Municipal market faces quiet day as FOMC decides monetary policy

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The municipal bond market will see a quiet day on Wednesday as the Federal Open Market Committee gets set to announce its decision on interest rates at the conclusion of its two-day meeting in the afternoon.

While most analysts expect the Federal Reserve to take no action on rates at this week’s meeting, the market will be looking for any hints as to the timing of future rate hikes and the start date for balance sheet reduction.

Secondary market
U.S. Treasuries were stronger Wednesday. The yield on the two-year Treasury dipped to 1.39% from 1.40% on Tuesday, the 10-year Treasury yield slid to 2.23% from 2.24% and the yield on the 30-year Treasury bond decreased to 2.80% from 2.81%.

Top-quality municipal bonds finished weaker on Tuesday. The yield on the 10-year benchmark muni general obligation rose one basis point to 1.91% from 1.90% on Monday, while the 30-year GO yield rose two basis points to 2.79% from 2.77%, according to the final read of Municipal Market Data's triple-A scale.

On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 85.4% compared with 85.4% on Monday, while the 30-year muni-to-Treasury ratio stood at 99.4% versus 98.8%, according to MMD.

MMD yields on the rise
Municipal bond yields have been slowly rising since the start of the month, with the municipal 10-year gaining to 1.91% on Sept. 19, according to the MMD triple-A benchmark scale.

The 10-year was yielding 1.85% on Sept. 5, then dipped slightly to 1.81% on Sept. 7, rising to 1.86% by mid-month before hitting its high of 1.91% on Tuesday.
Primary market
There are no major bond sales on tap for the day.

On Thursday in the competitive arena, the Cherry Creek School District No. 5, Colo., is selling $178.34 million of unlimited tax general obligation bonds

The deals consist of $100 million of Series 2017C GOs and $78.34 million of Series 2017B GOs.

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

In the negotiated sector on Thursday, D.A. Davidson & Co. is expected to price the California Statewide Commission’s Series 2017A refunding revenue bonds for the California Baptist University.

Stifel is expected to price Wayne Township School Building Corp., Ind.’s $100 million of ad valorem property tax first mortgage refunding and improvement bonds.

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

Bond Buyer reports 30-day visible supply
The Bond Buyer's 30-day visible supply calendar decreased $1.37 billion to $9.88 billion on Wednesday. The total is comprised of $5.44 billion of competitive sales and $4.44 billion of negotiated deals.

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Primary bond market Secondary bond market Cherry Creek School District No. 5, CO California Statewide Communities Development Authority