The muni market continued to weaken the day after Chicago pulled the biggest deal of the week.
“It has been a tough week, as supply was lower but customer bid wanteds were elevated,” said a Southern trader. Munis didn’t follow the Treasurys up as much when stocks were selling off and as soon as stocks turned around, munis felt heavy, he said.
“I think participants are a little wary about mid-terms and are a little cautious going into next week with the memories of the huge selloff after the 2016 elections,” he said. referring to the Nov. 6 congressional elections. “Next week should be interesting. If Republicans hold both chambers it is likely bonds would trade lower as fears another tax cut might require a larger bond financed deficit. Conversely, if the Democrats win the house bonds could see a bid, as further tax cuts/spending would be less likely and the economy could lose steam.”
In the big news of the week, Chicago’s $1.3 billion deal from the Sales Tax Securitization Corp., tentatively scheduled to price Wednesday, was moved to the day-to-day calendar.
"The recent market fluctuations resulted in the STSC’s decision to postpone the bond offering until the market normalizes,” said Chicago Finance Dept. spokeswoman Kristen Cabanban. “We will continue to monitor the market and will bring the offering when conditions are most favorable to achieving the greatest savings for taxpayers.”
Late Wednesday, JPMorgan received the written award on what is now the largest deal of the week, the Department of Airports for the city of Los Angeles’ $578 million transaction.
On Thursday, the Orange County, Calif. Sanitation District sold $102.125 million of revenue refunding certificate anticipation notes. Barlcays won with a true interest cost of 2.02%. The deal is rated triple-A by Moody’s Investors Service and Fitch Ratings.
Barclays priced the San Mateo County Joint Power Financing Authority’s $251.1 million of lease revenue bonds.
Citi priced The Charlotte-Mecklenburg Hospital Authority’s combined $360.595 million of bonds and variable rate bonds for Atrium Health.
Bond sale results
Secondary market
Municipal bonds were weaker on Thursday, according to a late read of the MBIS benchmark scale. Benchmark muni yields rose as much as two basis points in the three- to 30-year maturities. The first two maturities on the scale showed yields decreasing.
High-grade munis were mostly weaker, with yields calculated on MBIS' AAA scale rising as much as seven basis points in the four- to eight-year and 11- to 30-year maturities. The remaining six maturities saw yields dropping.
Municipals were weaker on Municipal Market Data’s AAA benchmark scale, which showed the yield on both the 10-year muni general obligation and on 30-year muni yields gained two basis points.
On Thursday, the 10-year muni-to-Treasury ratio was calculated at 87.7% while the 30-year muni-to-Treasury ratio stood at 100.6%, 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 turn red
Tax-free municipal money market fund assets decreased $17.5 million, lowering their total net assets to $134.07 billion in the week ended Oct. 29, according to the Money Fund Report, a service of iMoneyNet.com.
The average seven-day simple yield for the 196 tax-free and municipal money-market funds inched up to 1.16% from 1.14% last week.
Taxable money-fund assets increased $5.04 billion in the week ended Oct. 30, raising total net assets to $2.712 trillion.
The average, seven-day simple yield for the 830 taxable reporting funds crawled up to 1.80% from 1.79% last week.
Overall, the combined total net assets of the 1,028 reporting money funds rose $5.02 billion to $2.846 trillion in the week ended Oct. 30.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.
