Prices of top-shelf municipal bonds closed lower on Friday, according to traders, as yields on some maturities rose by as much as four basis points.
The yield on the 10-year benchmark muni general obligation finished up two basis points to 2.34% from 2.32% on Thursday, while the yield on the 30-year GO was up four basis points to 3.34% from 3.30%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were lower on Friday with the yield on the two-year Treasury note rising to 0.71% from 0.68% on Thursday, while the 10-year yield rose to 2.47% from 2.40% and the 30-year yield increased to 3.24% from 3.16%.
The 10-year muni to Treasury ratio was calculated on Friday at 93.4% versus 96.4% on Thursday, while the 30-year muni to Treasury ratio stood at 102.3% compared to 104.1%, according to MMD.
The Week's Primary Market
In the primary, the tax-exempt market saw over $7.5 billion of new supply sell during the week, according to revised figures from Thomson Reuters. This was comprised of about $5.8 billion of negotiated sales and $1.8 billion of competitive sales.
The biggest deal of the week was from the city of Los Angeles, which sold $1.4 billion of tax and revenue anticipation notes. The TRANs were priced by Stifel as 2s to yield 0.315% on June 30, 2016. The notes were rated MIG1 by Moody's Investors Service and SP1-plus by Standard & Poor's.
"The deal went well," a person familiar with the offering told The Bond Buyer. "It got a lot of interest."
Proceeds of the sale will be used to smooth cash flow and make pension payments before July 15, generating about $36.4 million in savings from a pre-payment discount.
Wayne County, Mich., came to market with its limited tax general obligation notes after the deal was delayed from the prior week when County Executive Warren Evans asked the state for fiscal intervention to help the county fix its financial problems.
Bank of America Merrill Lynch priced the taxables as 5 3/4s to yield 6% on Dec. 1, 2017, a price of about 99.438. The preliminary pricing on the notes offered a 5% coupon, which was pushed up to 5.75% in the final pricing, according to sources.
"The rate was slightly higher than anticipated as we were unable to completely overcome the county's request last week for a state financial review," said Wayne County Deputy Treasurer Christa McLellan. "However, we are very pleased to have the deal sold."
Standard & Poor's had assigned a short-term rating of SP1 to the notes ahead of the original sale date, but just ahead of the new sale, S&P put the county's BB-plus limited tax GO rating on CreditWatch with negative implications due to the request for state intervention.
S&P said if the request is approved by the state, county lawmakers could choose one of four possible outcomes: a consent agreement; appointment of an emergency manager; a neutral evaluation; or it could pursue a Chapter 9 bankruptcy filing.
The state of Massachusetts came to market with $955 million of general obligation bonds priced by Bank of America Merrill Lynch. The deal was rated Aa1 by Moody's and AA-plus by both S&P and Fitch Ratings.
Massachusetts Treasurer Deb Goldberg said the state would see about $73 million in budgetary savings over the next 22 years from the sale, adding it produced savings of 7.58% on the refunded bonds, without extending the life of the state's debt profile.
"In a difficult market environment, our sound debt management practices and long-term commitment to transparency have allowed us to lock in significant savings for the commonwealth's taxpayers, all while providing funding at attractive levels for our long-term infrastructure goals," she said.
Siebert Brandford Shank priced the New York State Environmental Facilities Corp.'s $217 million of clean water and drinking water state revolving funds revenue bonds for the New York City Municipal Water Finance Authority. The bonds were rated triple-A by Moody's and S&P and AA-plus by Fitch.
Siebert also priced Miami-Dade County, Fla.'s $206 million of public facilities revenue and refunding bonds for the Jackson Health System. The issue was rated Aa2 by Moody's, A-plus by S&P and AA-minus by Fitch.
Muni Bond Funds Post Outflows for 8th Straight Week
For the eighth week in a row, municipal bond funds reported outflows, bringing to 11 out of 26 weeks this year the funds have suffered cash withdrawals.
The weekly reporting funds saw $105.755 million of outflows in the week ended June 24, after experiencing outflows of $420.844 million in the previous week, according to the latest Lipper data.
The four-week moving average remained negative at $329.772 million after being in the red at $354.647 million in the previous week. The moving average has been negative for three weeks in a row. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds also experienced outflows, losing $24.416 million in the latest week, after outflows of $197.404 million in the previous week. It was the also the eighth week in a row long-term funds saw outflows. Intermediate-term funds recorded outflows of $29.451 million after seeing outflows of $15.216 million in the prior week.
However, high-yield muni funds had an inflow of $48.394 million in the latest reporting week, after an outflow of $161.877 million the previous week. And exchange traded funds saw inflows of $41.989 million, after experiencing inflows of $3.186 million in the previous week.
The Week's Most Actively Quoted Issues
Puerto Rico and New York issues were among the most actively quoted in the week ended June 26, according to data released by Markit.
On the bid side, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 10 unique dealers. On the ask side, the New York City Transitional Finance Authority BARB 4s of 2044 were quoted by 19 dealers. And among two-sided quotes, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 13 dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues in the week ended June 26 were in New York, Vermont and Mississippi names, according to Markit.
In the revenue bond sector, the New York City Transitional Finance Authority's BARB 4s of 2044 were traded 65 times. In the GO bond sector, the Vermont and State Agricultural College 4s of 2040 were traded 52 times. And in the taxable bond sector, the Mississippi Home Corp. single-family mortgage revenue 3.05s of 2034 were traded 13 times, according to Markit.
