Prices of top-rated municipal bonds were weaker at mid-session, traders said, with yields on some maturities rising by as much as two basis points.
The market is looking ahead to the week's $8.69 billion supply slate, which is topped by a $1.4 billion note sale from the city of Los Angeles in the short-term sector and a $939 million Massachusetts general obligation bond sale on the long-term calendar.
Secondary Market
The yield on the 10-year benchmark muni general obligation on Monday rose by as much as two basis points from 2.27% on Friday, while the yield on the 30-year GO was up by as much as two basis points from 3.26%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were also lower on Monday with the yield on the two-year Treasury note rising to 0.65% from 0.62% on Friday, while the 10-year yield rose to 2.35% from 2.27% and the 30-year yield increased to 3.14% from 3.06%.
The 10-year muni to Treasury ratio was calculated on Friday at 101.3% versus 97.9% on Thursday, while the 30-year muni to Treasury ratio stood at 106.2% compared to 104.8%, according to MMD.
Primary Market
There are $7.16 billion of negotiated sales scheduled for this week and $1.53 billion of competitive sales.
Bank of America Merrill Lynch is slated to price the Massachusetts GOs, consolidated loan of 2015, as Series C refunding bonds and Series 2015 A bonds for retail investors on Monday ahead of the institutional pricing on Tuesday. The GOs are rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
Citi is set to price the Philadelphia Authority for Industrial Development's $273 million of revenue bonds for Temple University. The bonds, slated for sale on Tuesday, are rated Aa3 by Moody's and A-plus by S&P.
The largest sale on the competitive calendar is Tuesday's offering from Seattle, Wash. The city is selling $164 million of Series 2015A municipal light and power revenue bonds. The issue is rated Aa2 by Moody's and AA by S&P. The last time the city competitively sold comparable bonds was on Oct. 22, 2014 when Wells Fargo Securities won $265.21 million of Series 2014 municipal light and power improvement and refunding revenue bonds with a true interest cost of 3.096%.
Stifel is set to price the city of Los Angeles' $1.39 billion of Series 2015 tax and revenue anticipation notes on Wednesday. The TRANs are rated MIG1 by Moody's and SP1-plus by S&P.
BAML will price FirstEnergy Nuclear Generation Corp.'s $296 million of pollution control revenue refunding bonds on Wednesday. The bonds are rated Baa3 by Moody's and BBB-minus by S&P.
BAML is also slated to price the Maryland Health and Higher Educational Facilities Authority's $263 million of Series 2015 revenue bonds for the Meritus Medical Center. The deal will have a retail order period on Wednesday. The bonds are rated BBB by S&P and Fitch.
Stifel is set to price the Industry Public Facilities Authority, Calif.'s $250 million of Series 2015B taxable tax allocation refunding bonds for the Industrial Redevelopment Project No. 2 on Thursday, The deal is rated A-minus by S&P.
Also, Wayne County, Mich., may sell $186.9 million of delinquent tax anticipation notes on Wednesday or Thursday. The DTANs are expected to be priced by Bank of America Merrill Lynch. Public Financial Management was municipal advisor and Axe & Ecklund was note counsel. The county also hired Orrick, Herrington & Sutcliffe as special bankruptcy counsel.
The deal was postponed from last week after County Executive Warren Evans asked for state fiscal intervention to help the county fix its financial problems.
BAML Report: Issuance Slows, Still on Track for $400B in '14
While municipal bond issuance has slowed from the fast and furious pace seen earlier this year, it is still on track to surpass 2014's totals, according to a new report from Bank of America Merrill Lynch Global Research.
As of June 18, issuance for the month-to-date was $24.2 billion, up 6.4% compared to the same period last year.
Issuance for the year-to-date is $205.8 billion, up 45.1% versus the same time last year. Of the total issuance so far this year, 66.5% has been related to refundings, compared to 51.1% in the same period in 2014.
"For the month, we are still ahead of last year, but below our original forecasts," the report said. "Nevertheless, we should realize our $400 billion estimate for the full year."
The market posted a relatively strong performance in June, the report stated.
The BofAML Muni Master Index returned -0.300% as of June 18, outperforming the Government Master Index and the Corporate Master Index which returned -1.181% and -1.742%, respectively. For the year to date, the muni index has returned -0.062% and outperformed both the Treasury and corporate indexes which had total returns of -0.296% and -0.563%, respectively.
The best performance in munis for the year-to-date has been in the one- and three-year maturities and the high-yield sector.
Ratios to Treasuries have performed well on the long end, however, long muni's remain at over 100% in the 20- and 30-year maturities. The one- and two-year maturities are cheapest on a relative value basis to Treasuries, according to the report.
Prior Week's Actively Traded Issues by Sector
Revenue bonds comprised 53.86% of new issuance in the week ended June 19, down from 56.14% in the previous week, according to Markit. General obligation bonds comprised 38.03% of total issuance, up from 36.13%, while taxable bonds made up 8.11%, up from 7.73%.
Some of the most actively traded issues last week were in New York, Los Angeles and Puerto Rico names.
In the revenue bond sector, the New York City Transitional Finance Authority's BARB 4s of 2044 were traded 73 times. In the GO bond sector, the Puerto Rico commonwealth GO 8s of 2035 were traded 37 times. And in the taxable bond sector, the Los Angeles Unified School District's 5.981s of 2027 were traded 13 times, according to Markit.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 32,469 trades on Friday on volume of $8.323 billion.
The most active bond, based on the number of trades, was the New York City Transitional Finance Authority's Fiscal 2015 Series S-2 building and revenue bonds 4s of 2044, which traded 132 times at an average price of 100.222 with an average yield of 3.904%. The bonds were initially priced at 99.625 to yield 4.022%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $263.6 million to $12.43 billion on Monday. The total is comprised of $2.90 billion competitive sales and $9.52 billion of negotiated deals.
