Muni market firms up again as momentum builds

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Municipal bonds strengthened further on Thursday, as the market maintained momentum heading into 2019. No new deals came to market.

“The market has a stronger tone to it, but it definitely still has a holiday week feel to it,” said one Southern trader. “This December rally has helped clean up and reduce dealer inventory, so I expect the positive momentum will continue through the first couple of weeks on the New Year. Hopefully the New Year will bring more supply from infrastructure spending and possibly the revival of advance refundings.”

Secondary market
Municipal bonds were stronger on Thursday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell no more than one basis point in the six- to 30-year maturities. The remaining five maturities were higher by less than two basis points.

High-grade munis were also stronger, with yields calculated on MBIS' AAA scale falling by as much as one basis point in the six- to 30-year maturities. The leftover five maturities saw yields rise by no more than four basis points.

Municipals were stronger on Municipal Market Data’s AAA benchmark scale, which showed the yield on the 10-year muni general obligation decreasing by two basis points and the 30-year muni maturity lower by one basis point.

On Thursday, the 10-year muni-to-Treasury ratio was calculated at 86.8% while the 30-year muni-to-Treasury ratio stood at 110.3%, 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.

Muni money market funds see another big inflow
Tax-free municipal money market fund assets increased $1.58 billion, raising their total net assets to $144.23 billion in the week ended Dec. 24, according to the Money Fund Report, a service of

The average seven-day simple yield for the 190 tax-free and municipal money-market funds rose to 1.25% from 1.22% last week.

Taxable money-fund assets increased 3.13 billion in the week ended Dec. 25, bringing total net assets to $2.827 trillion.

The average, seven-day simple yield for the 805 taxable reporting funds jumped to 1.98% from 1.91% last week.

Overall, the combined total net assets of the 995 reporting money funds gained $4.70 billion to $2.971 trillion in the week ended Dec. 25.

Previous session's activity
The Municipal Securities Rulemaking Board reported 30,502 trades on Wednesday on volume of $6.029 billion.

California, New York and Texas were the municipalities with the most trades, with the Golden State taking 16.496% of the market, the Empire State taking 12.514% and the Lone Star State taking 9.544%.

Primary market
There are no scheduled bond sales. Issuance will start up again in the 2019.

Treasury auctions bills
The Treasury Department Thursday auctioned $40 billion of four-week bills at a 2.400% high yield, a price of 99.820000.

The coupon equivalent was 2.438%. The bid-to-cover ratio was 3.03.

Tenders at the high rate were allotted 65.54%. The median rate was 2.370%. The low rate was 2.340%.

Treasury also auctioned $30 billion of eight-week bills at a 2.420% high yield, a price of 99.630278.

The coupon equivalent was 2.463%. The bid-to-cover ratio was 3.13.

Tenders at the high rate were allotted 24.28%. The median rate was 2.390%. The low rate was 2.350%.

Treasury auctions announced
The Treasury Department announced these auctions:
$26 billion 364-day bills selling on Dec. 31;

$36 billion 182-day bills selling on Dec. 31; and

$39 billion 91-day bills selling on Dec. 31.

Treasury also auctioned $32 billion of seven-year notes, with a 2 5/8% coupon and a 2.680% high yield, a price of 99.651077.

The bid-to-cover ratio was 2.46.

Tenders at the high yield were allotted 27.75%. All competitive tenders at lower yields were accepted in full.

The median yield was 2.640%. The low yield was 2.288%.

Gary E. 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 Ziad Saba at 212-803-6079 for more information.

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