bonds comprised 33.98% of total issuance, down from 36.88%, while taxable bonds made up 9.14%, up from 9.00%
Some of the most actively traded issues in the week were in New York and California.
In the revenue bond sector, the New York City Transitional Finance Authority 5s of 2035 were traded 86 times. In the GO bond sector, the California 5s of 2045 were traded 66 times. And in the taxable bond sector, the Sacramento Public Financing Authority lease revenue 5.637s of 2050 were traded 22 times, Markit said.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 30,079 trades on Friday on volume of $6.092 billion.
