Municipal bonds were stronger at midday, holding onto hefty gains made earlier in the week as the last of the week’s larger deals came to market.

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

High-grade munis were also stronger, with yields calculated on MBIS’ AAA scale falling by as much as one basis point across the curve.

Municipal Market Data’s AAA benchmark scale was unchanged, with yields steady in the 10-year general obligation muni and flat in the 30-year muni maturity.

Treasury bonds were stronger as stock prices moved lower.

On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 84.8% while the 30-year muni-to-Treasury ratio stood at 95.2%, 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.

Treasury yields are being pulled lower by concerns around the future of Italy’s finances and its membership in the European Union, Bill Merz, a director of fixed income at U.S. Bank Wealth Management, said a Wednesday market comment. Currently, Treasury yields are trading below the key technical level of 3%.

“Fundamentals still support modestly higher bond yields due to Fed rate hikes, rising inflation expectations, robust Treasury issuance and softer foreign demand for Treasuries. We continue to prefer shorter maturity bonds across asset classes, which offer compelling yields with less price risk from rising rates,” Merz said.

“We continue to prefer Treasuries to developed foreign debt. Developed foreign bonds are unattractive on an unhedged currency basis due to their low yields. While hedging currency risk boosts yields to competitive levels for U.S. investors, diverse economic outlooks make the aggregate outlook less certain. The likely end of the European Central Bank’s asset purchase program later this year will pose an additional downside risk to European bond prices (upside risk to yield). Near term, focus remains on political uncertainty in Italy and the spillover effect on other geographies.”

Previous session's activity
The Municipal Securities Rulemaking Board reported 40,204 trades on Wednesday on volume of $11.44 billion.

California, New York and Texas were the states with the most trades, with the Golden State taking 15.12% of the market, the Empire State taking 13.449% and the Lone Star State taking 10.359%.

Primary market
Barclays Capital priced the Metropolitan Washington Airports Authority’s $561.27 million of Series 2018A airport system revenue and refunding bonds subject to the alternative minimum tax.

Wells Fargo Securities priced Anchorage, Alaska’s $171.29 million of general obligation and GO refunding bonds.

In the competitive arena, the Virginia Transportation Board sold $149.61 million of Series 2018 transportation capital projects revenue bonds on Thursday.

Morgan Stanley won the bonds with a true interest cost of 3.3091%.

Thursday’s bond sales

D.C.:
Click here for the Met Airs deal

Alaska:
Click here for the Anchorage deal

Bond Buyer 30-day visible supply at $10.63B
The Bond Buyer's 30-day visible supply calendar decreased $641.5 million to $10.63 billion on Thursday. The total is comprised of $5.56 billion of competitive sales and $5.07 billion of negotiated deals.

Tax-exempt money market funds saw inflows
Tax-exempt money market funds experienced inflows of $590 million, raising their total net assets to a new yearly high of $140.04 billion in the week ended May 29, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $2.75 billion on to $139.45 billion in the previous week.

The average, seven-day simple yield for the 202 weekly reporting tax-exempt funds fell to 0.80% from 0.92% the previous week.

The total net assets of the 832 weekly reporting taxable money funds gained to $3.66 billion to $2.657 trillion in the week ended May 28, after an outflow of $2.20 billion to $2.653 trillion the week before. The average, seven-day simple yield for the taxable money funds increased to 1.40% from 1.38% from the prior week.

Overall, the combined total net assets of the 1,034 weekly reporting money funds increased $4.25 billion to $2.797 trillion in the week ended May 28, after inflows of $550.4 billion to $2.793 trillion in the prior week.

ICI: Long-term muni funds see $9M inflow
Long-term municipal bond funds saw an inflow of $9 million in the week ended May 23, the Investment Company Institute reported on Thursday.

This followed an inflow of $527 million into the tax-exempt mutual funds in the week ended May 16 and an inflow of $96 million in the week ended May 9. In the two weeks prior to that, the funds saw outflows of $255 million and $68 million.

Taxable bond funds saw an estimated inflow of $2.65 billion in the latest reporting week, after seeing an inflow of $2.72 billion in the previous week.

ICI said the total estimated outflows to long-term mutual funds and exchange-traded funds were $240 million for the week ended May 23 after outflows of $462 million in the prior week.

Treasury to sell $90B bills next week
The Treasury Department said Thursday it will auction $48 billion 91-day bills and $42 billion 182-day discount bills Monday.

The 91s settle June 7, and are due Sept. 6, and the 181s settle June 7, and are due Dec. 6. Currently, there are $44.996 billion 91-days outstanding and $19.999 billion 182s.

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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