Municipals finished mixed on Thursday along with Treasury bonds as stocks continued to exhibit volatility. In the primary, the last of the week’s supply trickled into the market
Secondary market
According to a late read of the MBIS benchmark scale, municipal bonds were mixed. Benchmark muni yields dipped as much as one basis point in the four- to six-year, nine- to 11-year and 19- to 24-year maturities, rose as much as two basis points in the one- to three-year, 13- to 18-year and 25- to 30-year maturities and were unchanged in the seven- and eight year and 12-year maturities.
High-grade munis were also mixed, with yields calculated on MBIS' AAA scale falling less than one basis point in the five- to 11-year and 19- to 25-year maturities, rising as much as two basis points in the one- to three-year, 12- to 17-year and 27- to 30-year maturities and remaining unchanged in the four-year, 18-year and 26-year maturities.
Municipals were mixed on Municipal Market Data’s AAA benchmark scale, which showed the yield on the 10-year muni general obligation remaining steady while the yield on the 30-year muni maturity rose one basis point.
"Tobacco bonds are moderately active and slightly weaker with yields up one basis point," ICE Data Services said in a late market comment on Thursday. "High-yield municipals are quiet today and unchanged. The taxable side of the market is 0.5 basis point to 1.5 basis points lower in yield in the shorter end from the seven-year inward with the largest movement in the shorter end."
Treasury bonds were stronger amid continued stock market volatility. The Treasury 30-year was yielding 3.161%, the 10-year yield stood at 2.907%, the five-year was at 2.758%, the two-year yield was at 2.762% while the Treasury three-month bill’s yield stood at 2.425%.
On Thursday, the 10-year muni-to-Treasury ratio was calculated at 82.4% while the 30-year muni-to-Treasury ratio stood at 100.3%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.
Previous session's activity
The Municipal Securities Rulemaking Board reported 49,894 trades on Wednesday on volume of $15.42 billion.
California, New York and Texas were the municipalities with the most trades, with the Empire State taking 14.108% of the market, the Golden State taking 13.873% and the Lone Star State taking 8.568%.
Muni money market fund inflows
Tax-free municipal money market fund assets increased $1.22 billion, raising their total net assets to $140.80 billion in the week ended Dec. 10, according to the Money Fund Report, a service of iMoneyNet.com.
The average seven-day simple yield for the 190 tax-free and municipal money-market funds was lower to 1.23% from 1.26% last week.
Taxable money-fund assets increased $85.82 billion in the week ended Dec. 11, bringing total net assets to $2.816 trillion.
The average, seven-day simple yield for the 805 taxable reporting funds rose to 1.90% from 1.88% last week.
Overall, the combined total net assets of the 995 reporting money funds gained $87.04 billion to $2.957 trillion in the week ended Dec. 11.
MarketAxess: Gap widens between A, BBB trades
Market data shows the trading gap between A-rated and BBB-rated corporate bonds has widened in volume, according to David Krein, global head of research at MarketAxess.
Krein notes that bonds rated A and BBB are the most heavily traded in the secondary U.S. corporate debt market. Looking at trades reported to TRACE and analyzed by MarketAxess, the gap between the rated securities has widened over the past three years.
In the third quarter of 2015, each accounted for about 40% of the trading volume, but as of this year A-rated securities are now at 34% while BBB rated trades are at 48% -- a 14 percentage point gap.
Krein said that while it's worth noting that this gap has shrunk slightly in recent quarters, it still remains significant. “I expect this trend to continue in 2019,” Krien told The Bond Buyer, “as downgrades of corporates could continue.”
He added that it would be a gradual widening shift, in a continuation of past trends.
Primary market
Bank of America Merrill Lynch priced Suffolk County, N.Y.’s $403.67 million of tax anticipation notes for 2019.
The deal is rated SP1 by S&P Global Ratings and F1 by Fitch Ratings.
BAML received the written award on the Public Facilities Financing Authority of the City of San Diego’s $243.18 million of Series 2018A subordinated water revenue bonds.
The deal is rated Aa3 by Moody’s Investors Service and AA-minus by Fitch.
Citigroup received the official award on Arizona’s $246.36 million of Series 2019 state lottery revenue refunding bonds.
The deal is rated Aa3 by Moody’s and AA-plus by S&P.
Bond sale results
New York
California
Arizona
Bond Buyer 30-day visible supply at $4.49B
The Bond Buyer's 30-day visible supply calendar decreased $3.18 billion to $4.49 billion for Thursday. The total is comprised of $1.20 billion of competitive sales and $3.28 billion of negotiated deals.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.
