Top quality municipal bonds were mostly steady at mid-session, traders said, as the market awaits the first of the week's $7.66 billion new issue pricings.
Secondary Market
The yield on the 10-year benchmark muni general obligation was flat from 1.70% on Friday, while the 30-year muni yield was steady from 2.68%, according to a read of Municipal Market Data's triple-A scale. Yields on some intermediate maturities were steady to as much as one basis point weaker.
U.S. Treasuries were slightly higher on Monday. The yield on the two-year Treasury dropped to 0.74% from 0.76% on Friday, while the 10-year Treasury yield dipped to 1.77% from 1.78% and the 30-year Treasury bond yield slipped to 2.60% from 2.61%.
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.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 31,196 trades on Friday on volume of $10.45 billion.
The Primary Market
This week's calendar consists of $6.58 billion of negotiated deals and $1.08 billion of competitive sales.
The week's bigger offerings will kick off on Tuesday with the city and county of San Francisco, Calif.'s competitive sale of $179.42 million of Series 2016C, D and E general obligation various purpose bonds. The deal is rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
Also on Tuesday, Stifel is set to price the San Diego Unified School District, Calif.'s $150.72 million of Series 2016 SR-1 GO refunding bonds. The deal is rated Aa2 by Moody's and triple-A by Fitch.
Citigroup is expected to price Lubbock, Texas' $124 million of GO refunding and tax and waterworks system surplus revenue certificates on Tuesday. The issue is rated Aa2 by Moody's and AA-plus by S&P and Fitch.
Raymond James & Associates is set to price the Burleson Independent School District, Texas' $121.42 million of unlimited tax refunding bonds backed by the Permanent School Fund guarantee program. The bonds are rated triple-A by Moody's and S&P.
For retail investors, Jefferies is expected to price the University of Connecticut's $340 million of Series 2016A GO and Series 2016A refunding GOs on Monday and Tuesday ahead of the institutional pricing on Wednesday. The bonds are rated Aa2 by Moody's and AA by S&P and Fitch.
Also for retail, Citi is set to price on Tuesday the Tarrant County Cultural Education Facilities Corp.'s $372 million of tax-exempt hospital revenue bonds for Baylor Scott & White Health. The deal is part of a $912 million issue which also consists of $540 million of taxable corporate CUSIP bonds. The issue is slated to be priced for institutions on Wednesday. The bonds are rated Aa3 by Moody's and AA-minus by S&P.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $260.4 million to $9.97 billion on Monday. The total is comprised of $2.49 billion of competitive sales and $7.47 billion of negotiated deals.
Previous Week's Actively Traded Issues
Revenue bonds comprised 52.56% of new issuance in the week ended April 1, up from 52.35% in the previous week, according to Markit. General obligation bonds comprised 40.84% of total issuance, up from 39.50%, while taxable bonds made up 6.55%, down from 8.15%.
Some of the most actively traded issues by type in the week 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.
BAML: Good Quarter for Munis
Municipal bonds put in a good performance in the first quarter of the year, but not as good as Treasury and corporate bonds, according to a new report from Bank of America Merrill Lynch Global Research.
The BofAML Muni Master Index returned 1.639% for the year-to-date, which has underperformed both the Treasury Master Index and the U.S. Corporate IG Master Index with total return of 3.281% and 3.923%, respectively.
The best performance in munis so far this year has been in the 22-year and longer maturities and in the triple-B rated sector, BAML said.
"Historically, March until early May is a technically weak period in munis, but the very strong fund flows into the market may largely offset that historical trend," the report said. "For first quarter 2016, industrial development revenue bonds had the best return at 2.202%, followed by toll and turnpike, and utilities, which returned 1.996% and 1.936% respectively. Multi-family housing was the worst performer at 1.211%."
