The municipal market was "fairly constructive" Tuesday, one trader said, as strong demand for new issues mixed with sluggish secondary trading.
“The deals that priced in the marketplace today were priced on the market and still saw significant oversubscription,” he said.
In the secondary, he said, the overall flow was reserved, though prices were stable. “I’m seeing prices better in serials by one basis point, but overall it’s an unchanged market.”
No impact from the Federal Reserve Board’s meeting was clouding the market as of Tuesday, and the trader said he didn’t expect any investor concern over the meeting’s results. “I don’t think there’s any expectations that the Fed will move this week; it’s just an exercise for the market,” with any impact from the meeting already priced in, he said.
“Typically customers in muni sector tend to wait for the news just to be validated, and that may be behind some of the light volume in the secondary we have seen in the two past trading sessions,” he said.
“The flow in the marketplace has been very slow and quiet over the last few weeks," he said. The market has been "fairly light in secondary volume, and we are continuing to see that into this week."
The trader said the market is heading into a strong seasonal pattern of spring reinvestments, and “expectations are pretty constructive, but we are not yet seeing a pick up in volume.
“The market is looking for excuses as to why we are not experiencing elevated flows right now, and the reason could be the Fed and payroll at the end of the week,” he said.
One New York trader saw heavy demand and strong technicals going into the Spring reinvestment season. The market is breathing a sigh of relief after the getting through the first quarter, tax season, and the last day of April, the trader said.
The offered side of the market is paying up for blocks of bonds and there is evidence of technical strength, the New York trader said. “We are entering a seasonally positive period of May, June, and July,” he said. “With that as a backdrop we will continue to see some firmness.”
Municipal bonds were mixed on Tuesday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell as much as one basis point in the three- and four-year, eight- to 10-year and 14- to 30-year maturities, rose less than one basis point in the one- and two-year, five- to seven-year and 12-year maturities and were unchanged in the 11- and 13year maturities.
High-grade munis were mixed as well with yields calculated on MBIS’ AAA scale falling by as much as one basis point in the one- to seven-year and 17- to 30-year maturities and rising less than a basis point in the eight- to 16-year maturities.
Additionally, municipals munis were mixed according to Municipal Market Data’s AAA benchmark scale, which showed yields rising one basis point in the 10-year and remaining unchanged in the 30-year maturity.
Treasury bonds were stronger on Tuesday as stocks turned mixed.
On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 84.1% while the 30-year muni-to-Treasury ratio stood at 98.6%, according to MMD.
Goldman Sachs priced the Dormitory Authority of the State of New York’s $326.04 million of Series 2018 A&B revenue bonds for Columbia University after holding a one-day retail order period. The deal is rated triple-A by Moody’s Investors Service and S&P Global Ratings.
Piper Jaffray priced the Fort Bend Independent School District, Texas’ $131.55 million of Series 2018 unlimited tax refunding bonds. The deal, backed by the Permanent School Fund guarantee program, is rated AAA by S&P and Fitch Ratings.
Bank of America Merrill Lynch priced the Massachusetts Department of Transportation’s $136.27 million of Series 2018A metropolitan highway system revenue refunding subordinated bonds and commonwealth contract assistance secured bonds. The deal is rated Aa2 by Moody’s, AA by S&P and AA-plus by Fitch.
JPMorgan Securities priced the Albuquerque Municipal School District No.12, N.M.’s $110 million of general obligation school building bonds. The deal, which is backed by the New Mexico School District Enhancement Program, is rated Aa2 by Moody’s and AA by S&P.
In the competitive arena on Tuesday, Prince George’s County, Md., sold $416.76 million of Series 2018A limited tax general obligation consolidated public improvement bonds.
Bank of America Merrill Lynch won the bonds with a true interest cost of 2.995%. Proceeds will be used to finance various capital improvements. The deal is rated triple-A by Moody’s, S&P and Fitch Ratings.
Since 2008, the county has sold about $2.78 billion of securities, with the most issuance occurring in 2017 when it sold $639 million and the least in 2012 when it sold $34 million.
Tuesday’s bond sales
Click here for the DASNY institutional pricing by Goldman
Click here for the DOT deal
Click here for the Albuquerque repricing
Previous session's activity
The Municipal Securities Rulemaking Board reported 40,417 trades on Monday on volume of $10.33 billion.
California, New York and Texas were the states with the most trades, with the Golden State taking 16.549% of the market, the Empire State taking 13.075% and the Lone Star State taking 10.933%
Treasury auctions $45B 4-week bills
The Treasury Department Tuesday auctioned $45 billion of four-week bills at a 1.650% high yield, a price of 99.871667.The coupon equivalent was 1.675%. The bid-to-cover ratio was 3.04.
Tenders at the high rate were allotted 95.47%. The median rate was 1.630%. The low rate was 1.600%.
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.