A few remaining deals trickled into a stagnant, steady market, as the SALT effects have impacted the seasonality typically associated with tax season.
The market this week and for the most part of this year, has been chugging along at its slow, albeit steady pace.
“We have had huge inflows this year into funds and while historically tax time seems to bring out sellers, this year it has brought out buyers as the realization of the effects of the restrictions on SALT deduction has materialized,” a trader said, referring to the cap on state and local tax decuctions.
He added that this has made has made many areas of the curve very rich and caused ratios to move down to the 65% area in spots.
“It certainly feels like yields need to back up, but I am not sure what the catalyst would be,” he said. “It might take something unexpected like the reintroduction of advance refundings to meaningfully increase supply.”
Bank of America Securities priced the Dallas Area Rapid Transit Authority's (Aa2/AA+/NR/AA+) $301.2 million of senior lien sales tax revenue bonds on Thursday.
Dallas Area Rapid Transit saw strong demand for the deal, which featured tax-exempt refunding of Build America Bonds.
“On the far end, we were oversubscribed six times,” said DART Treasurer Dwight Burns. “We generated savings of $44.3 million or 12% of the refunded debt.”
DART’s remaining BABs are “make whole,” Burns said, “so the value proposition just isn’t there.”
Burns said DART benefited from strong name identification and being a “highly rated but infrequent issuer.”
Ron Davis, managing director for Bank of America, was lead banker on the deal, with Estrada Hinojosa & Co. and Public Financial Management as co-financial advisors.
Morgan Stanley priced the General Authority of Southcentral, Pa.’s (Aa3/NR/AA-) $230 million of revenue bonds for Wellspan Health Obligated Group.
JPMorgan priced St. Cloud, Minn.’s (A1/NR/AA-) $130 million of healthcare revenue bonds for Centracare Health System.
"Some call it stagnant, others call it steady, but muni yields have trended nearly unchanged all week," a Midwest trader. "There has been a consistent stream of cash flowing into the sector and the market has seen a relevant amount of supply that have been priced and yields have no moved -- that says something."
Thursday’s bond sales
Muni money market funds see inflows again
Tax-free municipal money market fund assets increased $72.6 million, rising their total net assets to $139.54 billion in the week ended March 11, according to the Money Fund Report, a service of iMoneyNet.com.
The average seven-day simple yield for the 190 tax-free and municipal money-market funds slipped to 1.24% from 1.30% last week.
Taxable money-fund assets gained $3.53 billion in the week ended March 12, bringing total net assets to $2.931 trillion.
The average, seven-day simple yield for the 806 taxable reporting funds was unchanged from 2.06% last week.
Overall, the combined total net assets of the 996 reporting money funds increased $3.61 billion to $3.071 trillion in the week ended March 12. It marks the 10th consecutive week total money-fund assets have exceeded $3 trillion.
Secondary market
Municipal bonds were mixed on Thursday, according to the MBIS benchmark scale, with muni yields rising less than one basis point in the 10-year maturity and falling also by less than a basis point in the 30-year maturity. High-grade munis were also mixed, with the yield falling less than one basis point in both the 10-year and 30-year maturity.
Investment-grade municipals were flat on Refinitiv Municipal Market Data’s AAA benchmark scale, which showed the yields on the 10-year and 30-year muni unchanged.
The 10-year muni-to-Treasury ratio was calculated at 78.0% while the 30-year muni-to-Treasury ratio stood at 94.2%, according to MMD.
Previous session's activity
The MSRB reported 39,744 trades on Tuesday on $10.96 billion of volume. California, New York and Texas were most traded, with the Golden State taking 15.869% of the market, the Empire State taking 10.706% and the Lone Star State taking 9.4%. The most active issue was the University of California Regents 3.349s of 2029 which traded 25 times on volume of $46,930 million.
Treasury auctions announced
The Treasury Department announced these auctions:
$11 billion 9-year 10-month 7/8% TIPs selling on March 21;
$39 billion 182-day bills selling on March 18; and
$48 billion 91-day bills selling on March 18.
Treasury auctions bills
The Treasury Department Thursday auctioned $60 billion of four-week bills at a 2.420% high yield, a price of 99.811778.
The coupon equivalent was 2.465%. The bid-to-cover ratio was 2.43.
Tenders at the high rate were allotted 32.18%. The median rate was 2.390%. The low rate was 2.350%.
Treasury also auctioned $35 billion of eight-week bills at a 2.400% high yield, a price of 99.626667.
The coupon equivalent was 2.449%. The bid-to-cover ratio was 3.09.
Tenders at the high rate were allotted 59.02%. The median rate was 2.385%. The low rate was 2.350%.
Gary E. Siegel and Rich Williamson 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.
