Prices of top-rated municipal bond prices finished weaker on Friday, traders said, with yields from one to three basis points stronger.
In the primary, municipal bond traders will see about $5.1 billion of new issue supply hit the market in the upcoming week, according to an estimate by Ipreo and The Bond Buyer.
The weekly volume is forecast to consist of $4.0 billion of negotiated deals and $1.1 billion of competitive sales. This is down from a revised total of $6.4 billion in the prior week, according to Thomson Reuters, which was made up of $3.5 billion of negotiateds and $2.9 billion of competitives.
The muni market has been a bit quiet in recent weeks, according to some market participants, but this is expected to change going into the last two months of the year.
“It’s been steady as you go,” said Dawn Mangerson, managing director and senior portfolio manager at McDonnell Investment Management. “It’s just the same old, same old.”
But she said she was hoping that this would change soon and that the market would see a pickup in supply.
“Some of the issuers will be coming to market with the possibility of a Federal Reserve rate hike looming on the horizon,” she said, adding that it would be nice to see a mix of new names pricing along with some higher quality issuers.
Primary Market
The largest deal of the week is a short-term remarketing coming from Posey County, Ind., on Thursday.
Citigroup will remarket the $1.2 billion of Series 2013A revenue refunding bonds for the Midwest Fertilizer Co. The deal, which was last remarketed by Citi on March 27 and before that on Nov. 14, 2014, has a put date of Aug. 2, 2016. The issue is rated A1-plus by Standard & Poor’s.
Raymond James is slated to price the Broward County Airport Authority, Fla.’s $489 million of airport revenue bonds for the Fort Lauderdale International Airport on Thursday.
The issue will consist of Series A and C bonds subject to the alternative minimum tax and Series B non-AMT bonds. The deal is tentatively structured as serials maturing from 2016 to 2035 with term bonds in 2040 and 2045.
The bonds are rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s.
Morgan Stanley is expected to price the state of Tennessee’s $416.3 million of Series 2015A general obligation bonds and Series 2015B refunding bonds on Tuesday. The issue is rated triple-A by Moody’s and Fitch Ratings and AA-plus by S&P.
Jefferies is set to price the state of Texas’ $223 million of Series 2015D GOs and water financial assistance bonds on Tuesday. The issue is rated triple-A by Moody’s, S&P and Fitch.
Morgan Stanley is also expected to price the Marin County Healthcare District, Calif.’s $170 million issue on Tuesday. The bonds are rated Aa2 by Moody’s.
Bank of America Merrill Lynch is expected to price the Washington Township HealthCare District, Calif.’s $146 million of Series 2015B 2012 Election GOs on Thursday.
Siebert Brandford Shank is set to price Harris County, Texas’ $145 million of Series 2015B toll road senior lien revenue refunding bonds on Thursday.
And BAML is expected to price the California Pollution Control financing Authority’s $126 million of solid waste disposal refunding revenue bonds for Waste management Inc. on Thursday. The issue is rated A-minus by S&P.
Wells Fargo Securities is set to price the Virginia Housing Development Authority’s $101 million of taxable mortgage pass-through bonds. The deal is rated triple-A by Moody’s and S&P.
In the competitive arena, the California State Public Works Board is selling $223 million of Series 2015H Department of Corrections and Rehabilitation lease revenue bonds for the Corcoran state prison. The issue is rated A1 by Moody’s, A-plus by S&P and A by Fitch. The bonds are tentatively structured to mature serially from 2016 to 2035.
Secondary Market
The yield on the 10-year benchmark muni general obligation finished three basis points stronger at 2.04% from 2.01% on Thursday, while the yield on the 30-year GO was two basis points stronger at 3.07% from 3.05%, according to the a read of Municipal Market Data's triple-A scale.
On Friday, Oct. 16, the yield on the 10-year muni stood at 2.02% while the 30-year muni was yielding 3.07%.
Treasury prices were lower on Friday, with the yield on the two-year Treasury rising to 0.64% from 0.59% on Thursday, while the 10-year yield rose to 2.08% from 2.01% and the 30-year yield increased to 2.89% from 2.84%.
The 10-year muni to Treasury ratio was calculated on Friday at 98.2% versus 99.3% on Thursday, while the 30-year muni to Treasury ratio stood at 106.1% compared to 106.6%, according to MMD.
The Week's Most Actively Quoted Issues
New York & New Jersey and Puerto Rico were some of the most actively quoted names in the week ended Oct. 23 according to data released by Markit.
On the bid side, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 12 unique dealers. On the ask side, the Port Authority of New York & New Jersey revenue 5s of 2035 were quoted by 18 dealers. And among two-sided quotes, Puerto Rico commonwealth GO 8s of 2035 were quoted by 13 dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues in the week ended Oct. 23 were in New York, Puerto Rico and Florida, according to Markit.
In the revenue bond sector, the Utility Debt Securitization Authority, N.Y., LIPA 5s of 2036 were traded 81 times. In the GO bond sector, the Puerto Rico commonwealth GO 8s of 2035 were traded 44 times. And in the taxable bond sector, the Florida Hurricane Catastrophe Fund Finance Corp. 2.995s of 2020 were traded 14 times, Markit said.
Municipal Bond Funds See Inflows Again
Municipal bond funds reported inflows for the third week in a row, according to Lipper data released on Thursday.
Weekly reporting funds experienced $240.718 million of inflows in the week ended Oct. 21, after inflows of $520.807 million in the previous week, Lipper said.
The latest inflow brings to 22 out of 43 weeks this year that the funds have seen cash flowing in. Inflows for the year to date remain in the green, totaling over $2.7 billion.
The four-week moving average remained positive at $305.770 million after being in the green at $303.404 million in the previous week. 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 $386.074 million in the latest week, on top of inflows of $400.314 million in the previous week. However, intermediate-term funds had outflows of $78.649 million after inflows of $47.494 million in the prior week.
High-yield muni funds reported inflows of $280.664 million in the latest reporting week, after an inflow of $206.815 million the previous week.
Exchange traded funds saw inflows of $92.863 million, after inflows of $38.337 million in the previous week.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,857 trades on Thursday on volume of $8.91 billion.
