The tax-exempt market continued to rally Friday after Thursday’s gains as traders sifted through the week’s heavy new issues.
“It’s a modestly firmer market,” a trader in North Carolina said. “Even Treasuries are off and it’s the end of the week and a lot of the primary is out of the way. The market has firmed back up from having a concession earlier in the week to bring in new deals.”
A trader in New York said there is “continued buying,” and he is seeing yields slip between three and five basis points across the curve.
Munis were steady to firmer, according to the Municipal Market Data scale. Yields were unchanged within the four-year spot. Yields on the five- to 12-year maturities fell three basis points, while yields beyond that dropped two basis points.
The two-year muni closed Friday flat at 0.42% for its 13th consecutive trading session. The 10-year fell three basis points to 2.26% and the 30-year fell two basis points to 3.77%.
In the primary market Friday, RBC Capital Markets priced for retail $295 million of California Public Works Board lease revenue bonds. The bonds are rated Aa2 by Moody’s Investors Service, AA-minus by Standard & Poor’s, and AA by Fitch Ratings. Pricing information was not available by press time.
Loop Capital Markets priced for retail $200 million of University of Connecticut general obligation bonds. The credit is rated Aa2 by Moody’s, AA by Standard & Poor’s, and AA-minus by Fitch.
Yields ranged from 0.2% with a 1.5% coupon in 2012 to 3.33% with 3.75% and 5% coupons in a 2026 split maturity. Portions of credits maturing in 2012 and credits maturing in 2031 were not formally re-offered.
In a weekly MMD survey, 82% of traders said they remain neutral on the market for the short term, versus 78% the week before.
More traders are bullish as well, with 9% reporting positive views on the short term, up from zero the week before. Those who said they are bearish on the market were down to 9% from 22%.
In the secondary market, credits reported by the Municipal Securities Rulemaking Board showed gains Friday.
A dealer bought from a customer New Jersey Transportation Trust Fund Authority 5.5s of 2031 at 4.50%, three basis points lower than where they traded Thursday. Bonds from an interdealer trade of New Jersey TTFA 5.25s of 2023 yielded 3.79%, 11 basis points lower than where they traded Thursday.
A dealer sold to a customer Minnesota Tobacco Securitization Authority 5.25s of 2024 at 4.51%, 12 basis points lower than where they traded Thursday. Bonds from an interdealer trade of Minnesota TSA 4.85s of 2026 yielded 4.80%, 13 basis points lower than where they traded Thursday.
The tax-exempt market saw the heaviest inflows since September 2010, and the fifth consecutive week of inflows. For the week ending Nov. 9, bond funds that report flows weekly saw $761 million of inflows, according to Lipper FMI.
December reinvestment money from maturing bonds along with muni bond fund inflows should “help munis outperform Treasuries in the near future,” said Alan Schankel, managing director at Janney Capital Markets.
Indeed, the five-year muni-to-Treasury ratio is 136%, the 10-year ratio is 110.7%, and the 30-year is 127.6%, the highest it has been since Oct. 4.
