Municipal bonds steadied on Thursday after sliding the previous day, as the last of the week’s new issuance came to market.

Traders said that the future tone of the market may depend on Treasurys.

"Municipals are trying to stabilize at the moment -- although further weakness is possible should Treasurys weaken," said Michael Pietronico, chief executive officer of Miller Tabak Asset Management.

"Absolute yields are attractive, but dealers are looking to lighten inventory further to minimize their losses," he said. "Investors with cash are in complete control of the municipal bond market."

Secondary market
Municipal bonds were mixed on Wednesday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell as much as a basis point in the three- to 13-year maturities and rose as much as a basis point in the one- to two-year and 14- to 30-year maturities.

High-grade munis were mixed as well, as yields calculated on MBIS’ AAA scale fell by as much as one basis point in the three- to 13-year and 18- to 25-year maturities and rose as much as a basis point in the one- to two-year, 14- to 17-year and 26- to 30-year maturities.

Munis were stronger according to Municipal Market Data’s AAA benchmark scale, which showed yields declining two basis points in the 10-year maturity and dropping two basis points in the 30-year maturity.

Treasury bonds were stronger in late trade, with the 10-year yield slipping below 3% as the Dow Jones Industrial Average, the S&P 500 and Nasdaq index all moved up.

Primary market
JPMorgan Securities priced San Antonio, Texas’ $209.11 million of Series 2018A water system junior lien revenue and refunding bonds.

The deal is rated Aa2 by Moody’s Investors Service and AA by S&P Global Ratings and AA by Fitch Ratings.

Since 2008, the Alamo City has sold about $12.2 billion of securities, with the largest volume during that period occurring in 2012 when it sold $2.05 billion and the least amount (excluding this year) in 2011 when it sold $411 million.

In the competitive arena, the North Carolina Turnpike Authority sold $150.13 million of Series 2018A appropriation revenue refunding bonds for the Triangle Expressway System.

JPMorgan won the bonds with a true interest cost of 3.651%.

The deal is rated Aa1 by Moody’s and AA-plus by S&P.

Thursday’s bond sales
Texas:
Click here for the San Antonio pricing

North Carolina
Click here for Turnpike Authority sale

U.S. Bank: Limited supply bolsters munis
A limited supply of new bond issues continues to support municipal debt, according to Bill Merz, head of fixed-income research at U.S. Bank Wealth Management.

“Non- taxable municipals have outperformed the Bloomberg Barclays Aggregate Bond Index year to date on an absolute and tax-equivalent basis,” Merz said in a report released late Wednesday. “Net new municipal bond issuance is expected to remain below 2017 levels and provide continued support for municipals.”

Merz said that the steepness of the muni yield curve — the difference between longer and shorter maturities — makes extending maturity in high-quality municipals attractive for crossover buyers relative to Treasuries and investment-grade corporate debt.

Previous session's activity
The Municipal Securities Rulemaking Board reported 48,315 trades on Wednesday on volume of $15.57 billion.

California, New York and Texas were the states with the most trades, with the Golden State taking 16.977% of the market, the Empire State taking 13.124% and the Lone Star State taking 11.377%.

Tax-exempt money market funds saw outflows
Tax-exempt money market funds experienced outflows of $682.1 million, lowering their total net assets to $130.74 billion in the week ended April 24, according to The Money Fund Report, a service of iMoneyNet.com.

This followed an outflow of $2.30 billion on to $131.42 billion in the previous week.

The average, seven-day simple yield for the 202 weekly reporting tax-exempt funds climbed to 1.26% from 1.17% the previous week.

The total net assets of the 830 weekly reporting taxable money funds inched up to $22.7 million to $2.634 trillion in the week ended April 23, after an outflow of $25.76 billion to $2.634 trillion the week before.

The average, seven-day simple yield for the taxable money funds increased to 1.33% from 1.31% from the prior week.

Overall, the combined total net assets of the 1,032 weekly reporting money funds decreased $659.4 million to $2.764 trillion in the week ended April 23, after outflows of $28.06 billion to $2.765 trillion in the prior week.

Treasury announces auction details
The Treasury Department Thursday announced these auctions:

  • $42 billion 182-day bills selling on April 30; and
  • $48 billion 91-day bills selling on April 30.

Treasury sells $29B 7-year notes
The Treasury Department Thursday auctioned $29 billion of seven-year notes, with a 2 7/8% coupon and a 2.952% high yield, a price of 99.516250. The bid-to-cover ratio was 2.56.

Tenders at the high yield were allotted 72.28%. All competitive tenders at lower yields were accepted in full. The median yield was 2.900%. The low yield was 2.288%.

Gary Siegel contributed to this report.

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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Christine Albano

Christine Albano

Christine Albano is a reporter in the Investor’s & Investing beat, which she has covered for the past two decades. She has a wide range of buy side sources in the municipal market.
Chip Barnett

Chip Barnett

Chip Barnett is a journalist with more than 40 years of experience. Barnett is currently Senior Market Reporter for The Bond Buyer.
Aaron Weitzman

Aaron Weitzman

Aaron Weitzman is a markets reporter for The Bond Buyer, focusing on the sell side of the municipal bond market.