Prices of top-rated municipal bonds were higher at mid-session, traders said, as the market prepares to take a breather next week when only about $3.98 billion of bonds are scheduled to be sold.
Some analysts speculated the Treasury Department's suspension of sales of state and local government series securities may be starting to affect the issuance of some refunding bonds.
SLGS are special purpose Treasuries that help issuers avoid violating arbitrage rebate or yield restriction requirements. Issuers mostly buy SLGS for advance refunding escrows to make sure their investment yield won't significantly exceed the yield of their refunding bonds.
However, other market participants contend that it is very unlikely the SLGS suspension is delaying any bond sales.
Others said the April 28-29 meeting of the Federal Open Market Committee could be a factor in creating market hesitancy amid the uncertainty of interest rate direction.
"Perhaps the FOMC meeting scheduled for next week offered a reason for buyers to be patient," Municipal Market Data Senior Market Analyst Randy Smolik wrote in a market comment. "The Fed has made it clear that they will raise rates at least once this year. Although the economic news would suggest the timing of a rate hike could be pushed off beyond the June meeting, recent surveys of economists underscores the Fed's belief that economic growth will pick up soon as the effects of transient factors of weather, low oil prices and strong dollar levels created less drag for the economy."
Primary Market
Looking ahead to next week, volume is set to drop off dramatically.
Total volume is estimated at $3.98 billion, according to Ipreo and The Bond Buyer; this is down from the $7.64 billion sold this week, according to Thomson Reuters. The total is comprised of $2.74 billion of negotiated deals and $1.23 billion of competitive sales.
The biggest offering on the upcoming calendar is a competitive sale from the Humble Independent School District in Texas. The $218.01 million of Series 2015A unlimited tax school building and refunding bonds will go up for bidding on Tuesday.
The deal is backed by the Texas Permanent School fund guarantee and rated triple-A by Moody's and Standard & Poor's.
The last time the district sold bonds competitively was on April 10, 2007, when Prager Sealy won $25 million of Series 2007A unlimited tax school building bonds with a true interest cost of 4.6243%
The largest deal in the negotiated sector is a $209 million sale from the Grossmont Healthcare District in California. Goldman, Sachs is scheduled to the price the general obligation bonds on Tuesday. The GOs are rated Aa2 by Moody's Investors Service.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $1.410 billion to $6.889 billion on Friday. The total is comprised of $3.061 billion competitive sales and $3.828 billion of negotiated deals.
Secondary Market
Prices of top-quality municipal bonds were higher. The yield on the 10-year benchmark muni general obligation was down by as much as one basis point from to 2.01% on Wednesday, while the yield on the 30-year GO fell by as much as two basis points from 2.92%, according to a read of MMD's triple-A scale.
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 1.91% 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 Thursday at 103.3% versus 101.5% on Wednesday, while the 30-year muni to Treasury ratio stood at 110.8% compared to 109.7%.
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%.
