Prices of top-quality municipal bonds finished steady on Friday in an abbreviated trading session as the market went into holiday mode ahead of the full close on Monday for Memorial Day.
Secondary Market
The yield on the 10-year benchmark muni general obligation closed unchanged on Friday from 2.30% on Thursday, while the yield on the 30-year GO was unchanged at 3.28%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were lower on Friday as the yield on the two-year Treasury note increased to 0.62% from 0.57% from Thursday, while the 10-year yield rose to 2.22% from 2.18% and the 30-year yield was up to 2.99% from 2.98%.
The 10-year muni to Treasury ratio was calculated on Friday at 103.5% versus 105.2% on Thursday, while the 30-year muni to Treasury ratio stood at 109.6% compared to 110.2%, according to MMD.
Primary Market
Chicago was the attention grabber during the week as the city pulled scheduled two bond deals off the calendar after a downgrade by Moody's Investors Service. Moody's cut the Windy City to Ba1 over the challenges posed to its pension reforms by a state Supreme Court ruling voiding the state reforms.
Fitch Ratings and Standard & Poor's also lowered the boom on the city, but kept it within investment grade territory, to BBB-plus and A-minus, respectively, citing liquidity risks posed by the Moody's downgrade. Kroll Bond Rating Agency, however, affirmed the city's A-minus rating and stable outlook.
By the end of the week, Chicago said it had reached forbearance agreements with banks that support its floating-rate general obligation bonds and that it was really ready to head back into the market with deals totaling $800 million on Wednesday, May 27.
Atlantic City, N.J., was in the market with a $41 million taxable GO bond sale backed up by a state enhancement program designed to facilitate distressed municipal issuers' access to the capital markets. S&P rated the deal A-minus based on the program; the city's unenhanced GO debt is rated BB by S&P. Bank of America Merrill Lynch priced the bonds to yield 7.25% in 2028 and 7.75% in 2045.
Florida's Citizens Property Insurance Corp. came with a $1 billion deal structured as fixed-rate bonds and floating rate notes. Bank of America Merrill Lynch priced the $700 million of senior secured bonds while JPMorgan priced the $300 million of SIFMA-indexed floating-rate notes. Both issues were rated A1 by Moody's, A-plus by S&P's and AA-minus by Fitch.
Barclays Capital priced the New York City Municipal Water Finance Authority's $452 million of water and sewer system second general resolution revenue bonds, Fiscal 2015 Series HH for institutions. The issue was rated Aa2 by Moody's and AA-plus by S&P and Fitch.
Jefferies priced Miami-Dade County's $482 million of water and sewer system revenue refunding bonds. The deal was rated Aa3 by Moody's and A-plus by S&P and Fitch.
Siebert Brandford Shank priced Los Angeles' $231 million of wastewater system revenue bonds. The issue consisted of green bonds and refunding bonds. The issue was rated AA-plus by S&Ps, Fitch and Kroll.
In the competitive sector, Springfield, Mo., sold $524 million of public utility refunding revenue bonds. Bank of America Merrill Lynch won the issue with a true interest cost of 3.38%. The bonds were rated AA-plus by S&P and AA by Moody's.
Tax-Exempt Bond Funds Saw Outflows
For the third week in a row, municipal bond funds posted outflows, bringing to six the number of weeks the funds have seen cash withdrawals in 2015.
The weekly reporting funds saw $91.046 million of outflows in the week ended May 21, after experiencing outflows of $32.398 million in the previous week, according to the latest Lipper data.
The four-week moving average remained positive at $36.683 million after being in the green at $193.106 million in the prior week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds also saw outflows, losing $150.257 million in the latest week, after experiencing outflows of $109.874 million in the previous week. High-yield muni funds recorded an outflow of $132.141 million in the latest reporting week, after seeing outflows of $126.365 million the previous week. It was also the third straight week of outflows for both the long-term and high-yield funds.
However, intermediate-term funds saw inflows of $93.520 million after seeing inflows of $99.505 million in the prior week. And exchange-traded funds had inflows of $82.057 million, after seeing inflows of $53.986 million in the previous week.
The Week's Most Actively Quoted Issues
Puerto Rico was among the most actively quoted issues in the week ended May 22, according to data released by Markit.
On the bid side, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 12 unique dealers. On the ask side, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 16 dealers. And among two-sided quotes, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 12 dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues in the week ended May 22 came from Chicago, New Jersey and Sacramento, according to Markit.
In the revenue bond sector, the New Jersey Economic Development Authority 5s of 2026 were traded 379 times. In the GO bond sector, the Sacramento Unified School District 4s of 2040 were traded 198 times. And in the taxable bond sector, the Chicago Board of Education 6.519s of 2040 were traded 54 times, according to Markit.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $1.32 billion to $12.20 billion on Friday. The total is comprised of $6.36 billion competitive sales and $5.85 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 44,032 trades on Thursday on volume of $13.659 billion. The most active bond, based on the number of trades, was the Riverside County Public Financing Authority, Calif.'s Series 2015 capital facilities project lease revenue bonds 4 1/8s of 2040, which traded 219 times at an average price of 99.541 with an average yield of 4.152%. The bonds were initially priced at 98.201 to yield 3.52%.
Yvette Shields contributed to this report
