Top quality municipal bonds finished unchanged in quiet activity on Monday as trading resumed after the long Easter holiday weekend.
Traders will see more than $6 billion of new issuance come to market this week with the calendar consisting of $4.45 billion of negotiated deals and $1.66 billion of competitive sales.
Secondary Trading
The yield on the 10-year benchmark muni general obligation was steady from 1.82% on Thursday, while the 30-year muni yield was flat at 2.76%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were stronger on Monday. The yield on the two-year Treasury dipped to 0.86% from 0.87% on Thursday, while the 10-year Treasury yield dropped to 1.86% from 1.90% and the 30-year Treasury bond yield declined to 2.66% from 2.67%.
The 10-year muni to Treasury ratio was calculated on Monday at 97.4% compared with 96.3% on Thursday, while the 30-year muni to Treasury ratio stood at 104.4% versus 103.8%, according to MMD.
Previous Week's Most Actively Traded Issues
Revenue bonds comprised 52.35% of new issuance in the week ended March 25, up from 51.82% in the previous week, according to
Some of the most actively traded issues were in Connecticut and Tennessee. In the GO bond sector, the Connecticut 4s of 2036 traded 105 times. In the revenue bond sector, the Nashville and Davidson Health and Educational Facilities Board 5s of 2046 traded 134 times. And in the taxable bond sector, the Nashville and Davidson Health and Educational Facilities Board 4.053s of 2026 traded 157 times, Markit said.
Primary Market
JPMorgan Securities is expected to price the Houston Independent School District’s $683.6 million of Series 2016A limited tax schoolhouse and refunding bonds on Tuesday. The bonds are backed by the Permanent School Fund guarantee program and are rated triple-A by Moody’s and Standard & Poor’s.
Barclays Capital is set to price California State University’s $1.34 billion of Series 2016 A & B revenue bonds on Tuesday for retail investors ahead of the institutional pricing on Wednesday. The bonds are rated Aa2 by Moody’s.
Morgan Stanley is expected to price Tampa, Fla.’s $200 million of Series 2016A health system revenue bonds for Baycare Health System on Tuesday. The bonds are rated AA by Fitch.
In the competitive arena on Tuesday, the Central Florida Expressway Authority will be offering $154.67 million of Series 2016A senior lien refunding revenue bonds. The issue is rated A2 by Moody’s and A by S&P and Fitch.
Palm Beach County, Fla., will competitively sell $126.65 million of Series 2016 revenue refunding bonds on Tuesday. The deal is rated Aa1 by Moody’s and AA-plus by S&P and Fitch.
And the Virginia Public School Authority will competitively sell on Tuesday $148.90 million of Series 2016 special obligation school financing and refunding bonds for Prince William County. The bonds are rated triple-A by Moody’s, S&P and Fitch.
The state of Michigan will be taking bids on Tuesday for its $87.2 million of Series 2016A tax-exempt general obligation environmental program bonds. The deal is rated Aa1 by Moody’s and AA-minus by S&P.
The state last sold comparable tax-exempt bonds competitively on Nov. 15, 2012, when Wells Fargo Securities won $92 million of Series 2012 tax-exempt GO environmental program refunding bonds with a true interest cost of 1.09%. The state last sold comparable taxable bonds competitively on Nov. 6, 2013, when Wells Fargo won $30 million of Series 2013A taxable GO environmental program refunding bonds with a TIC of 0.44%.
Ramirez: Manageable Supply Should Help 5-Years Outperform
This week’s new issue calendar of over $6 billion is 12% below the average three-month volume, with 40% of new supply coming from just five issuers.
“The manageable supply, coupled with strong inflows and still cheaper ratios, should help the five-year part of the curve outperform,” Ramirez Municipal Strategy said in a Monday market comment. “We also continue to like 30-year bonds, as new issue supply remains focused inside 15 years to 20 years.”
Looking at rest of the year, Ramirez sees continued negative net issuance.
“We forecast gross supply at $378 billion in 2016 and continued negative net issuance. Gross supply through February was $42.88 billion while net supply was -$15.18 billion. We see net muni market supply at -$10.32 billion over the next 30 days, continuing the year to date trend,” Ramirez wrote. “Of the 10 states with the most outstanding debt, Pennsylvania stands to shrink the most (0.6%), followed by New York (0.5%), Massachusetts (0.5%), and New Jersey (0.5%). Conversely, Florida is set to expand the most (0.3%).”
Muni Bond Funds See Inflows for 25th Straight Week
For the 25th week in a row, municipal bond funds reported inflows, according to Lipper data released late Thursday.
Weekly reporting funds saw $901.500 million of inflows in the week ended March 23, after inflows of $780.007 million in the previous week, Lipper said. The four-week moving average remained positive at $603.004 million after being in the green at $551.727 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 also experienced inflows, gaining $643.831 million in the latest week after inflows of $522.398 million in the previous week. Intermediate-term funds had inflows of $258.537 million after inflows of $230.746 million in the prior week.
National funds had inflows of $772.198 million on top of inflows of $617.603 million in the previous week. High-yield muni funds reported inflows of $273.005 million in the latest reporting week, after inflows of $229.613 million the previous week.
Exchange traded funds saw inflows of $85.863 million, after inflows of $104.430 million in the previous week.
