CUSIP requests for all municipal securities surged 38.2% in May from April, CUSIP Global Services reported on Thursday, an indication that muni supply may soon be returning to more normal levels.

May is the third straight month of growth in the municipal category, which includes municipal bonds, long-term and short-term notes, and commercial paper. The gain follows a 0.3% rise in April and a 30.9% increase in March.

On a year-over-year basis, however, total municipal identifier request volume has fallen 19% from the same period in 2017, reflecting a significant slowdown in request volume in the first quarter of this year.

Before the March increase, municipal bond issuance had been trending lower after the passage of the Tax Cuts ad Jobs Act, which repealed advance refunding of muni bonds.

“Municipal issuers have driven CUSIP request volume to a level we haven't seen since November of last year,” said Gerard Faulkner, Director of Operations for CUSIP Global Services. “The increase is likely driven by a combination of pent up demand and a desire to secure funding before the Federal Reserve raises interest rates again.”

A total of 1,343 new municipal identifiers were requested in May, the highest level of municipal identifier request volume since November 2017.

Among top state issuers, CUSIPs for scheduled public finance offerings from California, Texas, and New York were the most active in May.

Primary market
Supply may be limited over the near term. The last of the the week’s biggest new issues came to market on Thursday, and next week’s issuance may be light ahead of the Federal Reserve monetary policy meeting. Expectations are for the Fed to raise interest rates by 0.25%.

“The reality is there is not a lot of paper floating around and what does come, gets eaten up quickly and that played out again this week,” said Mark Paris, head of municipal strategies at Invesco he said. “As we enter the Summer, supply will start slipping – next week little action is expected to take place since the Federal Open Market Committee is scheduled to meet.”

On Thursday, Morgan Stanley priced the Southeast Alabama Gas Supply District’s $972 million of gas supply revenue bonds for Project No. 2.

In the competitive arena, the New Mexico Finance Authority sold $424 million of Series 2018A state transportation refunding revenue bonds.

Goldman Sachs won the bonds with a true interest cost of 2.4967%.

The Orange County Unified School District, Calif., sold $188 million of Election of 2017 Series 2018 general obligation bonds.

RBC Capital Markets won the bonds with a TIC of 3.6347%.

Thursday’s bond sales

Alabama:
Click here for the Gas Supply deal

New Mexico:
Click here for the NMFA sale

Bond Buyer 30-day visible supply at $7.91B
The Bond Buyer's 30-day visible supply calendar decreased $2.42 billion to $7.91 billion on Thursday. The total is comprised of $4.38 billion of competitive sales and $3.53 billion of negotiated deals.

ICI: Long-term muni funds see $661M inflow
Long-term municipal bond funds saw an inflow of $661 million in the week ended May 30, the Investment Company Institute reported on Thursday.

This followed an inflow of $185 million into the tax-exempt mutual funds in the week ended May 23 and an inflow of $450 million in the week ended May 16. In the two weeks prior to that, the funds saw an inflow of $352 million and an outflow of $163 million.

Taxable bond funds saw an estimated inflow of $1.58 billion in the latest reporting week, after seeing an inflow of $5.02 billion in the previous week.

ICI said the total estimated outflows to long-term mutual funds and exchange-traded funds were $329 million for the week ended May 30 after outflows of $240 million in the prior week.

Tax-exempt money market funds saw outflows
Tax-exempt money market funds experienced outflows of $389.8 million, lowering their total net assets to $139.65 billion in the week ended June 5, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $590.0 million on to a yearly high of $140.04 billion in the previous week.

The average, seven-day simple yield for the 202 weekly reporting tax-exempt funds fell to 0.66% from 0.80% the previous week.

The total net assets of the 830 weekly reporting taxable money funds gained to $35.04 billion to $2.692 trillion in the week ended June 4, after an inflow of $3.66 billion to $2.657 trillion the week before.

The average, seven-day simple yield for the taxable money funds increased to 1.42% from 1.40% from the prior week.

Overall, the combined total net assets of the 1,032 weekly reporting money funds increased $34.65 billion to $2.832 trillion in the week ended June 4, after inflows of $4.25 billion to $2.797 trillion in the prior week.

Secondary market
Municipal bonds were mostly weaker on Thursday, according to a late read of the MBIS benchmark scale. Benchmark muni yields rose as much as one basis point in the eight - to 10-year and 14- to 30-year maturities, fell by as much as one basis point in the one- to seven-year maturities and were unchanged in the 11- to 13-year maturities.

High-grade munis were mostly weaker, with yields calculated on MBIS’ AAA scale rising as much as one basis point in the nine-year and 13- to 30-year maturities, falling as much as one basis point in the one- to seven-year maturities and remaining unchanged in the eight-year and 10- to 12-year maturities..

Municipals were unchanged according to Municipal Market Data’s AAA benchmark scale, which showed yields steady in the 10-year general obligation muni and flat in the 30-year muni maturity.

Treasury bonds were stronger as stock prices traded mixed.

On Thursday, the 10-year muni-to-Treasury ratio was calculated at 84.0% while the 30-year muni-to-Treasury ratio stood at 96.8%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.

Previous session's activity
The Municipal Securities Rulemaking Board reported 44,817 trades on Wednesday on volume of $18.74 billion.

California, New York and Texas were the states with the most trades, with the Golden State taking 17.89% of the market, the Empire State taking 11.29% and the Lone Star State taking 9.356%.

Treasury announces auction details
The Treasury Department announced these auctions:

  • $14 billion of 29-year 11-month 3 1/8% bonds selling on June 12;
  • $22 billion of nine-year 11-month 2 7/8% notes selling on June 11;
  • $32 billion of three-year notes selling on June 11;
  • $42 billion of 182-day bills selling on June 11; and
  • $48 billion of 91-day bills selling on June 11.

Gary Siegel contributed to this report.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.

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Chip Barnett

Chip Barnett

Chip Barnett is a journalist with more than 40 years of experience. Barnett is currently Senior Market Reporter for The Bond Buyer.
Aaron Weitzman

Aaron Weitzman

Aaron Weitzman is a markets reporter for The Bond Buyer, focusing on the sell side of the municipal bond market.