Municipal bonds are mixed at mid-session as the market awaits the start of this week's new issue activity.

Secondary market
The MBIS municipal non-callable 5% GO benchmark scale was stronger in midday trading.

The 10-year muni benchmark yield dipped to 2.265% on Wednesday from the final read of 2.280% on Tuesday, according to Municipal Bond Information Services. The MBIS 30-year benchmark muni yield decreased to 2.736% from 2.744%.

The MBIS benchmark index is updated hourly on the Bond Buyer Data Workstation.

Top-rated municipal bonds are mixed. The yield on the 10-year [2028] benchmark muni general obligation was unchanged from 1.98% on Tuesday, while the 30-year [2038] GO yield fell as much as one basis point from 2.55% according to a read of MMD’s triple-A scale.

U.S. Treasuries were mostly stronger on Wednesday. The yield on the two-year Treasury was steady at 1.92% from Tuesday, the 10-year Treasury yield dropped to 2.44% from 2.46% and the yield on the 30-year Treasury decreased to 2.79% from 2.81%.

On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 80.3% compared with 82.3% on Thursday, while the 30-year muni-to-Treasury ratio stood at 90.7% versus 92.6%, according to MMD.

MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 36,629 trades on Tuesday on volume of $16.23 billion.

Primary market
Wall Street firms seemingly all agree that 2018 municipal bond volume will be much less than what the market has seen over the past couple of years.

According to a recent MMD survey, firms estimated that muni volume this year will range anywhere from a high of $400 billion to a low of $285 billion. Bank of America Merrill Lynch is bullish on muni volume in 2018, as it is projecting $400 billion, while UBS is also quite optimistic with $355 billion. JPMorgan and Oppenheimer both seeing the muni market getting $330 billion, while Ramirez sees $317 billion, PNC eyes $315 billion and Janney is estimating $310 billion. The most bearish predictions come from RBC Captal Markets and Cumberland who are forecasting at $285 billion.

Reasons for lower than expected volume stem from the tax bill. Under the legislation, municipal issuers will no longer be able to come to market with advance refundings — a popular cost-saving tool that allowed issuers to take advantage of falling interest rates.

Also accounting for low volume estimate is the billions of issuance that was “stolen” from 2018 and given to 2017, as issuers big and small rushed to market ahead of the New Year.

“Our 2018 gross supply forecast [for 2018] is $317 billion, or down 23% year over year,” Ramirez & Co. wrote in its weekly market report. “The steep projected decline in gross supply of about $93 billion in 2018 vs. 2017 is driven by recent tax reform curbs on tax-exempt advance refundings, higher short-end rates, and a continued uncertain political environment, all of which could impact the pace and scale of new projects/new money.”

Ramirez said its total estimate for 2018 consists of $185 billion of new money (58% of the total) and $132 billion of refundings (42% of the total).

"Lower refunding issuance is likely to be driven by the relatively smaller universe of currently refundable bonds in 2018 (down 16%, or $17 billion, year over year) against higher taxable issuance for advance refunding purposes of about $43 billion,” Ramirez wrote, adding that “total taxable issuance is estimated to be up 100% to $73 billion (23% of total gross issuance), comprised of new money ($30 billion) and advance refundings ($43 billion).”

This week’s calendar totals about $757 million, which is made up of $713 million of negotiated deals and $44 million of competitive sales.

RBC Capital Markets is expected to price the New Jersey Economic Development Authority’s $381.195 million of state lease revenue bonds for state government buildings on Thursday.

The offering is comprised of $197.275 million bonds for the Health Department and Taxation Division office project; $19.225 million taxable bonds for the Health Department office project; and $164.695 million of bonds for the Juvenile Justice Commission Facilities project.

Proceeds of the sale will be used to fund construction of Health Department and Taxation Division office buildings in Trenton and to finance building juvenile justice commission facilities in Ewing and Winslow townships.

The deal is rated Baa1 by Moody’s Investors Service, BBB-plus by S&P Global Ratings and A-minus by Fitch Ratings.

RBC is also expected to price the Socorro Independent School District, Texas’ $173.54 million of Series 2018 unlimited tax school building bonds on Thursday.

The deal, which is backed by the Permanent School Fund guarantee program, is rated triple-A by Moody’s and Fitch.

Stifel is set to price the Anaheim Successor Agency to the Redevelopment Agency, Calif.’s $110 million of Series 2018A tax allocation refunding bonds on Thursday.

The deal is rated AA-minus by S&P.

The competitive arena remains particularly quiet this week.

Quincy, Mass., is selling notes and of bonds on Thursday. The separate deals consist of $42.39 million of general obligation bond anticipation notes and $10 million of GO district improvement bonds.

The BANs are rated SP-1-plus by S&P and the bonds are rated AA-plus by S&P.

Bond Buyer 30-day visible supply at $4.34B
The Bond Buyer's 30-day visible supply calendar increased $159.9 million to $4.34 billion on Wednesday. The total is comprised of $1.65 billion of competitive sales and $2.68 billion of negotiated deals.

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 Vanessa Kim at 212-803-8474 for more information.

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