Top shelf municipal bonds finished weaker on Thursday, as traders prepared for the upcoming week's hefty calendar, coming to market after the long holiday weekend honoring U.S. veterans.
Ipreo estimates new volume at $11.5 billion, up from a revised total of $1.7 billion in the past week, according to updated data from Thomson Reuters. The supply slate consists of $8.9 billion of negotiated deals and $2.7 billion of competitive sales.
"The lighter calendar for the past week was due to the election, but for the upcoming week higher volume resumes," said Natalie Cohen, Head of Municipal Research at Wells Fargo Securities. "I think volume will stay high until the Federal Reserve hike. We might have a lighter calendar going into 2017 initially, like we did last year after the Fed hike, but voters approved plenty of bond issues…which will start to emerge as we get into 2017."
She said some concerns about what will happen in D.C. are exaggerated.
"I think the worry about the president-elect's promise to increase spending and reduce taxes thereby growing the deficit (and debt) is overblown," she said. "Conservative members of Congress will likely push back on that approach. Pronouncements that the economy will surge and increase inflation are also exaggerated."
Topping the new issue calendar is the TSASC Inc.'s $1.02 billion tobacco settlement bond deal.
Jefferies is set to price the New York deal for retail investors on Tuesday followed by the institutional pricing on Wednesday.
The issue will consist of $584.39 million of Fiscal 2017 Series A Senior bonds and $440 million of Fiscal 2017 Series B Subordinate bonds. Proceeds will primarily be used to refund TSASC's outstanding bonds.
TSASC is a local development corporation that issues debt secured by tobacco settlement revenues, which cigarette companies pay as part of the 1998 master settlement agreement with 46 states.
According to the preliminary official statement, S&P Global Ratings is expected to assign various ratings for different maturities in the issue, ranging from A and A-minus to BBB-plus for some of the senior bonds and BBB for some maturities of the subordinate bonds.
Morgan Stanley is expected to price the Salt River Agricultural Improvement and Power District, Ariz.'s $719.82 million of Series 2016A refunding revenue bonds for the Salt River Project Electric System on Wednesday.
The deal is rated Aa1 by Moody's Investors Service and AA by S&P.
RBC Capital Markets is set to price the Los Angeles Department of Airports' $661.88 million of Series 2016B subordinate revenue bonds, subject to the alternative minimum tax, Series 2016C taxable senior refunding revenue bonds on Tuesday.
The Series 2016B bonds are rated A1 by Moody's and AA-minus by S&P and Fitch and the Series 2016C bonds are rated Aa3 by Moody's and AA by S&P and Fitch.
Bank of America Merrill Lynch is expected to price the Los Angeles County Metropolitan Transportation Authority's $515 million of Series 2016A Measure R senior sales tax revenue bonds on Tuesday. The deal is rated Aa1 by Moody's.
In the competitive arena, the Washington Suburban Sanitary District, Md., is selling $537.01 million of bonds in two separate offerings on Tuesday.
The deals consist of $381.81 million of consolidated public improvement bonds of 2016, Second Series, and $155.2 million of consolidated public improvement refunding bonds of 2016, Second Series.
Both sales are rated triple-A by Moody's, S&P and Fitch Ratings.
On Thursday, Clark County School District., Nev., is selling $510 million of bonds in three separate offerings.
The deals consist of $405.16 million of Series 2016D limited tax general obligation refunding bonds, $57.7 million of Series 2016E limited tax GO refunding bonds additionally secured by pledged revenues, and $47.99 million of Series 2016F limited tac GO various purpose medium-term bonds.
The deals are rated A1 BY Moody's and AA-minus by S&P.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose eight basis points to 1.94% from 1.86% on Wednesday, while the yield on the 30-year increased seven basis points to 2.76% from 2.69%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were also weaker on Thursday. The yield on the two-year rose to 0.90% from 0.89% on Wednesday, the 10-year Treasury gained to 2.11% from 2.07% and the yield on the 30-year Treasury bond increased to 2.92% from 2.88%.
The 10-year muni to Treasury ratio was calculated at 91.7% on Thursday compared to 89.9% on Wednesday, while the 30-year muni to Treasury ratio stood at 94.3% versus 93.6%, according to MMD.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Nov. 10 were from Puerto Rico, Illinois and Florida, according to
In the GO bond sector, the Puerto Rico Commonwealth 5s of 2041 were traded 21 times. In the revenue bond sector, Chicago O'Hare International Airport 5s of 2041 were traded 42 times. And in the taxable bond sector, the Sumter Landing Community Development District, Fla., 4.172s of 2047 were traded 37 times.
Week's Most Actively Quoted Issues
Minnesota, New Jersey and California issues were among the most actively quoted bonds in the week ended Nov. 10, according to Markit.
On the bid side, the Minneapolis & St. Paul Metropolitan Airports Commission revenue 5s of 2020 were quoted by 593 unique dealers. On the ask side, the New Jersey Transportation Trust Fund Authority taxable 4.1s of 2031 were quoted by 189 unique dealers. And among two-sided quotes, the California taxable 7.3s of 2039 were quoted by 13 unique dealers.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $572.9 million to $15.21 billion on Monday. The total is comprised of $3.68 billion of competitive sales and $11.53 billion of negotiated deals.
Tax-Exempt Money Market Fund Outflows
Tax-exempt money market funds experienced inflows of $1.14 million, bringing total net assets to $129.29 billion in the week ended Nov. 7, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $60.2 billion to $128.15 billion in the previous week.
The average, seven-day simple yield for the 238 weekly reporting tax-exempt funds dropped to 0.16% from 0.20% in the previous week.
The total net assets of the 868 weekly reporting taxable money funds increased $13.13 billion to $2.517 trillion in the week ended Nov. 8, after an inflow of $17.42 billion to $2.504 trillion the week before.
The average, seven-day simple yield for the taxable money funds held steady at 0.14% from the prior week.
Overall, the combined total net assets of the 1,106 weekly reporting money funds rose $14.27 billion to $2.647 trillion in the week ended Nov. 8 after inflows of $17.36 billion to $2.632 trillion in the prior week.
