Munis to see shrinking slate of sales

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The municipal market ended the week with light activity in the secondary market as traders eyed a smaller new issue calendar for the coming week.

With the 10-year Treasury yield ending at a 3.20% on Friday, the flow of municipal trading was “very slow” on Friday, the trader said.

“The flows are slow today with rates going up and cutting the scale,” following a stronger-than-expected unemployment report, he said.

U.S. Treasury yields rose modestly on Friday as data showed job growth rebounded in October and wages recorded their largest annual gain in 9-½ years, pointing to further labor market tightening that could encourage the Federal Reserve to raise interest rates again in December.

The lack of activity on Friday was in part due to the release of the jobs data, according to the trader.

“That usually happens after a number,” he said. “People stick their head in the sand and come back on Monday with a renewed sense of interest.”

“It’s been a grind this week,” he said.

The one bright spot looking ahead to next week’s new issue slate, albeit downsized from this week’s, is that investors can buy as a discount target yields at levels such as 4% in 20 years; 3% in 10 years; and 2% in one year.

“That brings some people in with smart money before year end,” he said.

Ipreo forecasts weekly bond volume will drop to $3.3 billion from a revised total of $5.2 billion in the prior week, according to updated data from Thomson Reuters. There are only seven deals on the schedule $100 million or larger, including a taxable negotiated deal and two competitive deals.

Goldman Sachs is scheduled to price Central Plains Energy Project, Neb.’s $527 million of gas project revenue bonds, including fixed rate, LIBOR index rate and SIFMA index rate bonds on Tuesday. The deal is rated A3 by Moody’s Investors Service and A by S&P Global Ratings.

Piper Jaffray is expected to price Portland Community College’s $171.87 of full faith credit pension taxable bonds on Tuesday. The deal is rated Aa1 by Moody’s and AA-plus by S&P.

The Virginia College Building Authority is scheduled to sell a total of $214.945 million of educational facility revenue bonds and taxable bonds in two separate sales also on Tuesday. The deals are rated Aa1 by Moody’s and AA-plus by S&P and Fitch Ratings.

Secondary market
Municipal bonds were weaker on Friday, according to a late read of the MBIS benchmark scale. Benchmark muni yields rose as much as two basis points in the two- to 30-year maturities. The remaining two maturities showed yields decreasing.

High-grade munis were weaker, with yields calculated on MBIS' AAA scale rising as much as two basis points in the three- to seven-year and the nine- to 30-year maturities. The remaining three maturities showed yields decreasing.

Municipals were weaker on Municipal Market Data’s AAA benchmark scale, which showed the yield on the 10-year muni general obligation up by two basis points and on 30-year muni yields increased four basis points.

On Friday, the 10-year muni-to-Treasury ratio was calculated at 84.3% while the 30-year muni-to-Treasury ratio stood at 98.6%, 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.

Week's actively traded issues
Some of the most actively traded munis by type in the week ended Nov. 2 were from Puerto Rico, Texas and California issuers, according to Markit.

In the GO bond sector, the Puerto Rico 8s of 2035 traded 42 times. In the revenue bond sector, the Mission, Texas Economic Development Corps. 4.625s of 2031 traded 51 times. And in the taxable bond sector, the California 6.2s of 2019 traded 30 times.

Week's actively quoted issues
New Jersey and Kentucky names were among the most actively quoted bonds in the week ended Nov. 2, according to Markit.

On the bid side, the South Jersey Port Corp. taxable 7.365s of 2040 were quoted by 50 unique dealers. On the ask side, the Paducah, Kentucky, Independent School District’s revenue 3.5s of 2035 were quoted by 290 dealers. And among two-sided quotes, the South Jersey Port Corp. taxable 7.365s of 2040 were quoted by 28 dealers.

Lipper: Muni bond funds see sixth outflow in a row
Investors in municipal bond funds remained cautious and again pulled cash out of the funds during the latest reporting week, according to Lipper data released on Thursday.

The weekly reporters saw $1.320 billion of outflows in the week ended Oct. 31 after outflows of $494.914 million in the previous week.

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Exchange traded funds reported inflows of $105.897 million, after outflows of $25.091 million in the previous week. Ex-ETFs, muni funds saw $1.426 billion of outflows, after outflows of $469.823 million in the previous week.

The four-week moving average remained negative at -$826.368 million, after being in the red at -$507.107 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

Long-term muni bond funds had outflows of $657.629 million in the latest week after outflows of $368.134 million in the previous week. Intermediate-term funds had outflows of $500.907 million after outflows of $143.005 million in the prior week.

National funds had outflows of $1.008 billion after outflows of $370.522 million in the previous week. High-yield muni funds reported outflows of $511.540 million in the latest week, after outflows of $230.226 million the previous week.

ICI: Long-term muni funds saw $178M outflow
Long-term tax-exempt municipal bond funds saw an outflow of $178 million in the week ended Oct. 24, the Investment Company Institute reported.

This followed an outflow of $1.310 billion in the week ended Oct. 17 and outflows of $1.653 billion, $3 million and $374 million and inflows of $116 million. $30 million, $4 million, $273 million and $531 million in the eight prior weeks.

Taxable bond funds saw an estimated outflow of $6.874 billion in the latest reporting week, after seeing an outflow of $4.327 billion in the previous week.

ICI said the total estimated outflows to long-term mutual funds and exchange-traded funds were $5.794 billion after outflows of $20.821 billion in the prior week.

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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