Prices of top-shelf municipal bonds were lower at mid-session, traders said, with yields on some maturities up by as much as four basis points.
Meanwhile, traders were looking ahead to about $8.4 billion of new supply slated to come to market this week.
Secondary Market
The yield on the 10-year benchmark muni general obligation was up one to three basis points from 2.18% on Friday, while the yield on the 30-year GO was up two to four basis points from 3.13%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were lower with the yield on the two-year Treasury note increasing to 0.59% from 0.58% on Friday, while the 10-year yield rose to 2.21% from 2.15% and the 30-year yield increased to 2.98% from 2.90%.
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.
Puerto Rico Pain
Puerto Rico is bringing more pain to the municipal bond market as the
As bond prices continue to decline, the average yield of bonds in the S&P Municipal Bond Puerto Rico Index rose to record highs last week — at 8.19% compared to a yield of 7.57% at the end of 2014, Rieger writes in a new research report.
"It gets worse when looking at Puerto Rico general obligation bonds, as the
He said factors driving the decline are the unknowns around a possible restructuring of PREPA bonds; tax collections have not impressed market participants; no imminent federal intervention; and the credibility of achieving a balanced budget in the next fiscal year
Primary Market
There are $7 billion of negotiated deals set for this week while bonds scheduled for competitive sale total $1.4 billion.
For May, the month to date issuance totals $7.2 billion as of May 7, up 35.1% compared to the same period last year, according to Bank of America Merrill Lynch Global Research.
Year to date issuance is at $153.4 billion, up 59.1% versus the time period last year, BAML said in its weekly research report. Of the total year to date issuance, 69.8% is related to refundings, compared to 50.3% in the same period last year, according to BAML.
For April, BlackRock estimated about $37.8 billion of munis were issued, well above the norm for the month, with the five- and 10-year historical averages being $31 billion and $33 billion, respectively.
"Notably, we saw a meaningful uptick in new-money issuance in April — 42% of April's issuance was new money rather than refundings, which had represented the preponderance of supply in the first three months," BlackRock said in its monthly Municipal Market Update.
Siebert Brandford Shank is set to price the state of Connecticut's $500 million of Series 2015B general obligation bonds for retail on Monday, with the institutional pricing scheduled for Tuesday. The GOs are rated Aa3 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
"We are expecting a strong response to these offerings," said Sarah K. Sanders, assistant treasurer for debt management in the Connecticut State Treasurer's office.
On Tuesday, Goldman is slated to price Austin, Texas' $404 million of electric utility system revenue refunding bonds. The issue is expected to consist of $323 million of tax-exempts and $81 million of taxable. The bonds are rated A1 by Moody's and AA-minus by S&P and Fitch.
Frost Bank is slated to price the San Antonio Independent School District, Texas' $307.44 million of Series 2015 unlimited tax school building and refunding bonds on Tuesday. The bonds, which are backed by the Permanent School Fund guarantee program, are rated triple-A by Moody's and Fitch.
Meanwhile, the biggest deal of the week is the Salt River Project Agricultural Improvement and Power District, Ariz.'s $833 million of electric system revenue bonds, scheduled to be priced by Goldman, Sachs on Wednesday. The issue is rated Aa1 by Moody's and AA by S&P.
The Las Vegas, Nev., Valley Water District is set to come to market with $388.12 million of Series 2015 A, B and C limited tax GO refunding bonds. JPMorgan is slated to price the bonds on Wednesday. The issue is rated Aa1 by Moody's and AA-plus by S&P.
The Pennsylvania Turnpike Commission's $495.56 million of Series 2015A turnpike revenue bonds are set to be priced by Loop Capital Markets on Thursday. The issue is expected to consist of $379.92 million fix-rated Series A-1 bonds and $115.64 million of Series A-2 SIFMA floating-rate notes. The issue is rated A1 by Moody's and A-plus by S&P and Fitch.
In the competitive arena, the Santa Clara Unified School District, Calif., is selling two separate offerings totaling $243.45 million on Thursday. The issues are comprised of $140.7 million of Series 2015 election of 2014 GO refunding bonds and $102.75 million of Series 2015 GO refunding bonds. Both sales are rated AA by S&P.
Also on Thursday, Milwaukee will sell a $166.11 million single issue consisting of $137.54 million Series 1015 N2 GO promissory notes and $28.57 million of Series 2015 B3 GO corporate purpose bonds. The issue is rated AA by Fitch. Milwaukee will also sell a separate issue of $125 million Series 2015 R1 revenue anticipation notes. The RANs are rated F1-plus by Fitch.
Some 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.
Broken down by market sector, revenue bonds comprised 54.83% of new issuance, down from 54.84% in the prior week. General obligation bonds comprised 36.70% of total issuance, down from 37.46%, while taxable bonds made up 8.47%, down from 7.70%.
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.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $1.340 billion to $14.317 billion on Monday. The total is comprised of $4.681 billion competitive sales and $9.636 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,646 trades on Friday on volume of $10.436 billion.
The most active bond, based on the number of trades, was the Freemont Unified School District, Calif., 2015 certificates of participation 4s of 2040, which traded 117 times at an average price of 99.854 with an average yield of 3.989%. The bonds were initially priced at 98.50 to yield 4.096%.
