It comes as no surprise that overall municipal primary market issuance is down during a week where the Federal Open Market Committee is meeting - the upcoming week is no different, especially considering the probability of an interest rate hike.
Ipreo estimates volume will decrease to $5.81 billion, from a revised total of $9.17 billion in the past week, according to updated figures from Thomson Reuters. The calendar for the week ahead is composed of $3.09 billion of negotiated deals and $2.71 billion of competitive sales.
"It will be a pretty quiet week supply wise, not surprising as the FOMC is set to meet," said Jim Grabovac, senior portfolio manager at McDonnell Investment Management. "It will be a heavy political and policy week, which will have more impact in the long term."
Grabovac mentioned that in addition to the Fed meeting, there is a scoring scheduled for the Affordable Health Care Act as well as an election in the Netherlands.
"Both of those won't directly impact our market but with those other things on investors' minds, the Fed meeting isn't getting as much attention as it normally would, especially considering the fact that most have already factored in a hike."
He also said that the labor market numbers that came out [on Friday] won't cause the Fed to rethink their decision.
"At the beginning of the year I would have said three hikes or an increase of 0.75% for interest rates was aggressive but so much has changed since then," he said. "The attitude of the Fed is now less patient with regard to the pace of rate hikes. Economic conditions in the U.S. have been established but political and geo-political risk continued to be heightened and continued to be watched close by investors."
The largest deal will on the competitive side, as the Empire State Development Corporation is scheduled to sell a total of roughly $1.84 billion in five separate sales. The New York State Urban Development Corporation State personal income tax revenue general purpose bonds will feature both taxable and tax-exempts. The two larger sales of $523.515 million and $507.32 million will be taxables and the other three sales of $318.975 million, $247.93 million and $246.355 million will be tax-exempts.
The Empire State Development's roots trace to the Division of Commerce, created by the state legislature in 1941, and the Urban Development Corporation (UDC), which the legislature created in 1968. Over the years, many departments and divisions were created to handle the challenges of the state. Then, in 1995, in an effort to reduce the size of government and improve efficiency, the operational efforts of the Department of Economic Development (DED) and the UDC were consolidated; doing business as the Empire State Development Corporation (ESDC).
RBC Capital Markets is expected to price the Ohio Water Development Authority's $400 million of state water pollution control loan fund revenue bonds on Tuesday. The deal is rated triple-A by Moody's Investors Service and S&P Global Ratings.
Back over to the competitive side, Boulder Valley School District No. RE-2, Colo. is set to sell roughly $284.88 million over two separate deals on Tuesday. The general obligation and GO refunding bonds are rated Aa1 by Moody's and AA-plus by S&P and Fitch Ratings.
Citi is scheduled to price the California Health Facilities Financing Authority's $287 million of revenue bonds for El Camino Hospital on Tuesday. The deal is expected to mature serially from 2020 through 2037 and include term bonds in 2042 and 2047. The deal is rated A1 by Moody's and A+ by S&P.
Secondary Market
Top-shelf municipal bonds finished unchanged on Friday, traders said, as they digested another strong jobs report on Friday ahead of the next meeting of the Federal Reserve.
The 10-year benchmark muni general obligation yield was steady from 2.47% on Thursday, while the yield on the 30-year GO was flat from 3.24%, according to the final read of Municipal Market Data's triple-A scale.
Non-farm payrolls rose 235,000 in February, far above the 190,000 gain predicted by economists polled by IFR Markets. The data cements the case for those who believe the Federal Open Market Committee will raise interest rates at its upcoming meeting.
U.S. Treasuries were slightly stronger in late trade. The yield on the two-year Treasury slipped to 1.35% from 1.36% on Thursday, while the 10-year Treasury yield dipped to 2.58% from 2.59%, and the yield on the 30-year Treasury bond deceased to 3.16% from 3.18%.
On Friday, the 10-year muni to Treasury ratio was calculated at 95.7% compared to 95.1% on Thursday, while the 30-year muni to Treasury ratio stood at 102.3%, versus 101.9%, according to MMD.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended March 10 were from California and New York,
In the GO bond sector, the California 4s of 2038 were traded 55 times. In the revenue bond sector, the New York City Transitional Finance Authority 3.5s of 2034 were traded 30 times. And in the taxable bond sector, the California 7.55s of 2039 were traded 18 times.
Week's Most Actively Quoted Issues
Alaska, New York and Florida names were among the most actively quoted bonds in the week ended March 10, according to Markit.
On the bid side, the Alaska Sport Fishing revenue 5s of 2025 were quoted by 299 unique dealers. On the ask side, the New York City Municipal Water Finance Authority 4s of 2039 were quoted by 256 unique dealers. And among two-sided quotes, the Florida Hurricane Catastrophe Fund Financing Corp. taxable 2.995s of 2020 were quoted by 25 unique dealers.
Lipper: Muni Bond Funds Report Outflows
Investors in municipal bond funds continued to withdraw cash in the latest week, according to Lipper data released late Thursday. The weekly reporters saw $73.145 million of outflows in the week ended March 8, after outflows of $346.225 million in the previous week.
The four-week moving average remained in the green at positive $52.510 million, after being positive at $146.846 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 outflows, losing $25.122 million in the latest week after falling $228.545 million in the previous week. Intermediate-term funds had outflows of $1.386 million after outflows of $41.652 million in the prior week.
National funds had inflows of $669,000 after outflows of $239.790 million in the previous week. High-yield muni funds reported inflows of $17.823 million in the latest reporting week, after inflows of $48.366 million the previous week.
Exchange traded funds saw inflows of $11.944 million, after inflows of $105.083 million in the previous week.
