Prices of top-rated municipal bonds on Monday ended flat, traders said, ahead of Congressional testimony from Federal Reserve chair Janet Yellen and the largest weekly supply calendar so far this year.
Yellen is set to begin testifying before Congress on Tuesday. She is expected to defend the Fed’s stance on monetary policy and interest rates. Market participants will be watching her words for any hint on the timing or pace of a rate tightening. However, most analysts expect Yellen won’t give anything away and will defend the Fed’s current stance on rates amid an unclear economic picture.
Meanwhile, this week’s new issue volume is estimated at $8.807 billion, up from the revised estimate of $3.155 billion sold last week.
Secondary Market
Market activity was subdued on Monday, according to traders, as prices of top-shelf munis closed unchanged for the third straight session.
The yield on the 10-year benchmark muni general obligation was flat at 2.08%, while the yield on 30-year GO remained at 2.88%, according to the final read of MMD's triple-A scale.
Treasury prices rose on Monday. The yield on the two-year Treasury note decreased to 0.61% from 0.64% on Friday while the 10-year yield declined to 2.06% from 2.10% and the 30-year yield dropped to 2.66% from 2.70%.
The 10-year muni to Treasury ratio was calculated at 101.0% versus 97.7% on Friday, while the 30-year muni to Treasury ratio stood at 108.3% compared to 105.4%.
Primary Market
There are $7.044 billion of negotiated deals scheduled for the week. Loop Capital Markets is scheduled to price the biggest deal of the week -- Atlanta, Ga.’s $1.25 billion of water and wastewater revenue refunding bonds -- on Tuesday. The issue is rated Aa3 by Moody's Investors Service, AA-minus by Standard & Poor's and A-plus by Fitch Ratings.
Also, Wells Fargo Securities is scheduled to price the New York City Transitional Finance Authority’s $700 million of tax-exempt fixed-rate refunding bonds. The deal is slated to be priced on Wednesday after a two-day retail order period.
The offering is expected to consist of $600 million future tax secured tax-exempt subordinate bonds, Fiscal 2015 Series C, and $100 million future tax secured tax-exempt subordinate bonds, Fiscal 2015 Series D.
The bonds are Aa1 by Moody’s and triple-A by S&P and Fitch.
In assigning its ratings, Moody’s said, “The TFA's senior lien bonds ($1.6 billion outstanding) are rated triple-A and its subordinate lien bonds ($24 billion outstanding) are rated Aa1, reflecting the high debt service coverage provided by the pledge of New York City personal income tax and sales tax revenues, a strong legal structure that insulates TFA from potential city fiscal stress, the open subordinate lien that permits future leverage of the pledged revenues, and New York State's (Aa1/stable) ability to repeal the statutes imposing the pledged revenues.”
Also on the negotiated slate this week is the Pennsylvania Department of Transportation’s $732 million of Series 2015 tax-exempt private activity revenue bonds for Plenary Walsh Keystone Partners slated to be priced on Tuesday by JPMorgan Securities.
Bonds scheduled for competitive sale are estimated at $1.763 billion.
Two separate offerings from the Clark County School District, Nev., totaling $398.405 million are scheduled for competitive sale on Tuesday.
The school district will sell $266.640 million Series A limited tax general obligation refunding bonds and $131.765 million Series B limited tax GO refunding bonds. Both issues are rated A1 by Moody’s and AA-minus by S&P.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $381.9 million to $13.077 billion on Monday. The total is comprised of $3.646 billion competitive sales and $9.431 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 42,917 trades on Friday on volume of $9.716 billion.
Most active on Friday, based on the number of trades, was the New York City Municipal Water Finance Authority 2015 Series FF second general resolution water and sewer system revenue bond 3s of 2028, which traded 274 times at an average price of 99.887, with an average yield of 3.001%.
Last Week's Top Traded Munis by Sector
Munis from issuers in Puerto Rico, Pennsylvania, and Connecticut were the top traded bonds by market sector in the week of Feb. 16, according to data released by Markit.
Looking at market sector makeup, revenue bonds comprised 55.29% of new issuance last week, down from 55.34% in the previous week. General obligation bonds comprised 36% of total issuance, up from 35.26%, while taxable bonds made up 8.71%, down from 9.04%.
In the GO bond sector, Puerto Rico GO 8s of 2035 traded 42 times. In the revenue bond sector, Pennsylvania Higher Education Facilities Authority revenue 4s of 2045 traded 78 times. And in the taxable bond sector, the Hartford Stadium Authority, Conn., lease revenue 5 3/8s of 2042 traded 58 times, Markit said.
