Munis ended the week mixed Friday, with yields as many as two basis points lower in some maturities, according to traders.
The calendar for the week ahead is looking golden as four deals in the top 10 in terms of dollar amount hail from California – the Golden State – including two of the top three.
Primary Market
Municipal volume for the week ahead is estimated by Ipreo at $7.7 billion, up from the revised total of $6.1 billion sold in the past week, according to Thomson Reuters. The calendar consists of about $6.6 billion of negotiated deals and $1.1 billion of competitive sales.
The two largest deals feature both tax-exempt and taxable bonds.
Citi is expected to price Tarrant County Cultural Education Facilities Finance Corp.'s $912 million of hospital revenue bonds for Baylor Scott and White Health. It is scheduled to have a tax-exempt series of roughly $372 million and a taxable series for roughly $540 million, which will have corporate CUSIP's. The bonds are anticipated to be priced on Wednesday, following a one day retail order period on Tuesday. The deal is rated Aa3 by Moody's Investors Service and AA-minus by Standard and Poor's.
With this deal, the health system will have about $1.5 billion of outstanding debt, according to Moody's Investors Service.
Created by the 2013 merger of two major health networks, BSWH ranks as the largest not-for-profit health system in Texas.
Moody's sees strengths in BSWH'S size, its geographic diversity, favorable demographics, strong revenue growth and "proven track record of executing integration and growth strategies."
Wells Fargo is scheduled to price the Regents of the University of California's $842 million of general revenue bonds on Thursday, following a one day retail order period. The deal is slated to be separated into four series': two tax-exempt, one taxable and one taxable fixed rate notes, with the tax-exempt series' making up roughly $570 million. The deal is rated Aa2 by Moody's and AA by both S&P and Fitch Ratings.
The largest tax-exempt only deal on the schedule is another issuer from the Golden State and the timing for the sale could not be any better.
Wells Fargo is anticipated to price the Department of Water and Power of the city of Los Angeles' water system revenue bonds on Thursday. The deal is rated Aa2 by Moody's, AA by Fitch and was upgraded from AA to AA-plus by S&P on March 31.
"The rating reflects our view of such factors as the department's very strong service territory, extremely strong historical all-in coverage metrics, and extremely strong liquidity position," said the rating agency in a press release announcing the news.
The series 2016A bond proceeds will be used to fund $200 million in capital improvement projects, refund about $197 million in series 2006A bonds outstanding, and repay $250 million borrowed from its water system revolving loan. The series 2016B bonds are being issued to fund $148 million in capital improvement projects and refund about $185 million in series 2006A bonds outstanding.
The competitive calendar looks to be as light as a feather next week, as there are only two scheduled deals that are greater than $100 million.
Secondary Market
Top shelf municipal bonds ended mixed on Friday, after the Labor Department reported non-farm payrolls rose 215,000 last month. Yields on shorter to intermediate-term munis were steady to stronger on the news, while longer term maturities weakened. The jobs report gives the Federal Reserve more data to support raising interest rates at least one time this year.
The yield on the 10-year benchmark muni general obligation finished steady at 1.70% on Thursday, while the 30-year muni yield fell one basis point to 2.68% from 2.69%, according to the final read of Municipal Market Data's triple-A scale.
Yields moved lower on the week, with the benchmark muni falling by 12 basis points. On Thursday, March 24, the yield on the 10-year muni stood at 1.82%; the 30-year yield was at 2.76%.
U.S. Treasuries were mixed on Friday. The yield on the two-year Treasury rose to 0.76% from 0.73% on Thursday, while the 10-year Treasury yield dropped to 1.78% from 1.79% and the 30-year Treasury bond yield fell to 2.61% from 2.63%.
The 10-year muni to Treasury ratio was calculated on Friday at 95.0% compared with 95.3% on Thursday, while the 30-year muni to Treasury ratio stood at 102.3% versus 102.8%, according to MMD.
Muni Bond Funds See Inflows for 26th Straight Week
For the 26th week in a row, municipal bond funds reported inflows, according to Lipper data released Thursday.
Weekly reporting funds saw $783.896 million of inflows in the week ended March 30, after inflows of $901.500 million in the previous week, Lipper said. The four-week moving average remained positive at $745.914 million after being in the green at $603.004 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds also experienced inflows, gaining $519.825 million in the latest week after inflows of $643.831 million in the previous week. Intermediate-term funds had inflows of $205.746 million after inflows of $258.537 million in the prior week.
National funds had inflows of $652.906 million on top of inflows of $772.198 million in the previous week. High-yield muni funds reported inflows of $268.113 million in the latest reporting week, after inflows of $273.005 million the previous week.
Exchange traded funds saw inflows of $86.080 million, after inflows of $85.863 million in the previous week.
The Week's Most Actively Quoted Issues
California, New York and Illinois issues were among some of the most actively quoted names in the week ended April 1, according to data released from Markit.
On the bid side, the California taxable 7.6s of 2040 were quoted by 15 unique dealers. On the ask side, the New York City Transitional Finance Authority revenue 4s of 2040 were quoted by 16 unique dealers. And among two-sided quotes, the Illinois taxable 7.51s of 2033 were quoted by 13 dealers.
The Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended April 1 were in Kansas, California and Tennessee,
In the GO bond sector, the Johnson and Miami County USD 230, Kan., 4s of 2023 traded 32 times. In the revenue bond sector, the California 4s of 2045 traded 116 times. And in the taxable bond sector, the Nashville and Davidson Health and Educational Facilities Board 4.053s of 2026 traded 26 times, Markit said.
