Prices of top-rated municipal bonds were stronger at mid-session, traders said, as yields on some maturities fell by as much as five basis points.
The municipal market on Monday was gearing up after the long holiday weekend and ahead of this week's almost $7 billion of new supply. There were no muni deals sold during Friday's abbreviated session and market activity was minimal because of the Passover and Easter holidays despite the release of a weaker-than-expected employment report.
The Municipal Securities Rulemaking Board was closed on Friday. Municipal Market Data was also closed and no scale readings were set.
Secondary Market
Prices of top-quality munis were higher. The yield on the 10-year benchmark muni general obligation was off from two to four basis points from 1.93% on Thursday, while the yield on 30-year GO was down from one to three basis points from 2.80%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were mixed on Monday after Friday's release of the weaker-than-expected March employment report. Non-farm payrolls rose 126,000 last month, lower than a 240,000 gain forecast by economists. The yield on the two-year Treasury note fell to 0.48% from 0.53% on Thursday, while the 10-year yield decreased to 1.87% from 1.90% and the 30-year yield rose to 2.53% from 2.52%.
On Thursday, the 10-year muni to Treasury ratio was calculated at 101.4% versus 103.4% on Wednesday, while the 30-year muni to Treasury ratio stood at 110.9% compared to 112.8%.
Primary Market
Traders are now looking at the $6.96 billion of new supply set to come to market this week. An estimated $5.01 billion of negotiated deals are slated to be priced and about $1.95 billion of competitive offerings are scheduled for sale.
Topping the new issue calendar is the North Texas Tollway Authority's $871 million toll road deal, expected to be priced by JPMorgan on Wednesday. The deal is rated A3 by Moody's Investors Service and BBB-plus by Standard & Poor's.
The New York State Dormitory Authority is expected to come to market with three separate negotiated deals totaling more than $1 billion. The issues consist of $690.49 million of Series 2015A revenue bonds and $265.97 million of Series 2015B taxable revenue bonds for New York University to be priced by Morgan Stanley on Thursday; and $125 million of revenue bonds for The New School to be priced by Goldman, Sachs on Tuesday. The NYU bonds are rated Aa2 by Moody's and AA-minus by S&P and The New School bonds are rated A3 by Moody's and A-minus by S&P.
North Carolina will sell by competitive bid $225 million of general obligation bonds on Wednesday. The bonds have triple-A ratings from all three major rating agencies and are structured to mature serially from 2016 to 2035.
Top Traded Munis by Sector
Muni bonds from issuers in California and New York were the most actively traded bonds by market sector in the week ended April 3, according to data released by Markit.
Broken down by market sector, revenue bonds comprised 54.53% of new issuance, down from 54.62% in the prior week. General obligation bonds comprised 37.65% of total issuance, up from 37.46%, while taxable bonds made up 7.82%, down from 7.92%.
In the revenue bond sector, California's Golden State Tobacco Securitization Corp. 5s of 2045 were traded 109 times. In the GO bond sector, California 5s of 2026 were traded 21 times. And in the taxable bond sector, the New York City Transitional Finance Authority 5.508s of 2037 were traded 20 times, according to Markit.
Tax-Exempt Bond Funds See Outflow
For the first time in 12 weeks, municipal bond funds reported a cash outflow as retail investors cashed out ahead of the April 15 tax filing date.
Municipal bond funds which report weekly posted $300.580 million of outflows in the week ended April 1, after experiencing inflows of $581.664 million in the week ended March 25, according to the latest Lipper data.
Up until the latest reporting period, muni bond funds had seen inflows in each week of 2015, according to Lipper data. Inflows for the year total about $5.21 billion. The last time the funds saw an outflow was on Dec. 31, 2014, when the funds lost $9.4 million of cash.
The four-week moving average remained positive at $141.929 million in the latest week after being in the green at $319.195 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 also saw outflows, losing $49.567 million in the latest week, after experiencing inflows of $569.870 million in the previous week.
However, high-yield muni funds recorded an inflow of $1.733 million in the latest reporting week, after seeing inflows of $306.515 million in the previous week. And exchange-traded funds had inflows of $72.441 million, after recording inflows of $83.348 million in the previous week.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $1.644 billion to $10.007 billion on Monday. The total is comprised of $3.529 billion competitive sales and $6.479 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,181 trades on Thursday on volume of $11.043 billion. Most active, based on the number of trades, was the California Department of Water Resources Series 2015O power supply revenue bond 5s of 2022, which traded 177 times at an average price of 121.116 with an average yield of 1.78%. The bonds were initially priced at 121.119 to yield 1.78%.
Christine Albano contributed to this report.
