Municipals ended the week mixed, according to traders, as the market looked ahead to some rare opportunities.
Yields were one basis point higher in nine maturities towards the front end of the curve, and the rest of the maturities were unchanged, traders said.
The upcoming week's new issue slate will be led by issuers from Tennessee, New York, Connecticut and Hawaii, which plans its first competitive deal since the 1980s.
Primary Market
Municipal volume for the week ahead is estimated by Ipreo at $7.3 billion, down from a revised total of $8.5 billion sold in the past week, according to Thomson Reuters. The calendar consists of $5.8 billion of negotiated deals and $1.5 billion of competitive sales.
"The coming week is notable for offering the chance to purchase bonds from issuers who rarely come to market," said John Mousseau, director of fixed income at Cumberland Advisors.
The largest deal of the week will be priced by JPMorgan for the Health and Educational Facilities of the Board of the Metropolitan Government of Nashville and Davidson County, Tenn.'s $780 million of revenue bonds for the Vanderbilt University Medical Center. The day of the sale will depend on market conditions. The deal is expected to feature a tax-exempt portion of about $530 million and a $250 million of taxables. It is anticipated that the deal will mature serially from 2021 through 3031 and also feature term bonds in 2036, 2041 and 2045 as well as a bullet maturity in 2016 for the taxable portion. The deal is rated A3 by Moody's Investors Service.
Another week and another issuer from New York is set to come to market. This week, it is the NYC Transitional Finance Authority. Ramirez & Co. is scheduled to price the $750 million of building aid revenue bonds for institutional investors on Monday, after retail order periods on March 10 and 11.
On Friday, the New York City Transitional Finance Authority held a second day for retail orders on its $750 million of building aid revenue bonds, Fiscal 2016 Series S-1. The deal will be priced for institutions on Monday.
Ramirez & Co. priced the issue for retail on Friday to yield from 0.98% with a 3% coupon in 2019 to 3.21% with a 4% coupon in 2036; a 2045 maturity was priced as 4s to yield 3.45%. No orders were taken in the 2029-2030, 2032, 2034-2035, 2040 or 2043 maturities. The 2017 and 2018 maturities were offered as sealed bids.
On Thursday, Ramirez priced the issue for retail to yield from 0.96% with a 3% coupon in 2019 to 3.21% with a 4% coupon in 2036; a 2045 maturity was priced as 4s to yield 3.45%. No orders were taken in the 2028-2030, 2032, 2034-2035, 2040 or 2044 maturities. The 2017 and 2018 maturities were offered as sealed bids.
The bonds are rated Aa2 by Moody's and AA Standard & Poor's and Fitch Ratings.
Ramirez will see a busy week, as the firm is also on the docket to price the State of Connecticut's $550 million of general obligation bonds on Wednesday. The deal is rated Aa2 by Moody's and AA by Standard and Poor's, Fitch Ratings and Kroll Bond Rating Agency.
Two new negative outlooks on Connecticut's bond ratings represent "bittersweet" news in advance of next week's $550 million general obligation bond sale, said state Treasurer Denise Nappier.
Moody's Investors Service and Kroll Bond Rating Agency revised their outlooks on Connecticut GOs to negative from stable ahead of the deal. Standard & Poor's on Wednesday night continued the negative outlook it imposed in March 2015, while Fitch Ratings reaffirmed its stable outlook.
"While there is the good news that the state's ratings remain unchanged -- which demonstrates continued confidence in our creditworthiness -- the Moody's and Kroll negative outlooks further emphasize the need to fortify the state's fiscal footing," Nappier said in a statement on March 10.
Mousseau also said that the negative signs around Connecticut are not yet to the point of deep concern, but do indicate problems the state needs to address with its tax code.
"Its trading value has held up," he said of Connecticut debt, "but you worry about it."
The competitive calendar looks to be light next week, as only two issuers are coming with noteworthy deals. The state of Hawaii will hold two separate sales totaling $525 million on Tuesday. The Aloha State will start off with $500 million of GO bonds and then follow up with $25 million of taxable GO bonds. This will mark the first time in more than a quarter century that Hawaii will sell a competitive bond. Both deals are rated Aa2 by Moody's and AA by S&P and Fitch.
"The ability to buy Hawaii paper is limited," Mousseau said, adding that it will probably be a popular deal on the competitive market despite low yields. "There's going to be a food fight over the bonds."
Howard County, Md. will be selling three separate sales totaling $172.245 million also on Tuesday. The largest of the three deals is a $135.965 million offering for GO consolidated public improvement project refunding bonds. All three issues are rated triple-A by Moody's, S&P and Fitch.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose one basis point to 1.89% from 1.88% on Thursday, while the 30-year muni yield was flat from 2.86%, according to the final read of Municipal Market Data's triple-A scale.
Yields were lower, but little changed on the week. On Friday, March 4, the yield on the 10-year muni stood at 1.90% while the 30-year muni was yielding 2.90%.
Treasuries were lower on Friday. The yield on the two-year Treasury rose to 0.96% from 0.92% on Thursday, while the 10-year Treasury yield gained to 1.98% from 1.93% and the 30-year Treasury bond yield increased to 2.75% from 2.69%.
The 10-year muni to Treasury ratio was calculated on Friday at 95.7% compared to 97.7% on Thursday, while the 30-year muni to Treasury ratio stood at 104.1% versus 106.1%, according to MMD.
The Week's Most Actively Quoted Issues
California, Kentucky and Ohio issues were among some of the most actively quoted names in the week ended March 11, according to data released by Markit.
On the bid side, the California taxable 7.55s of 2039 were quoted by nine unique dealers. On the ask side, the Kenton County School District Financing Corp., Ky., revenue 3s of 2026 were quoted by 16 unique dealers. And among two-sided quotes, Ohio State University taxable 3.798s of 2046 were quoted by nine dealers.
The Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended March 11 were in California and Ohio,
In the GO bond sector, the California 5s of 2045 traded 143 times. In the revenue bond sector, the Los Angeles County Public Works Financing Authority 4s of 2040 traded 80 times. And in the taxable bond sector, the Ohio State University 3.798s of 2046 traded 30 times, Markit said.
Muni Bond Funds See Inflows for 23rd Straight Week
Municipal bond funds reported inflows for the 23rd straight week, according to Lipper data released on Thursday. Weekly reporting funds saw $518.253 million of inflows in the week ended March 9, after inflows of $212.255 million in the previous week, Lipper said.
The four-week moving average remained positive at $523.966 million after being in the green at $629.577 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 $276.208 million in the latest week after inflows of $202.928 million in the previous week. Intermediate-term funds had inflows of $201.549 million after inflows of $143.242 million in the prior week.
National funds saw inflows of $492.834 million after inflows of $128.892 million in the prior week. High-yield muni funds reported inflows of $151.240 million in the latest reporting week, after inflows of $27.310 million the previous week.
Exchange traded funds saw inflows of $67.895 million, after inflows of $87.289 million in the previous week.
