Prices of top-shelf municipal bonds were sharply higher, traders said, as yields on some maturities fell by as much as six basis points as uncertainty over Puerto Rico and Greece fueled a flight to safety buy.
Secondary Trading
The yield on the 10-year benchmark muni general obligation was down three to five basis points from 2.34% on Friday, while the yield on the 30-year GO was off four to six basis points from 3.34%, according to a read of Municipal Market Data's triple-A scale.
"With the negotiations between Athens and its creditors breaking down over the weekend in favor of bank closures, capital controls, and a July 5th referendum vote presumably on whether or not to accept austerity measures, money was quickly exiting global stock markets and pouring into bonds," Gregory Saulnier, research analyst at Municipal Market Data, wrote in a Monday comment.
Treasury prices were mostly higher on Monday with the yield on the two-year Treasury note gaining to 0.71% from 0.67% on Friday, while the 10-year yield dropped to 2.40% from 2.47% and the 30-year yield decreased to 3.16% from 3.24%.
The 10-year muni to Treasury ratio was calculated on Friday at 93.4% versus 96.4% on Thursday, while the 30-year muni to Treasury ratio stood at 102.3% compared to 104.1%, according to MMD.
Puerto Rico GOs Fall on Reports of Debt Distress
Prices of Puerto Rico debt fell in early trading on Monday, after a published reported quoted Puerto Rico Gov. Alejandro García Padilla as saying the commonwealth cannot pay its roughly $72 billion in debt.
The governor said the commonwealth would likely seek significant concessions from creditors, which could include putting off some debt payments for as long as five years, the New York Times reported.
Puerto Rico commonwealth Series 2014A general obligation 8s of 2035 were trading as low as 68.50 cents on the dollar on Monday, according to the Municipal Securities Rulemaking Board's EMMA website. There were 12 trades totaling $27 million; eight customers sold the bonds while four customers bought them.
On Friday, the GOs traded as low as 76.75, according to EMMA, in 19 trades totaling $22 million.
Primary Market
Volume for the week totals $3.26 billion, consisting of $2.83 billion of negotiated deals and $432.5 million of competitive sales. The municipal market will be closed on Friday for the July 4th holiday so all of this week's paltry supply will be squeezed into the few full trading days.
Citi is expected to price the largest deal of the week on Tuesday, the Texas Transportation Commission's $800 million of state highway fund's first tier revenue refunding bonds. The issue is initially structured as serials running from 2017 through 2026. The bonds are rated triple-A by Moody's Investors Service and Standard & Poor's.
Morgan Stanley is set to price the Metropolitan Washington Airports Authority's $350 million of Series 2015 B, C and D airport system revenue and refunding bonds on Tuesday. The issue is rated A1 by Moody's and AA-minus by S&P and Fitch Ratings.
Morgan Stanley is also expected to price the state of Arizona's $168 million of Series 2015 refunding certificates of participation on Tuesday. The COPs are rated Aa3 by Moody's and AA-minus by S&P.
Jefferies is slated to price the Jets Stadium Finance Issuer 2015, LLC's $147 million of Series 2015 taxable weekly mode variable-rate demand notes on Tuesday. The notes are rated VMIG1 by Moody's and A1 by S&P.
Wells Fargo Securities is set to price Clark County, Nev.'s $102 million of revenue refunding bonds for the Las Vegas-McCarran International Airport on Tuesday. The bonds, initially structured as serials running from 2019 through 2027, are rated A1 by Moody's and A-plus by S&P.
The only competitive bond sale over $100 million will take place on Tuesday, when the North Dakota Public Finance Authority offers $125 million of Series 2015A revolving fund program bonds.
The last time the PFA competitively sold comparable bonds was on April 23, when Citi won $25.62 million of Series 2015B capital financing program bonds with a true interest cost of 3.33%.
Prior Week's Actively Traded Issues by Sector
Revenue bonds comprised 54.90% of new issuance in the week ended June 26, up from 53.86% in the previous week, according to Markit. General obligation bonds comprised 36.54% of total issuance, down from 38.03%, while taxable bonds made up 8.56%, up from 8.11%.
Some of the most actively traded issues last week were in New York, Vermont and Mississippi names, according to Markit.
In the revenue bond sector, the New York City Transitional Finance Authority's BARB 4s of 2044 were traded 65 times. In the GO bond sector, the Vermont and State Agricultural College 4s of 2040 were traded 52 times. And in the taxable bond sector, the Mississippi Home Corp. single-family mortgage revenue 3.05s of 2034 were traded 13 times, according to Markit.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 31,525 trades on volume of $9.414 billion. The most active bond, based on the number of trades, was the New York City Transitional Finance Authority's Series 2015 S-2 building and revenue bond 4s of 2044, which traded 157 times at an average price of 99.856 with an average yield of 3.856%. The bonds were initially priced at 99.625 to yield 4.022%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $455.9 million to $7.11 billion on Monday. The total is comprised of $2.58 billion competitive sales and $4.53 billion of negotiated deals.
