Top-shelf municipal bonds closed a bit stronger on Friday, according to traders, who will see a smaller, very manageable new issue supply calendar.
Ipreo estimates volume for the week ahead at $4.03 billion, down from a revised total of $6.20 billion in the past week, according to updated data from Thomson Reuters. The slate is composed of $3.37 billion of negotiated deals and $661.4 million of competitive sales.
"We are not surprised by the supply decline," said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management.
He cited market concerns over interest rates and other issues such as tax reform as causing some wariness among issuers.
"We think that this trend of lighter volume may play out not only through the coming week, but also through the end of the first quarter," he said.
Heckman added that some market participants might be counting too much on increased infrastructure to fuel volume for 2017.
"They may be overestimating the possible issuance in the short-term," he said, adding that any increased supply would come in the second half at the earliest, and possibly in 2018. "These projects are based on long-term design and planning."
In the primary, the biggest negotiated deal of the week is coming out of Oklahoma, when its Turnpike Authority sells $478.51 million of revenue bonds.
Wells Fargo Securities is expected to price the Series 2017A second senior revenue bonds and the Series 2017B refunding second senior revenue bonds on Wednesday after a one-day retail order period. The deal is rated Aa3 by Moody's Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.
Barclays Capital will price the New York City Municipal Water Finance Authority's $330 million of Fiscal 2017 Series DD water and sewer system second general resolution revenue bonds on Tuesday, after a one-day retail order period.
Piper Jaffray is expected to price the North Clackamas School District No. 12, Ore.'s $323.64 million Series 2017 general obligation bonds and Series 2017A GOs on Tuesday. The issue is rated Aa1 by Moody's and AA-minus by S&P.
Citigroup is set to price the University of Colorado Hospital Authority's $300 million of Series 2017C-1 and Series 2017C-2 revenue PUT bonds. The deal is rated Aa3 by Moody's and AA-minus by S&P and Fitch.
In the competitive arena, the University of Maryland System is selling $115 million of Series 2017A tax-exempt auxiliary facility and tuition revenue bonds on Tuesday. The system is also selling $52.26 million of Series 2017B tax-exempt auxiliary facility and tuition refunding revenue bonds Both deals are rated Aa1 by Moody's and AA-plus by S&P and Fitch.
Secondary Market
The 10-year benchmark muni general obligation yield declined two basis points to 2.33% from 2.35% on Thursday, while the yield on the 30-year GO decreased two basis point to 3.08% from 3.10%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were also weaker on Friday. The yield on the two-year Treasury dipped to 1.21% from 1.22% on Thursday, while the 10-year Treasury yield declined to 2.48% from 2.51%, and the yield on the 30-year Treasury bond decreased to 3.06% from 3.09%.
The 10-year muni to Treasury ratio was calculated at 94.0% compared to 93.8% on Wednesday, while the 30-year muni to Treasury ratio stood at 100.7%, versus 100.4%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 45,872 trades on Thursday on volume of $12.05 billion.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Jan. 27 were from Illinois and New York,
In the GO bond sector, the Chicago, Ill., 6s of 2038 were traded 126 times. In the revenue bond sector, the New York Transportation Development Corp.'s 5.25s of 2050 were traded 46 times. And in the taxable bond sector, the Chicago 7.045s of 2029 were traded 73 times.
Week's Most Actively Quoted Issues
Oregon, New Jersey and California names were among the most actively quoted bonds in the week ended Jan. 27, according to Markit.
On the bid side, the Portland, Ore., taxable 6.046s of 2020 were quoted by 102 unique dealers. On the ask side, the New Jersey Economic Development Authority revenue 4s of 2027 were quoted by 294 unique dealers. And among two-sided quotes, the California taxable 7.7s of 2030 were quoted by 25 unique dealers.
Lipper: Muni Bond Funds Report Inflows
Municipal bond funds attracted inflows again, just barely, as investors continued their return to the market, according to Lipper data released late Thursday. The weekly reporters saw $6.98 million of inflows in the week ended Jan. 25, after inflows of $511.739 million in the previous week.
The four-week moving average moved back into the green at positive $145.238 million, after being negative $265.669 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 had inflows, gaining $239.931 million in the latest week after gaining $421.726 million in the previous week. Intermediate-term funds had outflows of $140.103 million after inflows of $96.682 million in the prior week.
National funds had outflows of $630 million after inflows of $471.471 million in the previous week. High-yield muni funds reported inflows of $197.757 million in the latest reporting week, after inflows of $442.286 million the previous week.
Exchange traded funds saw outflows of $147.402 million, after outflows of $33.755 million in the previous week.
