Munis stronger in quiet trade

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Municipal bonds were stronger on Monday in a quiet pre-holiday trading session. Bond markets closed early ahead of the New Year’s holiday.

Muni market activity remains light with no new issue activity to set the pace. Benchmark yields were little changed over the three post-Christmas trading sessions, despite volatility in Treasuries,” Janney said in a Monday market comment. “Lipper reported that muni mutual funds added $931 million in the week ended Dec. 26, the second week of inflows and strongest inflow pace since July. Most of the inflows were to exchange traded funds, with the total of positive flows dropping to $382 million if ETFs are excluded.”

While the Bond Buyer’s 30-day visible supply is just a bit over $5 billion, Janney said it expects total issuance to grow as deals are added to next week’s calendar in the coming days.

“As the year winds to a close, munis are on track to notch the strongest 2018 total return performance among fixed income classes with a 1.25% year-to-date return, which does not reflect the further benefit of the tax-free coupon,” Janney said.

Secondary market
Municipal bonds were stronger on Monday, according to a read of the MBIS benchmark scale. Benchmark muni yields fell as much as two basis points in the one- to 30-year maturities.

High-grade munis were stronger, with yields calculated on MBIS' AAA scale dropping as much as two basis points across the curve.

Municipals were steady on Municipal Market Data’s AAA benchmark scale, which showed the yield on both the 10-year muni general obligation and the 30-year muni maturity remaining unchanged.

Treasury bonds were stronger amid continuing stock market volatility. The Treasury 30-year was yielding 3.011%, the 10-year yield stood at 2.702%, the five-year was at 2.530%, the two-year was at 2.520% while the Treasury three-month bill stood at 2.450%.

On Monday, the 10-year muni-to-Treasury ratio was calculated at 85.1% while the 30-year muni-to-Treasury ratio stood at 100.7%, 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 32,130 trades on Friday on volume of $5.36 billion.

California, New York and Texas were the municipalities with the most trades, with the Golden State taking 13.842% of the market, the Empire State taking 12.196% and the Lone Star State taking 8.674%.

Week's actively traded issues
Revenue bonds comprised 56.84% of total new issuance in the week ended Dec. 28, according to Markit with general obligation bonds making up 37.74% and taxable bonds accounting for 5.42%.

Some of the most actively traded munis by type in the week were from New York, Texas and Puerto Rico issuers, according to Markit.

In the GO bond sector, the New York City zeros of 2038 traded 30 times. In the revenue bond sector, the Texas 4s of 2019 traded 27 times. And in the taxable bond sector, the Puerto Rico Government Development Bank Recovery Authority 7.5s of 2040 traded 16 times.
Week's actively quoted issues
Puerto Rico, New York and Illinois names were among the most actively quoted bonds in the week ended Dec. 28, according to Markit.

On the bid side, the Puerto Rico Sales Tax Financing Corp. revenue 6s of 2042 were quoted by 60 unique dealers. On the ask side, the NYC taxable 5.206s of 2031 were quoted by 79 dealers. And among two-sided quotes, the Illinois taxable 5.1s of 2033 were quoted by 26 dealers.

Primary market
While this week’s calendar is mostly empty, market participants will see only about $17.6 million of deals go up for sale.

The calendar is composed of $6.4 million of negotiated deals and $11.3 million of competitive sales.

Bond Buyer 30-day visible supply at $5.02B
The Bond Buyer's 30-day visible supply calendar increased $923.8 million to $5.02 billion for Monday. The total is comprised of $1.91 billion of competitive sales and $3.11 billion of negotiated deals.

Treasury sells $26B year bills
The Treasury Department on Monday said it sold $26 billion of one year bills at a high rate of 2.545%; 62.17% of the bills were allotted at the high rate.

The low rate was 2.480% while the median rate was 2.51%; the coupon equivalent was 2.631%.

The bills are dated Jan. 3, 2019 and due Jan. 2, 2020.

Treasury to sell $40B 4-week bills
The Treasury Department on Monday said it will sell $40 billion of four-week discount bills on Thursday. The bills are dated Jan. 3, 2019 and due Feb. 5, 2019.
There are currently $30 billion of four-week bills outstanding.

Treasury also said it will sell $30 billion of eight-week bills Thursday. The bills are dated Jan. 3, 2019 and due March 5 2019. There are no eight-week bills outstanding.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Ziad Saba at 212-803-6079 for more information.

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