Muni market will keep rolling after the holiday and beyond

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The muni market is winding down to a pause for the long holiday weekend and when the market opens back up Tuesday, big deals will be few and far between, but the market will continue its run.

“The holiday week provides a temporary pause, but I expect volume to continue to be on the low side and demand to remain strong into the beginning of the summer,” Tom Kozlik, head of municipal strategy and credit at Hilltop Securities said.

It is not abnormal for holiday-shortened weeks to be really slow and low in terms of action but clearly issuers are not worried about getting deals in quickly, before the month’s end.

“Most issuers would try to move into the full week before or after the holiday-shortened week,” he said. “On the other hand it might not matter on the pricing side because demand is so high and issuance so low, relatively speaking that is.”

He noted that while issuance is still below average and demand is still robust, he did see an acceleration in terms of bank and small banks who were selling.

“I also saw some arbitrage accounts become more active, perhaps because muni/Treasury ratios became slightly more attractive,” he said. “The drop in SIFMA could raise interest in short-term maturities.”

Since munis bonds are in such high demand, not only are traditional bond buyers having a hard time competing with each other for what little bonds there are — they are now also competing with cross-over and international buyers, since there is so such much negative-yielding debt globally.

“I am hearing of anecdotal evidence of that and the Fed Flow numbers show it is occurring,” Kozlik said. “And it makes sense from a relative value perspective.”

IHS Markit Ipreo forecasts weekly bond volume will dwindle down to $2.8 billion from a revised total of $5.11 billion in the prior week, according to updated data from Refinitiv. The calendar is composed of $1.84 billion of negotiated deals and $935 million of competitive sales.

There are only five scheduled deals $100 million or larger — with two of those being competitive deals.

Bank of America Securities is expected to price the largest deal of the week — the Industrial Development Authority of Chandler, Arizona’s (A1/A+/ ) $500 million of series 2019 revenue bonds for the Intel Corporation Project on Thursday.

Goldman Sachs is set to price the Port of Port Arthur Navigation District, Jefferson County, Texas’s (Aaa/ / ) $315 million of facilities revenue bonds for the Emerald Renewable Diesel LLC Project on Tuesday.

Morgan Stanley is scheduled to run the books on the North Orange County Community College District, California’s (Aa1/AA+/ ) $150 million of election of 2014 general obligation bonds on Wednesday.

The Southern California Metropolitan Water District ( /AAA/AA+) will auction off $220.4 million of water revenue refunding bonds on Wednesday.

Hillsborough County, Florida, (Aa1/AAA/AA+) is expected to competitively sell $134.32 million of capital improvement non-ad valorem revenue bonds, also on Wednesday.

Lipper: More inflows into muni funds
For 20 straight weeks, investors have put cash into municipal bond funds, data from Refinitiv Lipper shows.


Tax-exempt mutual funds which report flows weekly saw $1.502 billion of inflows in the week ended May 22 after inflows of $1.272 billion in the previous week. It was the fifth week in a row that flows totaled over $1 billion, Lipper said Thursday.

Exchange traded muni funds reported inflows of $79.125 million after inflows of $19.289 million in the previous week. Ex-ETFs, muni funds saw inflows of $1.423 billion after inflows of $1.252 billion in the previous week.

The four-week moving average remained positive at $1.367 billion, after being in the green at $1.385 billion in the previous week.

Long-term muni bond funds had inflows of $1.008 billion in the latest week after inflows of $726.027 million in the previous week. Intermediate-term funds had inflows of $428.393 million after inflows of $517.470 million in the prior week.

National funds had inflows of $1.306 billion after inflows of $1.004 billion in the previous week. High-yield muni funds reported inflows of $580.780 million in the latest week, after inflows of $396.616 million the previous week.

On Wednesday, the Investment Company Institute reported long-term municipal bond funds and exchange-traded funds saw a combined inflow of $1.819 billion in the week ended May 15, while long-term muni funds alone saw an inflow of $1.764 million and ETF muni funds saw an inflow of $54 million.

Secondary market
Munis were mostly slightly stronger on the MBIS benchmark scale Friday, which showed yields increasing by less than one basis point in the 10-year maturity and falling no more than two basis points in the 30-year maturity. High-grade munis were also stronger, with both maturities following the benchmark yields.


On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10-year muni and 30-year muni maturities were unchanged.

The 10-year muni-to-Treasury ratio was calculated at 74.0% while the 30-year muni-to-Treasury ratio stood at 87.9%, according to MMD.

Treasuries were mixed, with stocks on the rise.

Week's actively traded issues
Some of the most actively traded munis by type in the week ended May 24 were from Georgia, Arkansas and California issuers, according to IHS Markit.

In the GO bond sector, the Fulton County, Georgia, 2.5s of 2019 traded 24 times. In the revenue bond sector, the Arkansas Development Finance Authority 4.5s of 2049 traded 42 times. In the taxable bond sector, the Inland Empire Tobacco Securitization Authority, California, 3.678s of 2038 traded 37 times.

Week's actively quoted issues
Puerto Rico and New York names were among the most actively quoted bonds in the week ended May 24, according to IHS Markit.

On the bid side, the Puerto Rico Sales Tax Finance Corp. taxable 4.55s of 2040 were quoted by 44 unique dealers. On the ask side, the Dormitory Authority of the State of New York revenue 5s of 2039 were quoted by 207 dealers. Among two-sided quotes, the Puerto Rico Sales Tax Financing Corp. taxable 4.55s of 2040 were quoted by 19 dealers.

Previous session's activity
The MSRB reported 38,576 trades on Thursday on volume of $17.24 billion. The 30-day average trade summary showed on a par amount basis of $12.72 million that customers bought $6.21 million, customers sold $4.31 million and interdealer trades totaled $2.20 million.

Texas, California and New York were most traded, with the Lone Star State taking 14.865% of the market, the Golden State taking 13.549% and the Empire State taking 8.49%.

The most actively traded security was the Puerto Rico Sales Tax Financing Corp. restructured revenue COFINA A-2 4.55s of 2040, which traded 64 times on volume of $54.05 million.

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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