Top-rated municipal bonds ended weaker on Monday even as traders anticipated demand for the week’s new issue slate.
The yield on the 10-year benchmark muni general obligation rose one basis point to 1.88% from 1.87% on Friday, while the 30-year GO yield increased one basis point to 2.72% from 2.71%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were also weaker on Monday. The yield on the two-year Treasury rose to 1.36% from 1.33% on Friday as the 10-year Treasury yield gained to 2.21% from 2.20% while the yield on the 30-year Treasury bond increased to 2.87% from 2.85%.
The 10-year muni to Treasury ratio was calculated at 85.0% on Monday, compared with 85.1% on Friday, while the 30-year muni to Treasury ratio stood at 94.8% versus 95.0%, according to MMD.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 31,691 trades on Friday on volume of $7.749 billion.
Prior week's actively traded issues
Revenue bonds comprised 53.96% of new issuance in the week ended June 9, down from 55.28% in the previous week, according to Markit.
General obligation bonds comprised 40.26% of total issuance, up from 39.11%, while taxable bonds made up 5.78%, up from 5.61%.
Previous week's top underwriters
The top negotiated and competitive underwriters of last week included Bank of America Merrill Lynch, Wells Fargo Securities, JPMorgan Securities, Citigroup and Siebert Cisneros Shank & Co., according to Thomson Reuters data.
In the week of June 4 to June 10, BAML underwrote $911 million, Wells $644.5 million, JPMorgan $607.4 million, Citi $583.2 million and Siebert $566.2 million.
On this week’s calendar, there are 15 scheduled negotiated deals bond salesand one competitive sale larger than $100 million.
In short-term competitive action on Monday, Bank of America Merrill Lynch won Ventura County, Calif.’s $145.54 million of 2017-2018 tax and revenue anticipation notes with a bid of 4% and a $4,603,500 premium, an effective rate of 0.893002%. The notes, due July 2, 2018, were priced at 4s yield 0.85%.
The TRANs are rated MIG1 by Moody’s Investors Service and SP1-plus by S&P Global Ratings.
Long-term bond action gets underway on Tuesday with the pricing of several large deals.
Bank of America Merrill Lynch is set to price the state of Wisconsin’s $342 million of Series 2017I general obligation refunding bonds.
The deal is rated Aa2 by Moody’s and AA by S&P and Fitch Ratings.
JPMorgan is set to price the New York City Housing Development Corp.’s $272.73 million of Series 2017 C-1 and C-2 multi-family housing revenue sustainable neighborhood bonds.
The deal is rated Aa2 by Moody’s and AA-plus by S&P.
JPMorgan Securities is set to price Tallahassee, Fla.’s $154.28 million of Series 2017 energy system refunding revenue bonds.
The deal is rated Aa2 by Moody’s and AA by S&P.
Citigroup is expected to price the California Municipal Finance Authority’s $151 million of Series 2017A lease revenue bonds for the Orange County Civic Center infrastructure improvement program’s phase 1.
The deal is rated AA by S&P and Fitch Ratings.
Muni bond CUSIP requests rose 32% in May
Demand for new municipal bond CUSIP identifiers surged 32% in May after falling 13% in April, CUSIP Global Services said on Monday. This made last month the most active so far this year for new requests for muni bond identifiers. The report tracks requests by issuers for bond identifiers as an early indicator of new volume.
A total of 1,224 new municipal bond identifier requests were made last month, compared to 930 in April, 1,066 in March, 933 in February and 826 in January.
On a year-over-year basis, however, municipal bond request volume was down through the end of May. For the year to date through May, muni bond CUSIP orders were 4,979, down 25.2% from the same period in 2016, when 6,660 were sought.
“A combination of macroeconomic and technical variables have driven a fair amount of volatility in month-to-month CUSIP request volume so far this year,” Gerard Faulkner, director of Operations at CUSIP Global Services, said in a press release. “Overall uncertainty about where the markets and interest rates are going, and preparations for pending regulatory reforms such as the Fiduciary Rule have all conspired to create a choppy trend in pre-trade activity.”
Long-term muni note CUSIP requests totaled 41 as 79 short-term muni requests were made along with 69 other municipal CUSIP category requests bringing the municipal bond industry total to 1,413 for May. On a year-over-year basis, the industry total was 5,871 down 21.4% from the 7,465 sought in the same period in 2016.
“In the big picture, we’re seeing very healthy levels of CUSIP request volume, indicative of robust new issuance activity,” said Richard Peterson, senior director at S&P Global Market Intelligence. “But the path we’ve been taking to get there has been bumpy with monthly surges in activity followed by slow-downs over the course of the year.”