Prices of top-shelf municipal bonds were weaker at mid-session, traders said, with yields on some maturities rising by as much as two basis points ahead of the upcoming week’s $6.24 billion new issue slate.
Total volume for the week consists of $4.85 billion of negotiated deals and $1.39 billion of competitive sales, as estimated by Ipreo.
Secondary Trading
The yield on the 10-year benchmark muni general obligation was as much as one basis point stronger from 2.08% on Thursday, while the yield on the 30-year GO was as much as two basis points stringer from 3.08%, according to a read of Municipal Market Data's triple-A scale.
On Friday, Sept. 18, the yield on the 10-year muni stood at 2.14% while the yield on the 30-year muni was at 3.13%.
Treasury prices were also lower on Friday after Federal Reserve Chair Janet Yellen said she is ready to raise interest rates this year.
“Most of my colleagues and I anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year,” she said Thursday in a speech in Amherst, Mass.
The yield on the two-year Treasury note rose to 0.70% from 0.68% on Thursday, while the 10-year yield gained to 2.18% from 2.12% and the 30-year yield increased to 2.97% from 2.90%.
The 10-year muni to Treasury ratio was calculated on Thursday at 98.4% versus 98.9 on Wednesday, while the 30-year muni to Treasury ratio stood at 106.2% compared to 105.8%, according to MMD.
Week’s Primary Market
Municipal bond traders were wading through the current week’s issuance on Friday, which was topped by big offerings from New York City and Massachusetts.
A revised $4.48 billion of supply came to market during the week, according to Thomson Reuters, including $3.52 billion of negotiated deals and $944 million of competitive sales.
The NYC Transitional Finance Authority sold a total of $1 billion in the negotiated and competitive sectors, comprising both tax-exempt and taxable bonds.
Goldman Sachs priced the TFA’s $750 million of Fiscal 2016 Series A-1 future tax secured tax-exempt subordinate bonds for institutions after holding a two-day retail order period.
“The TFA received approximately $346 million of retail orders for the tax-exempt bonds during the two-day retail order period preceding [the institutional sales], of which over $265 million was usable,” the TFA said in a press release. “During [the] institutional order period, the TFA received approximately $732 million of priority orders from institutional investors for the approximately $464 million of bonds left to sell. At the final pricing, strong investor demand made it possible to reduce yields by up to 3 basis points in seven maturities.”
The TFA also sold $250 million taxable future tax secured subordinate bonds in two separate sales in the competitive arena. Bank of America Merrill Lynch won the $190 million of Fiscal 2016 Series A Subseries A2 taxables with a true interest cost of 2.71%. Wells Fargo Securities won the $60 million of Fiscal 2016 Series A Subseries A3 taxables with a TIC of 3.53%.
All the TFA issues were rated Aa1 by Moody’s Investors Service and triple-A by Standard & Poor’s and Fitch Ratings.
In the short-term competitive sector, the state of Massachusetts sold three separate note deals totaling $1.2 billion.
There were four winning bids on the $400 million of Series 2015A general obligation revenue anticipation notes. There were nine winning bids on the $400 million of Series 2015B GO RANs. And there were eight winning bids on the $400 million of Series 2015C GO RANs. There were 37 total bids for the Series A notes, 33 bids for the Series B notes and 32 bids for the Series C notes, the state said.
The RANs were rated MIG1 by Moody’s, SP1-plus by S&P and F1-plus by Fitch.
Wells Fargo Securities priced a two-part deal totaling $463.42 million for the San Francisco Bay Area Transit District, consisting of $276.78 million of GO refunding bonds, rated triple-A by Moody’s and S&P and $186.64 million of Series 2015A sales tax refunding bonds, rated AA-plus by S&P and Fitch.
Goldman Sachs priced the Sacramento Public Financing Authority’s taxable Series 2015 lease revenue bonds for the Golden 1 Center. The issue was rated A-plus by S&P and A by Fitch.
Citigroup priced Wayne County Airport Authority, Mich.'s $520.06 million of new money and refunding bonds. Ahead of the sale, airport officials had highlighted its legal separation from its struggling home county of Wayne as the operator of Detroit's airport.
The authority achieved its goal, said Janney Municipal Strategist Alan Schankel, with the final pricing “indicating little taint for the airport authority from Detroit’s fiscal woes.”
Municipal Bond Funds See Inflows
Municipal bond funds reported inflows for the first time in four weeks, according to Lipper data released on Thursday.
Weekly reporting funds experienced $231.252 million of inflows in the week ended Sept. 23, after outflows of $411.069 million in the previous week, Lipper reported.
The latest outflow brings to 19 out of 39 weeks this year that the funds have seen cash flowing in. Inflows for the year to date remain in the green, totaling over $1.7 billion.
The four-week moving average remained negative at $215.571 million after being in the red at $359.525 million in the previous week. The moving average has now been negative for 19 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 $752.920 million in the latest week, on top of inflows of $12.897 million in the previous week. Intermediate-term funds had outflows of $61.783 million after outflows of $157.937 million in the prior week.
Exchange traded funds saw outflows of $90.678 million, after inflows of $65.897 million in the previous week.
And high-yield muni funds reported inflows of $178.146 million in the latest reporting week, after an outflow of $348,000 the previous week.
The Week's Most Actively Quoted Issues
New Jersey and Illinois were some of the most actively quoted names in the week ended Sept. 25, according to data released by Markit.
On the bid side, the New Jersey State Turnpike Authority taxable revenue 7.414s of 2040 were quoted by 13 unique dealers. On the ask side, the New Jersey Economic Development Authority revenue 4 1/4s of 2026 were quoted by 18 dealers. And among two-sided quotes, Illinois taxable 5.1s of 2033 were quoted by 20 dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues in the week ended Sept. 25 were in New York and California, according to Markit.
In the revenue bond sector, the New York City Transitional Finance Authority 5s of 2035 were traded 86 times. In the GO bond sector, the California 5s of 2045 were traded 66 times. And in the taxable bond sector, the Sacramento Public Financing Authority lease revenue 5.637s of 2050 were traded 22 times, Markit said.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,080 trades on Thursday on volume of $9.766 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $2.23 billion to $9.15 billion on Friday. The total is comprised of $2.42 billion competitive sales and $6.74 billion of negotiated deals.
