Prices of top-rated municipal bonds on were lower by the end of day Monday, according to traders. With new supply volume close to $9 billion this week, there were only some smaller deals in the market on Monday. Tuesday is when the real action will start and traders believe that “yields will be relatively attractive for buyers and that will help get the deals done.”
Secondary Market
The yield on the 10-year benchmark muni general obligation on Monday was three basis points higher to 2.05% from Friday’s 2.02%, while the yield on the 30-year GO rose three basis points to 2.90% from 2.87%, according to the final read of Municipal Market Data’s triple-A scale.
Treasury prices were weaker on Monday, as the yield on the two-year Treasury note increased to 0.66% from 0.62% on Friday while the 10-year yield rose to 2.08% from 2.01% and the 30-year yield rose to 2.68% from 2.62%.
The 10-year muni to Treasury ratio was calculated at 98.5% on Monday versus 101.0% on Friday, while the 30-year muni to Treasury ratio stood at 108.1% compared to 110.5%.
Primary Market
New issue volume for this week is estimated at $8.947 billion, according to Ipreo and The Bond Buyer. That total is up from a revised $7.532 billion sold last week, according to Thomson Reuters.
There are $6.965 billion of negotiated deals slated for this week and $1.982 billion competitive sales scheduled.
The big supply week will be started Tuesday as Cypress-Fairbanks Independent School District is coming to market with $297.92 million of unlimited tax refunding bonds. Raymond James will price the bonds, which are scheduled to mature serially from 2028 to 2035. The issue has underlying ratings of Aa1 by Moody's Investors Service and AA-minus by Standard & Poor's.
Also pricing Tuesday is Oregon’s Medford School District No. 549C $136.28 million of general obligation refunding bonds that will be priced by Piper Jaffray. Later this week, Piper is also expected to price the Citrus Community College District, Calif.'s $700 million Series 2015A general obligation refunding bonds and Series 2015E GOs of election 2004.
Bank of America Merrill Lynch and Morgan Stanley are scheduled to price the biggest deal of the week - California's $1.9 billion of general obligation bonds for retail investors on Tuesday followed by institutional pricing on Wednesday. The deal is rated Aa3 by Moody's and A-plus by both S&P and Fitch Ratings.
Bank of America Merrill Lynch is also expected to price Thursday the Los Angeles Department of Water and Power, Calif.'s $495 million power system revenue bonds.
On the competitive side, Maryland is scheduled to auction two issues totaling $922 million on Wednesday. The sales consist of $518 million tax-exempt First Series A State and Local Facilities Loan of 2015 GOs and $404 million First Series B State and Local Facilities Loan of 2015 refunding GOs. The issues are rated triple-A by Moody's, S&P and Fitch.
Maryland comes to market fairly often, having sold five deals since 2012, the latest being July 23 of last year, when JP Morgan won $449.61 million of GOs with a true interest cost of 2.6535%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $397.5 million to $11.824 billion on Monday. The total is comprised of $3.590 billion competitive sales and $8.234 billion of negotiated deals.
The Week's Top Traded Munis by Sector
Munis from issuers in Pennsylvania, New York, and Connecticut were the top traded bonds by market sector in the week ended Feb. 27, according to data released by Markit. Revenue bonds comprised 53.72% of new issuance in the week ended Feb. 27, down from 55.29% in the week ended Feb. 20. GOs comprised 36.25% of total issuance, up from 36.00%, while taxables made up 10.03%, up from 8.71%.
In the GO bond sector, Chartiers Valley School District, Pa., 4s of 2044 was the top traded maturity, trading 332 times. In the revenue bond sector, New York City Municipal Water Finance Authority 5s of 2039 traded 85 times, topping the list. And in the taxable bond sector, Hamden, Conn. 5.2s of 2044 traded 52 times to lead all deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 35,602 trades on Friday on volume of $9.370 billion.
Most active on Friday, based on the number of trades, was the JEA electric system revenue bonds Series 3 2015A 3.75% of 2041, which traded 164 times at an average price of 98.864, with an average yield of 3.815%.
