Munis set to end week on positive note

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The market maintained a "pretty positive" tone Thursday as the municipal market saw the last of the week's new issuance come and go.

Robert W. Wimmel, head of municipal fixed income at BMO, said that the Fed’s U-turn at the end of January is a major driver of the increased optimism for muni bonds, along with solid inflows over the past month have firmed.

“The tone of the muni market is pretty positive currently,” he said. “Three months of positive returns for munis have eased many of the concerns retail investors had through much of last year. Over the past couple weeks, most of the deals have been easily placed with investors. [There has been] some weakness and cheaper levels on the long end of the curve.”

Demand remains strong for paper 10-years and shorter and for lower quality bonds with some extra yield, he said.

“With the Fed pause, it’s a good time to tweak your portfolio’s duration and curve positioning," Wimmel said. The market "looks good currently, but we have some sizable hurdles in front of us on the domestic and global economic fronts.”

Citi received the verbal award on the Board of Trustees for Michigan State University’s $323 million of taxable general revenue bonds. The deal is rated Aa2 by Moody’s Investors Service and AA by S&P Global Ratings.

Siebert Cisneros Shank received the official award on the Los Angeles County Metropolitan Transportation Authority’s $545 million Proposition C sales tax senior revenue bonds. The deal is rated Aa2 by Moody’s, AAA by S&P and Kroll Bond Rating Agency and AA-plus by Fitch Ratings.

Goldman Sachs received the written award on Riverside, California’s $183.325 million of refunding electric revenue bonds, issue of 2019A. The deal is rated AA-minus by S&P and Fitch.

RBC Capital Markets got the official award on the Desert Sands Unified School District, Riverside County, California’s $100 million of Series 2019 Election of 2014 GOs. The deal is rated Aa2 by Moody’s and AA by S&P.

Jefferies received the written award on the California Infrastructure and Economic Development Bank’s remarketing of $162.955 million of Series 2013 variable-rate refunding revenue bonds for the J. Paul Getty Trust. The deal is rated triple-A by Moody’s and S&P.

Bank of America Merrill Lynch got the official award on the Massachusetts Development Finance Agency’s $348.515 million of Series 2019A revenue bonds, Wellforce issue. The deal is rated BBB-plus by S&P and Fitch.

Thursday’s bond sales

Michigan

Click here for the MSU award

California

Click here for the LA MTA award

Click here for the Desert Sands award

Click here for the Riverside award

Click here for the Infrastructure award

Massachusetts

Click here for the DFA award

Secondary market
Municipal bonds were stronger Thursday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell as much as three basis points in the two- to 30-year maturities, while the one-year maturity was flat

High-grade munis were also stronger, with muni yields falling as much as two basis points in all maturities, with the exception of the one-year spot, which was up by less than one basis point.

Municipals were stronger on Municipal Market Data’s AAA benchmark scale, which showed the yield on both the 10-year muni general obligation and the yield on the 30-year muni maturity falling by three basis points.

On Thursday, the 10-year muni-to-Treasury ratio was calculated at 80.6% while the 30-year muni-to-Treasury ratio stood at 100.3%, 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 suffer fourth outflow in a row
Tax-free municipal money market fund assets decreased $1.30 billion, lowering their total net assets to $141.19 billion in the week ended Feb. 4, 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 rose to 1.04% from 0.91% last week.

Taxable money-fund assets gained $13.71 billion in the week ended Feb. 5, bringing total net assets to $2.878 trillion.

The average, seven-day simple yield for the 804 taxable reporting funds increased to 2.06% from 2.04% last week.

Overall, the combined total net assets of the 994 reporting money funds increased $12.41 billion to $3.019 trillion in the week ended Feb. 5. It marks the fifth consecutive week total money-fund assets have exceeded $3 trillion.

Previous session's activity
The Municipal Securities Rulemaking Board reported 43,697 trades on Wednesday on volume of $14.71 billion.

California, New York and Texas were the municipalities with the most trades, with the Golden State taking 16.456% of the market, the Empire State taking 11.897% and the Lone Star State taking 9.755%.

Treasury auctions bills
The Treasury Department Thursday auctioned $50 billion of four-week bills at a 2.390% high yield, a price of 99.814111.

The coupon equivalent was 2.428%. The bid-to-cover ratio was 2.79.

Tenders at the high rate were allotted 91.20%. The median rate was 2.370%. The low rate was 2.330%.

Treasury also auctioned $35 billion of eight-week bills at a 2.385% high yield, a price of 99.629000.

The coupon equivalent was 2.427%. The bid-to-cover ratio was 3.21.

Tenders at the high rate were allotted 57.45%. The median rate was 2.370%. The low rate was 2.330%.

Treasury also auctioned $19 billion of 30-year bonds with a 3% coupon at a 3.022% high yield, a price of 99.568039.

The bid-to-cover ratio was 2.27.

Tenders at the high yield were allotted 29.24%.

The median yield was 2.972%. The low yield was 2.588%.

Treasury announces discount bill auctions
The Treasury Department said Thursday it will auction $45 billion 91-day discount bills and $39 billion 182-day discount bills Monday.

The 91s settle Feb. 14, and are due May 16, and the 182s settle Feb. 14, and are due Aug. 16.

Currently, there are $38.998 billion 91-days outstanding and $25.999 billion 182s.

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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Primary bond market Secondary bond market Money market funds State of California State of New York State of Texas L.A. Metropolitan Transportation Authority California Infrastructure and Economic Development Bank Massachusetts Development Finance Agency
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