Municipal bonds continued to show strength along with Treasuries as equity prices continued their downward spiral.
Secondary market
Municipal bonds were stronger on Tuesday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields dipped as much as two basis points in the one- to 30-year maturities.
High-grade munis were also stronger, with yields calculated on MBIS' AAA scale decreasing as much as two basis points across the curve.
Municipals were stronger on Municipal Market Data’s AAA benchmark scale, which showed the yield on the 10-year muni general obligation falling as much as two basis points while the yield on 30-year muni maturity dropped one to three basis points.
Treasury bonds were stronger as stocks traded sharply lower. The Treasury 10-year stood at 3.051% while the Treasury three-month bill was at 2.395%.
The Dow Jones Industrial Average was off 1.7% while the Nasdaq Composite Index fell 1.2% and the S&P 500 Index lost 1.3%.
On Monday, the 10-year muni-to-Treasury ratio was calculated at 86.3% while the 30-year muni-to-Treasury ratio stood at 99.8%, 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 44,457 trades on Monday on volume of $10.84 billion.
California, New York and Texas were the municipalities with the most trades, with the Golden State taking 18.659% of the market, the Empire State taking 12.06% and the Lone Star State taking 10.215%.
Looking at fund flows
After seven weeks of municipal mutual fund outflows, portfolio managers are raising cash by reducing positions, according to Alan Schankel, managing director at Janney.
“The impact of $5.7 billion in mutual fund outflows since late September is mitigated by light primary supply and a projected pick-up in seasonal reinvestment flows in the next two months,” Schankel wrote in a Tuesday market comment. “The outflow pace hardly compares to late 2016 post-election outflows, which ran for 10 weeks and totaled $28.2 billion.”
He said exchange traded funds are beginning to receive more investor interest.
“ETFs have experienced flat net issuance since September. That may be changing. MUB, the largest municipal ETF, had $343 million of new shares created over the past four trading sessions, to reach a market cap exceeding $10 billion,” he wrote.
Primary market
JPMorgan Securities is expected to price the North Carolina Turnpike Authority’s $394 million of Series 2018 senior lien turnpike revenue refunding bonds for the Triangle Expressway System.
The deal is rated BBB by S&P Global Ratings and BBB-minus by Fitch Ratings.
RBC Capital Markets is set to price Colorado’s $242 million of Series 2018N tax-exempt certificates of participation for the Building Excellent School Today program.
The deal is rated Aa2 by Moody’s Investors Service and AA-minus by S&P.
Late Monday, Citigroup received the official award on the Charlotte Mecklenburg Hospital Authority, N.C. (doing Business as Atrium Health) $100 million of Series 2018F variable-rate healthcare revenue bonds.
The deal has is rated Aa3/VMIG1 by Moody’s and AA-minus/A1-plus by S&P.
Bond sale results
North Carolina
Bond Buyer 30-day visible supply at $4.30B
The Bond Buyer's 30-day visible supply calendar increased $924.3 million to $4.30 billion for Tuesday. The total is comprised of $1.66 billion of competitive sales and $2.65 billion of negotiated deals.
Treasury sells bills
The Treasury Department Tuesday auctioned $50 billion of four-week bills at a 2.200% high yield, a price of 99.847222.
The coupon equivalent was 2.234%. The bid-to-cover ratio was 2.90. Tenders at the high rate were allotted 24.13%. The median rate was 2.170%. The low rate was 2.150%.
Treasury also auctioned $30 billion of eight-week bills at a 2.300% high yield, a price of 99.661389.
The coupon equivalent was 2.340%. The bid-to-cover ratio was 3.48. Tenders at the high rate were allotted 89.31%. The median rate was 2.290%. The low rate was 2.260%.
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.
