Prices of top-rated municipal bonds finished stronger on Monday, according to traders, ahead of this week's new issue slate and the Federal Open Market Committee's two-day meeting.
Secondary Market
The yield on the 10-year benchmark muni general obligation dropped two basis points to 2.12% from 2.14% on Friday, while the yield on 30-year GO decreased by one basis point to 2.93% from 2.94%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were mixed on Monday. The yield on the two-year Treasury note was up to 0.65% from 0.64% on Friday, while the 10-year yield was down to 2.10% from 2.11% and the 30-year yield was flat at 2.68%.
The FOMC's Tuesday to Wednesday meeting on monetary policy is keeping a damper on trading as market participants speculated about what stance the Fed would take on interest rates. After Wednesday's statement, the Fed will release a summary of its economic projections followed by a press conference with Chair Janet Yellen.
Also constraining price movement on Monday was the Treasury Department's continuing halt of state and local government securities, or SLGS, sales and the start of Congressional debate on raising the debt limit.
The 10-year muni to Treasury ratio slipped on Monday to 99.9% from 100.4% on Friday, while the 30-year muni to Treasury ratio stood at 109.2%, compared with 108.6%.
Out Like a Lamb
It's been a tough month for municipal bond performance, according to data supplied by S&P Dow Jones Indices.
The S&P Municipal Bond Index is in negative returns at -0.32% for the month to data. However, for the year to date, the index is positive, returning 0.44%. The S&P Municipal Bond Index is a broad, market value-weighted index.
Kevin Horan, S&P DJI Director of Fixed Income Indices, wrote in a research note on Monday that the S&P National AMT-Free Municipal Bond Index is also in negative returns for March, at -0.38%. For the year to date, the index is returning 0.28%.
The index is a broad, comprehensive, market value-weighted index designed to measure the performance of the investment-grade tax-exempt muni bond market. Bonds issued by U.S. territories, including Puerto Rico, are excluded from this index.
Top Traded Munis by Sector
Munis from issuers from Rhode Island, California and Connecticut were the top traded bonds by market sector in the week ended March 13, according to data released by Markit.
Broken down by market sector, revenue bonds comprised 54.31% of new issuance, down from 56.00% in the prior week. GOs comprised 37.69% of total issuance, up from 36.29%, while taxables made up 8.00%, up from 7.71%.
In the revenue bond sector for the week ended March 13, the Rhode Island Tobacco Settlement Financing Corp. 5s of 2040 were traded 56 times. In the GO bond sector, California 5s of 2045 were traded 67 times. And in the taxable bond sector, the Hamden, Conn., 5.2s of 2044 were traded 34 times, according to Markit.
Primary Market
The muni market was looking ahead to feasting on the upcoming week's new volume, after digesting an extra heavy portion of bonds in the prior week.
Reports said that Puerto Rico will delay a planned April sale of as much as $2.95 billion bonds until early May. Reuters quoted sources as saying the delay was caused because of continuing negotiations between Puerto Rico and potential buyers of its bonds.
Topping this week's calendar is the city and county of Honolulu, Hawaii's $879 million of Series A-D tax-exempt and Series E taxable general obligation bonds, scheduled to be priced by Bank of America Merrill Lynch for institutions on Tuesday. The bonds are rated Aa1 by Moody's Investors Service and AA-plus by Fitch Ratings.
On Monday, Morgan Stanley priced the state of Wisconsin's $171.05 million of general obligation bonds.
The bonds were priced to yield 0.11% with a 1% coupon in 2015; and priced to yield from 0.67% with a 4% coupon in 2017 to 2.34% with 3% and 5% coupons in a split 2025 maturity; a 2027 term bond was priced as 5s to yield 2.55% and a 2029 term was priced as 5s to yield 2.72%
The issue is rated Aa2 by Moody's and AA by Standard & Poor's and Fitch and is expected to be rated AA by Kroll Ratings Agency.
The largest competitive bond sale during the week is set for Wednesday -- the Omaha Public School District No. 001, Neb.'s $141 million of Series 2015 GOs. The bonds, rated Aa1 by Moody's and triple-A by Standard & Poor's, mature serially from 2024 to 2040. The school district last sold bonds competitively on July 11, 2001, when Merrill Lynch won $100 million of Series 2001B GOs with a true interest cost of 5.0372%.
On the competitive note slate is a $200 million sale from Baltimore County, Md., on Tuesday. The sale is composed of $112 million of consolidated public improvement bond anticipation notes and $88 million of Metropolitan District BANs. The notes are rated MIG-1 by Moody's, SP-1-plus by S&P and F-1-plus by Fitch.
Baltimore County last sold bonds on Dec. 10, 2014, when JPMorgan won $200 million public improvement and Metropolitan District bonds with a TIC of 3.0093%. Baltimore County sold notes in two sales on Jan. 24, 2013; Merrill Lynch won the $212 million Metropolitan District BANs with a TIC of 0.1642% and PNC Capital Markets won $11.83 million of certificates of participation with a TIC of 1.3477%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $350.7 million to $11.494 billion on Monday. The total is comprised of $2.742 billion competitive sales and $8.752 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 33,792 trades on Friday on volume of $10.444 billion. Most active on Friday, based on the number of trades, was the Louisiana Public Facilities Authority revenue refunding bond for the Franciscan Missionaries of Our Lady Health System Project Series 2015A 4s of 2039, which traded 235 times at an average price of 99.522 with an average yield of 4.025%; (initial offering price of 99.714 and an initial offering yield of yield of 4.15%).
