Prices of top-rated municipal bonds finished out the week little changed, according to traders, as the market took a breather on Friday to digest some of the week's hefty new issue slate and adopted a cautious tone ahead of the upcoming Federal Open Market Committee meeting.
Secondary Market
The yield on the 10-year benchmark muni general obligation remained at 2.14%, while the yield on 30-year GO stayed at 2.94%, according to the final read of Municipal Market Data's triple-A scale.
Since the previous Friday, yields on the 10-year have declined by three basis points and yields on the 30-year have fallen by eight basis points.
Treasury prices were mixed on Friday. The yield on the two-year Treasury note dropped to 0.64% from 0.66% on Thursday, while the 10-year yield rose to 2.11% from 2.09% and the 30-year yield increased to 2.68% from 2.67%.
The 10-year muni to Treasury ratio was calculated at 100.4% versus 102.1% on Thursday, while the 30-year muni to Treasury ratio stood at 108.6% compared to 109.7%.
Primary Market
The muni market was looking ahead to the upcoming week's $8.2 billion of new supply, after digesting an extra portion of volume in the previous week.
According to the Bank of America Merrill Lynch, month to date issuance totaled $16.7 billion as of March 12, up 26.8% from the same time last year. This brings the year to date total to $77.9 billion, up 58.23% from the same period in 2014. Bank of America Merrill Lynch said that 70% of the total issuance this year has been refundings.
The University of California Regents took a top seat at the new issuance table as investors got to feast on sales totaling more than $1 billion.
Barclay's Capital priced the UC's $789 million of tax-exempt Series AO general revenue bonds for institutions with Stifel as co-manager after a one-day retail order period. The series was rated Aa2 by Moody's Investors Service and AA by both Standard & Poor's and Fitch Ratings.
Barclays also priced the UC's $436 million of taxable limited project revenue bonds, Series 2015 J with Raymond James as co-manager. That series is rated Aa3 by Moody's and AA-minus by S&P and Fitch.
New York City was also a very active issuer, coming to market with over $1 billion of bonds in both the negotiated and competitive sectors. The offerings included $800 million of tax-exempt fixed-rate refunding bonds and approximately $203 million of taxable fixed-rate bonds, consisting of $100 million of new money bonds and a conversion of $103 million of variable-rate demand bonds to fixed-rate.
RBC Capital Markets priced the city's $800 million of Fiscal 2015 Series C and D GOs for institutions on Thursday after holding a retail order period on Tuesday and Wednesday.
"The city received approximately $270 million of retail orders for the $800 million of tax-exempt fixed-rate refunding bonds during the two-day retail order period preceding (Thursday's) sale," New York City Comptroller Scott Stringer said in a statement. "Strong demand during (the institutional pricing) allowed the city to reduce yields by up to 4 basis points on 11 of 18 maturities (excluding two maturities offered via sealed bid and one maturity not offered to institutions)."
Since 2005, New York City has issued about $50 billion of GOs. The largest issuances came in 2008 and 2009 when $6.7 billion and $6.2 billion were sold, respectively. The lowest issuances occurred in 2011 and 2014, when $2.7 billion and $3 billion were sold, respectively.
The city also competitively sold $100 million of taxable fixed-rate new money bonds. The winning bidder was Bank of America Merrill Lynch with a true interest cost of 2.6761%. The city also competitively sold $103 million of a conversion of taxable VRDBs to fixed-rate bonds which was won by J.P. Morgan Securities with a TIC of 3.5931%.
The last time NYC sold taxable bonds competitively was on Sept. 25, 2013 when BMO Capital Markets won $125 million Fiscal 2014 Series D Subseries D-2 taxable GOs with a true interest cost of 2.5983%
New York City is rated Aa2 by Moody's and AA by S&P and Fitch.
In the competitive arena, New York State sold about $330 million of tax-exempt, taxable and tax-exempt refunding general obligation bonds in three separate sales. The bonds are rated Aa1 by Moody's and AA-plus by S&P, Fitch and Kroll Bond Rating Agency.
"These bonds, all of which have been approved by the voters, will pay for essential investments in transportation and environmental projects," New York State Comptroller Thomas DiNapoli said in a statement. "Once again, there was significant investor interest in the state's bonds. The combination of strong market interest and a historically low interest rate environment translated into favorable pricing for the state."
The NYS $142.6 million Series 2015A tax-exempt general obligation bonds were won by Citigroup Global Markets with a TIC of 2.8499%. The NYS $181 million Series 2015C tax-exempt GO refunding bonds were won by Morgan Stanley with a TIC of 1.7437%. The NYS $5.6 million Series 2015B taxable GOs were won by Roosevelt & Cross with a TIC of 2.3695%.
The state received eight bids for the $142.6 million sale, eight bids for the $181 million sale and seven bids for the $5.6 million sale.
"The refunding will result in lower debt service payments, saving New York taxpayers approximately $33.2 million on a cash flow basis and $26.8 million on a net present value basis over the life of the bonds," DiNapoli said.
The last time NYS sold tax-exempt GOs was on March 17, 2013, when Morgan Stanley won $170.69 million Series 2013C tax-exempt GO refunding bonds with a TIC of 1.5549%. The last time NYS sold taxable bonds was on Dec. 6, 2011, when Robert W. Baird won $30.91 million Series 2011F taxable GOs with a TIC of 2.3106%.
The Week's Most Actively Quoted Issues
California, Georgia and Texas names were among the most actively quoted issues in the week ended March 13, according to data released by Markit.
Among bid-side quotes, the California 7.5s of 2034 were quoted by 10 unique dealers. Among ask-side quotes, the Atlanta, Ga., water and wastewater revenue 5s of 2040 were quoted by 14 dealers. And among two-sided quotes, the Texas 5s of 2044 were quoted by 10 dealers, Markit said.
The Week's Most Actively Traded Issues
Among the most actively traded issues in the week ended March 13, were issuers from California, Rhode Island and Connecticut, according to Markit.
In the GO bond sector, California 5s of 2045 were traded 67 times. In the revenue bond sector, the Rhode Island Tobacco Settlement Financing Corp. 5s of 2040 were traded 56 times. And in the taxable bond sector, the Hamden, Conn., 5.2s of 2044 were traded 34 times, according to Markit.
Tax-Exempt Bond Funds See Inflows
Municipal bond funds which report weekly posted $152.957 million of inflows in the week ended March 11, after experiencing inflows of $408.481 million in the week ended March 4, according to the latest Lipper data. It was the 10th straight week muni funds experienced inflows.
The four-week moving average remained positive at $262.454 million in the latest week after being in the green at $339.278 million in the prior week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Muni bond funds so far have experienced inflows in each week of 2015, according to Lipper data. Inflows for the year total about $5.789 billion.
Long-term muni bond funds saw inflows of $110.328 million in the latest week, after experiencing inflows of $200.363 million in the previous week.
High-yield muni funds recorded an outflow of $51.421 million in the latest reporting week, after seeing inflows of $124.114 million in the previous week. Exchange-traded funds had inflows of $75.130 million, after recording inflows of $83.539 million in the previous week.
In contrast, long-term municipal bond mutual funds posted $675 million of inflows in the week ended March 4, according to the Investment Company Institute. ICI reported that inflows into long-term funds were $1.003 billion in the previous week.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $554.7 million to $11.845 billion on Friday. The total is comprised of $2.681 billion competitive sales and $9.164 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,712 trades on Thursday on volume of $11.572 billion. Most active on Thursday, based on the number of trades, was the New York Metropolitan Transportation Authority Series 2015B transportation revenue 4s of 2025, which traded 402 times at an average price of 100.085 with an average yield of 3.984%; (initial offering price of 100.161 and an initial offering yield of yield of 3.980%).
