Prices of top-rated municipal bonds rallied in late morning trading, according to traders, with yields on some maturities weakening by as much as seven basis points.
A day after the Federal Reserve decided not to raise interest rates, U.S. stocks slumped while Treasury prices surged.
In the primary, muni market attention will turn to next week’s $4.12 billion new issue slate, which features deals from New York City, Massachusetts, San Francisco and Sacramento.
Secondary Market
The yield on the 10-year benchmark muni general obligation on Friday weakened from five to seven basis points from 2.22% on Thursday, while the yield on the 30-year GO was weaker by five to seven basis points weaker from 3.22%, according to the 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 dropping to 0.68% from 0.70% on Thursday, while the 10-year yield declined to 2.16% from 2.22% and the 30-year yield decreased to 2.97% from 3.02%.
The Dow Jones Industrial Average was down about 185 points; the Nasdaq Composite Index was off around 40 points and the S&P 500 Index dropped about 20 points.
The 10-year muni to Treasury ratio was calculated on Thursday at 100.2% versus 98.1% on Wednesday, while the 30-year muni to Treasury ratio stood at 106.2% compared to 105.1%, according to MMD.
Primary Market
Municipal bond volume for next week is estimated at $4.12 billion, according to Ipreo, consisting of $3.16 billion of negotiated deals and $957.2 million of competitive sales.
The largest bond offerings will be coming from the New York City Transitional Finance Authority, which is selling a total of $1 billion of bonds divided in deals in both the negotiated and competitive sectors.
Goldman Sachs is set to price the TFA’s $750 million of future tax secured tax-exempt subordinate bonds. Retail orders are slated to be taken on Friday and Monday with an institutional pricing tentatively scheduled for Tuesday.
In the competitive arena, the TFA will sell $250 million of future tax secured taxable subordinate bonds in two separate sales on Tuesday. The sales consist of $190 million of Fiscal 2016 Series A Subseries A2 taxables and $60 million of Fiscal 2016 Series A Subseries A3 taxables.
The bonds are rated Aa1 by Moody’s Investors Service and triple-A by Standard & Poor’s and Fitch Ratings.
Wells Fargo Securities is expected to price the San Francisco Bay Area Transit District’s $358.56 million offering, which consists of $187.63 million of sales tax refunding bonds, rated AA-plus by S&P and Fitch, pricing on Tuesday, and $170.93 million of general obligation refunding bonds, rated triple-A by Moody’s and S&P, pricing on Thursday.
Goldman is set to price the Sacramento Public Financing Authority’s $274 million of Series 2015 taxable lease revenue bonds for the Golden 1 Center on Wednesday. The bonds are rated A-plus by S&P and A by Fitch.
Barclays Capital is expected to price the Toledo Hospital’s $270 million of Series 2015A taxable corporate CUSIP bonds for the ProMedica Healthcare Obligated group on Thursday. The issue is rated Aa3 by Moody’s and AA by S&P.
Morgan Stanley is set to price the state of Mississippi’s $200 million of Series 2015E gaming tax revenue bonds. The issue is rated A3 by Moody’s and A-plus by S&P and Fitch.
In the short-term competitive sector, the state of Massachusetts is selling three separate note deals totaling $1.2 billion on Tuesday. The deals consist of $400 million of Series 2015A general obligation revenue anticipation notes, $400 million of Series 2015B GO RANs, and $400 million of Series 2015C GO RANs.
The RANs are rated MIG1 by Moody’s, SP1-plus by S&P and F1-plus by Fitch.
Muni Funds See Outflows for 4th Straight Week
Municipal bond funds reported outflows for the fourth straight week, according to Lipper data released Thursday.
Weekly reporting funds experienced $411.069 million of outflows in the week ended Sept. 16, after outflows of $95.986 million in the previous week, Lipper reported.
The latest outflow brings to 20 out of 38 weeks this year that the funds have seen redemptions. Inflows for the year to date are still in the green, totaling over $1.5 billion.
The four-week moving average remained negative at $359.525 million after being in the red at $245.843 million in the previous week. The moving average has now been negative for 18 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 experienced inflows, gaining $12.897 million in the latest week, on top of inflows of $12.690 million in the previous week. Intermediate-term funds had outflows of $157.937 million after outflows of $9.352 million in the prior week.
Exchange traded funds saw inflows of $65.897 million, after inflows of $28.812 million in the previous week.
And high-yield muni funds reported outflows of $348,000 in the latest reporting week, after an outflow of $6.069 million the previous week.
In the past 21 weeks, high-yield funds have had outflows 15 times totaling $1.946 billion and inflows six times totaling $322.011 million.
The Week's Most Actively Quoted Issues
Puerto Rico and Arizona were some of the most actively quoted names in the week ended Sept. 18, according to data released by Markit.
On the bid side, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 11 unique dealers. On the ask side, the Salt River Project, Ariz.’s revenue 5s of 2028 were quoted by 23 dealers. And among two-sided quotes, the Puerto Rico commonwealth GO 8s of 2035 were quoted by nine dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues in the week ended Sept. 18 were in Oklahoma, Pennsylvania and California, according to Markit.
In the revenue bond sector, the University of Oklahoma 4s of 2045 were traded 104 times. In the GO bond sector, the Philadelphia 4s of 2035 were traded 36 times. And in the taxable bond sector, the California 7.55s of 2039 were traded 11 times, Markit said.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 34,731 trades on Thursday on volume of $8.668 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $1.04 billion to $7.51 billion on Thursday. The total is comprised of $2.84 billion competitive sales and $4.67 billion of negotiated deals.
