Prices of top-quality municipal bonds were higher at mid-session, traders said, with yields on some maturities falling by as much as two basis points.
The municipal bond market on Friday is looking ahead to next week's $8.5 billion new issue calendar, which is topped off by big sales in New Jersey and California. Market participants were also eying the fate of the delayed Puerto Rico Aqueduct and Sewer Authority's $750 million bond deal.
PRASA Deal on Day-to-Day Calendar
"We are not pricing today in order to provide investors with the time they need to adequately review and analyze the materials so they can make the most informed decision about their potential investment," a spokesperson for the Puerto Rico Government Development Bank said in a statement released late Thursday.
"I heard the PRASA pricing was $300 million short of getting the deal done with an 8% coupon priced at a 10% yield to maturity," a New York source told The Bond Buyer. "Supposedly, more hedge funds would care, but were pressing for stronger covenant protections."
Bank of America Merrill Lynch had no comment on the timing on the deal or details of the offering, which it had been expected to price this week.
On Friday's Bloomberg calendar, the deal is now listed as day-to-day. However, some traders were hearing a possible Tuesday date for the sale.
"Next week is shaping up to be relatively busy for municipal new issuance, with $8 billion listed for sale so far, not including the $750 million Puerto Rico Aqueduct and Sewer Authority issue (Caa3/CCC-/CC) which was scheduled for this week, but is now listed as day-to-day," Janney Municipal Strategist Alan Schankel wrote in a Friday market comment. "Despite some tweaking of security features, investor interest in the PR issue is apparently lacking, notwithstanding a reported yield as high as 10% for the 30-year maturity. Perhaps investor caution derives from the backdrop of an Aug. 1 default on the Puerto Rico Public Finance Corp. and the Commonwealth's plan to present a broad debt restructuring proposal by Sept. 1."
The sale of PRASA's Series 2015A senior lien revenue bond sale would be the first for a Puerto Rico authority since the commonwealth sold $3.5 billion of general obligation bonds last year.
Primary Market
Total volume for next week is estimated by Ipreo at $8.48 billion, consisting of $7.17 billion of negotiated deals and $1.31 billion of competitive sales.
Bank of America Merrill Lynch is slated to price three series of bonds for the New Jersey Economic Development Authority totaling $2.2 billion. The bonds have a two-day retail order period on Friday and Monday with the institutional pricing set for Tuesday.
On Friday, BAML priced the authority's $1.658 billion of school facilities construction bonds and refunding bonds, Series WW and XX for retail.
The $500 million of Series 2015 WW school facilities construction bonds were priced as 5s to yield 5.07% in 2035. The 2028-2034 maturities are not offered to retail.
The $1.159 billion of Series 2015 XX school facilities construction refunding bonds were priced to yield from 3.55% with 3.25% and 5% coupons in a split 2020 maturity to 4.39% with a 5% coupon in 2025. The 2026 and 2027 maturities were not offered to retail.
A sale of $574 million of Series 2015YY taxable school facilities construction refunding bonds is also scheduled.
The bonds are rated A3 by Moody's Investors Service and A-minus by Standard and Poor's and Fitch Ratings.
Morgan Stanley is set to price the state of California's $1.9 billion of various purpose general obligation and GO refunding bonds on Wednesday after holding a retail order period on Tuesday.
"These bonds help strengthen our communities by helping to fund the construction of roads, schools and other important infrastructure projects," state Treasurer John Chiang said in a release.
About $1.35 billion from the sale will be used to refinance existing debt with the remaining $550 million providing permanent financing for capital facilities or other voter-approved projects and public facilities.
The deal is rated Aa3 by Moody's, AA-minus by S&P and A-plus by Fitch.
Barclays Capital is expected to price Guam's $404.87 million of Series 2015D business privilege tax refunding bonds on Wednesday. The deal is rated rate A by S&P and A-minus by Fitch.
Barclays is also set to price the Connecticut Health and Educational Facilities Authority's $320 million of Series L revenue bonds for Quinnipiac University on Thursday. The bonds are rated A3 by Moody's and A-minus by S&P.
In the competitive arena, the Cobb-Marietta Coliseum and Exhibit hall Authority, Ga., is selling $372.55 million of Series 2015 taxable revenue bonds for the Cobb County Coliseum project on Tuesday. The deal is rated triple-A by Moody's, S&P and Fitch.
Secondary Trading
The yield on the 10-year benchmark muni general obligation on Friday weakened by as much as two basis points from 2.16% on Thursday, while the yield on the 30-year GO was off as much two basis points from 3.02%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were higher on Friday, with the yield on the two-year Treasury note falling to 0.63% from 0.67% on Thursday, while the 10-year yield fell to 2.05% from 2.08% and the 30-year yield decreased to 2.74% from 2.75%.
The 10-year muni to Treasury ratio was calculated on Thursday at 103.8% versus 104.0% on Wednesday, while the 30-year muni to Treasury ratio stood at 109.8% compared to 109.4%, according to MMD.
Municipal Bond Funds See Inflows
Municipal bond funds saw inflows in the latest week, according to Lipper data released on Thursday.
Funds which report weekly saw $43.656 million of inflows in the week ended Aug. 19, after seeing inflows of $11.087 million in the previous week, Lipper reported. The latest inflow brings to 18 out of 34 weeks this year that the funds have seen a cash infusion. Inflows for the year to date are still in the green, totaling $3.008 million.
The four-week moving average remained negative at $81.719 million after being in the red at $61.280 million in the previous week. The moving average has now been negative for 13 weeks in a row. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds also experienced inflows, gaining $289.019 million in the latest week, after seeing inflows of $134.829 million in the previous week. Intermediate-term funds saw outflows of $6.790 million after seeing inflows of $8.368 million in the prior week.
Exchange traded funds saw outflows of $19.800 million, after experiencing inflows of $49.071 million in the previous week.
And high-yield muni funds saw inflows of $182.789 million in the latest reporting week, after seeing an inflow of $60.437 million the previous week.
In the past 17 weeks, high-yield funds have seen outflows 11 times totaling $1.775 billion and inflows six times totaling $322.011 million.
The Week's Most Actively Quoted Issues
New York and Ohio were some of the most actively quoted names in the week ended Aug. 21, according to data released by Markit.
On the bid side, the Port Authority of New York and New Jersey tax 5.647s of 2040 were quoted by 11 unique dealers. On the ask side, the New York City GO 5s of 2028 were quoted by 18 dealers. And among two-sided quotes, the Buckeye Tobacco Settlement Financing Authority, Ohio 5.875s of 2047 were quoted by seven dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues in the week ended Aug. 21 were in the District of Columbia, California and Oregon, according to Markit.
In the revenue bond sector, the District of Columbia hospital 4s of 2040 were traded 67 times. In the GO bond sector, the Mount Diablo Unified School District, Calif., zeros of 2030 were traded 34 times. And in the taxable bond sector, the Port Morrow Transmission Facilities, Ore., revenue 2.937s of 2022 were traded 13 times, Markit said.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,013 trades on Thursday on volume of $9.529 billion. The most active bond, based on the number of trades, was the Washington HealthCare Facilities Authority Series 2015A Providence Health and Services revenue 4s of 2045, which traded 103 times at an average price of 99.836, an average yield of 3.993%. The bonds were initially priced at 97.766 to yield 4.13%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $4.24 billion to $10.84 billion on Friday. The total is comprised of $2.55 billion competitive sales and $8.29 billion of negotiated deals.
Christine Albano contributed to this report
