Prices of top-rated municipal bonds finished stronger on Friday, traders said, after nearly $8 billion of new supply came to market during the week.
Secondary Market
The yield on the 10-year benchmark muni general obligation fell by one basis point to 2.00% from to 2.01% on Wednesday, while the yield on the 30-year GO fell two basis points to 2.90% from 2.92%, according to the final read of MMD's triple-A scale. On Friday, April 17, the yield on the muni 10-year stood at 1.94% while the 30-year was at 2.83%.
Treasury prices were higher on Friday as the yield on the two-year Treasury note dropped to 0.51% from 0.53% from Thursday, while the 10-year yield declined to 1.92% from 1.96% and the 30-year yield decreased to 2.61% from 2.64%.
The 10-year muni to Treasury ratio was calculated on Friday at 104.3% versus 103.3% on Thursday, while the 30-year muni to Treasury ratio stood at 110.8% compared to 110.8%.
The Week's Primary Market
The market saw about $7.64 billion of new bonds priced in the week, consisting of $5.08 billion of negotiated deals and $2.56 billion of competitive sales.
The largest sales came out of California, which sold three separate issues totaling $1.1 billion, the largest competitive offerings so far this year.
Morgan Stanley won the $578.6 million of tax-exempt various purpose general obligation refunding bonds with a true interest cost of 3.4497%; JPMorgan won the $408.6 million of tax-exempt various purpose GO refunding bonds with a TIC of 1.2544%; and Wells Fargo Securities won the $105.36 million of taxable various purpose GOs with a TIC of 1.6942%. All three sales were rated Aa3 by Moody's Investors Service and A-plus by Standard & Poor's and Fitch Ratings.
"This successful sale is a strong indicator that investors are bullish about the Golden State," State Treasurer John Chiang said in a statement. He added that taxpayers saved over $180 million in debt service payments by the sale which refunded more than $1 billion in older, higher interest-rate bonds. California is expected back in the market in the summer or fall.
Also in the week, JPMorgan priced $902.47 million of Energy Northwest's electric revenue and refunding bond deal.
The offering consisted of $117.82 million of Series 2015-A Project 1 electric revenue refunding bonds; $330.46 million of Series 2015-A Columbia Generating Station electric revenue and refunding bonds; $79.04 million of Series 2015-A Project 3 electric revenue refunding bonds; $12.44 million of Series 2015-B taxable electric revenue refunding bonds; and $329.18 million of Series 2015-B taxable Columbia Generating Station electric revenue and refunding bonds. The bonds were rated Aa1 by Moody's, AA-minus by S&P and AA by Fitch.
Energy Northwest's Assistant Treasurer Jeff Windham said the pricing was well received and that many maturities were oversubscribed. He added that a retail order period also went well and met the issuer's expectations.
Meanwhile, despite a spate of negative headlines - or perhaps because of them -- the Chicago Board of Education saw its $300 million GO bond sale gobbled up by investors drawn to its high yields. The BOE is currently under federal investigation for the awarding of a no-bid contract.
PNC Capital Markets priced the offering, which consisted of $275.68 million of project bonds and $20 million of green bonds, backed by dedicated alternative revenues. The top yield of 5.63% on a 25-year maturity was 285 basis points over MMD's triple-A benchmark. The deal was oversubscribed, with more than 100 buyers participating, according to finance team members. The issue was rated A-minus by S&P, BBB-minus by Fitch and BBB-plus by Kroll Bond Rating Agency.
Elsewhere, the state of Connecticut came to market with $250 million of green bonds on Earth Day, which were priced by Goldman, Sachs. The deal was rated triple-A by Moody's, S&P and Fitch.
The offering was the Nutmeg State's first all-green bond sale and will finance wastewater and drinking water infrastructure projects all across the state.
Also, the city of Phoenix, Ariz.'s Civic Improvement Corp. came to market with $319.31 million of subordinated excise tax revenue refunding bonds, priced by Wells Fargo Securities. The deal was rated Aa3 by Moody's and AA-plus by S&P.
And the North Texas Municipal Water District sold $302.13 million of water system revenue refunding and improvement bonds in the competitive arena. Barclays Capital won the deal with a TIC of 3.4777%. The issue was rated Aa2 by Moody's and triple-A by S&P.
The Week's Most Actively Quoted Issues
Chicago, New York and Puerto Rico names were among the most actively quoted issues in the week ended April 24, according to data released by Markit.
On the bid side, the Chicago 5.432s of 2042 were quoted by nine unique dealers. On the ask side, the New York City Transitional Finance Authority 5s of 2041 were quoted by 16 dealers. And among two-sided quotes, the Puerto Rico 8s of 2035 were quoted by nine dealers, Markit said.
The Week's Most Actively Traded Issues
Among the most actively traded issues in the week ended April 24, were issuers from Chicago, Ohio and California, according to Markit.
In the revenue bond sector, the Allen County, Ohio, hospital facilities 4s of 2044 were traded 93 times. In the GO bond sector, the Chicago Board of Education 5 1/4s of 2039 were traded 112 times. And in the taxable bond sector, the California 1.8s of 2020 were traded 27 times, according to Markit.
Tax-Exempt Bond Funds See Inflows Again
Municipal bond funds which report weekly, posted $534.645 million of inflows in the week ended April 22, after experiencing outflows of $486.312 million in the week ended April 15, according to the latest Lipper data.
It was the first time this month that flows were positive, reflecting the seasonal outflows usually experienced during tax filing season.
The four-week moving average remained negative at $71.264 million in the latest week after being in the red at $59.509 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 saw inflows, gaining $551.993 million in the latest week, after experiencing inflows of $237.634 million in the previous week.
High-yield muni funds recorded an inflow of $374.224 million in the latest reporting week, after seeing inflows of $49.576 million in the previous week. Exchange-traded funds had inflows of $43.787 million, after recording inflows of $126.797 million in the previous week.
In contrast, long-term municipal bond mutual funds posted $943 million of outflows in the week ended April 15, according to the Investment Company Institute. ICI reported outflows from long-term funds of $187 million in the previous week.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 41,863 trades on Thursday on volume of $16.567 billion.
The most active bond, based on the number of trades, was the Pennsylvania State Turnpike Commission's 2015 Subordinate Sub-Series A-1 revenue 4s of 2041, which traded 654 times at an average price of 99.502 with an average yield of 4.027%. The bonds were initially priced at 98.386 to yield 4.10%.
