Municipal bond prices remained under pressure at midday as U.S. Treasury yields hit three-year highs as forecasts of above average growth and rising inflation fueled concern over possible Federal Reserve interest rate increases. The possibility of a government shutdown also weighed on the market.

The municipal market looked ahead to a return to normal supply, as Ipreo estimated weekly volume will rise to $7.17 billion, from $2.78 billion this week. Next week’s calendar consists of $5.56 billion of negotiated deals and $1.61 billion of competitive sales.

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

The 10-year muni benchmark yield rose to 2.363% on Friday from the final read of 2.359% on Thursday, according to Municipal Bond Information Services. The MBIS 30-year benchmark muni yield rose to 2.840% from 2.835%.

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

Top-rated municipal bonds are weaker at mid-session. The yield on the 10-year benchmark muni general obligation rose as much as one basis point from 2.12% on Thursday, while the 30-year GO yield gained as much as two basis points from 2.71%, according to a read of MMD’s triple-A scale.

U.S. Treasuries were also weaker in midday activity. The yield on the two-year Treasury gained to 2.05% on Thursday from 2.04% on Thursday, the 10-year Treasury yield rose to 2.64% from 2.61% and the yield on the 30-year Treasury increased to 2.91% from 2.89%. The 2.64% yield on the 10-year was its high rate since 2014.

On Thursday, the 10-year muni-to-Treasury ratio was calculated at 81.3% compared with 78.0% on Wednesday, while the 30-year muni-to-Treasury ratio stood at 93.9% versus 92.6%, according to MMD.

MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 45,524 trades on Thursday on volume of $12.80 billion.

Texas, California and New York made up the top three states with the most trades on Thursday with the Lone Star State taking 14.698% of the market, the Golden State taking 12.675% and the Empire State taking 10.942%.

Week's actively traded issues
Some of the most actively traded bonds by type in the week ended Jan. 19 were from Colorado, New York and Pennsylvania issuers, according to Markit.

In the GO bond sector, the Grand River Hospital District, Colo., 5.25s of 2037 traded 25 times. In the revenue bond sector, the New York Metropolitan Transportation Authority 4s of 2019 traded 41 times. And in the taxable bond sector, the Pennsylvania Commonwealth Financing Authority 3.864s of 2038 traded 81 times.

Week's actively quoted issues
Illinois, New Jersey and California names were among the most actively quoted bonds in the week ended Jan. 19, according to Markit.

On the bid side, Illinois taxable 5.1s of 2033 were quoted by 40 unique dealers. On the ask side, the N.J. Transportation Trust Fund Authority taxable 6.561s of 2040 were quoted by 81 dealers. And among two-sided quotes, Los Angeles Unified School District taxable 6.758s of 2034 were quoted by 23 unique dealers.

Week’s primary market
The biggest deal of the week – the Sales Tax Securitization Corp.’s $898.07 million of Series 2018A sales tax securitization bonds was delayed until next week. The deal, rated AA by S&P Global Ratings, and AAA by Fitch Ratings and Kroll Bond Rating Agency, will be priced by Goldman Sachs.

Loop Capital Markets priced Cook County, Ill.’s $103.15 million of Series 2018 GO refunding bonds. The deal is rated A2 by Moody’s, AA-minus by S&P and A-plus by Fitch.

Piper Jaffray priced the Pasadena Independent School District, Texas’ $120.095 million of Series 2018 unlimited tax school building bonds. The deal is backed by the Permanent School Fund guarantee program and rated triple-A by Moody’s and S&P.

JPMorgan Securities priced the Orlando Utilities Commission, Fla.’s $150.18 million of Series 2018A utility system revenue bonds. The deal is rated Aa2 by Moody’s and AA by S&P and Fitch.

In the competitive arena, the New York Metropolitan Transportation Authority sold $471.31 million of mandatory tender bonds in two separate sales. Bank of America Merrill Lynch won the $276.61 million of Series 2018A-2 transportation revenue bonds with a true interest cost of 1.9074%. BAML also won the $194.7 million of Subseries 2018A-1 transportation revenue bonds with a TIC of 1.7972%. The deals are rated A1 by Moody’s Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings and AA-plus Kroll Bond Rating Agency.

The N.Y. MTA also sold $500 million of Series 2018A transportation revenue bond anticipation notes, due Aug. 15, 2019, to five groups.

Citigroup won $200 million, taking $100 million with a bid of 4% and a $3,609,000 premium, an effective rate of 1.651290% and took $100 million with a bid of 4% and a $3,584,000 premium, an effective rate of 1.667220%.

Jefferies won $100 million with a bid of 4% and a premium of $3,590,002, an effective rate of 1.663400%. Morgan Stanley won $100 million, taking $50 million with a bid of 4% and a premium of $1,789,500, an effective rate of 1.670410% and took $50 million with a bid of 4% and a premium of 1,788,000, an effective rate of 1.672320%.

JPMorgan won $75 million, taking $50 million with a bid of 4% and a premium of $1,793,000, an effective rate of 1.665950% and taking $25 million with a bid of 4% and a $892,750 premium, an effective rate of 1.675510%. Goldman Sachs won $25 million with a bid of 4% and a premium of $901,500, an effective rate of 1.653200%.

The BANs are rated MIG1 by Moody’s, SP1-plus by S&P, F1-plus by Fitch and K1-plus by Kroll.

The University of Kentucky sold $210.56 million of Series 2018A general receipt bonds. Wells Fargo Securities won the bonds with a true interest cost of 3.31%. The deal is rated Aa2 by Moody’s and AA by S&P.

The Prior Lake Independent School District No. 719, Minn., sold $125 million of GOs in two separate sales. Morgan Stanley won the $65 million of Series 2018A GO school building bonds with a TIC of 3.1758% and Wells Fargo Securities won the $60 million of Series 2018B GO school building capital appreciation bonds with a TIC of 2.7620%. The deals are backed by the Minnesota School District Credit Enhancement Program.

The Sheldon Independent School District, Texas, competitively sold $98.665 million of Series 2018 unlimited tax school building and refunding bonds. UBS won the bonds with a TIC of 3.38%. The deal is backed by the PSF and rated Aaa by Moody’s.

Bond Buyer 30-day visible supply at $9.36B
The Bond Buyer's 30-day visible supply calendar increased $2.18 billion to $9.36 billion on Friday. The total is comprised of $2.20 billion of competitive sales and $7.16 billion of negotiated deals.

Lipper: Muni bond funds saw inflows
Investors in municipal bond funds again put cash into the funds in the latest week, according to Lipper data released on Thursday.

The weekly reporters saw $1.18 billion of inflows in the week of Jan. 17, after inflows of $1.06 billion in the previous week.

Exchange traded funds reported inflows of $118.046 million, after inflows of $22.703 million in the previous week. Ex-ETFs, muni funds saw $1.06 billion of inflows, after inflows of $1.04 billion in the previous week.

The four-week moving average was positive at $503.830 million, after being in the green at $271.840 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

Long-term muni bond funds had inflows of $1.099 billion in the latest week after inflows of $1.12 billion in the previous week. Intermediate-term funds had inflows of $178.692 million after inflows of $360.123 million in the prior week.

National funds had inflows of $1.14 billion after inflows of $988.826 million in the previous week.

High-yield muni funds reported inflows of $206.925 million in the latest week, after inflows of $365.937 million the previous week.

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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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.