Municipal bond traders are set to see only a handful of deals come to market on Tuesday, as they prepare to finish up the week's business ahead of the last full trading session of the week on Wednesday.
Secondary Market
U.S. Treasury bonds were lower on Tuesday. The yield on the two-year yield rose to 0.96% from 0.95% on Monday, while the 10-year Treasury gained to 2.21% from 2.19% and the 30-year Treasury yield increased to 2.93% from 2.91%.
On Monday, the yield on the 10-year benchmark muni general obligation fell one basis point to 1.92% from 1.93% on Friday, while the 30-year yield was unchanged from 2.81%, according to the final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated on Monday at 87.6% compared to 87.8% on Friday, while the 30-year muni to Treasury ratio stood at 96.1% versus 96.7%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 33,705 trades on Monday on volume of $4.27 billion.
Primary Market
On Tuesday, Boenning & Scattergood is expected to price Bucks County, Pa.'s $38 million of water and sewer revenue bonds. The deal is tentatively structured to mature serially from 2016 to 2040.
Loop Capital is scheduled to price the Massachusetts Housing Finance Agency's $24 million of Series A multifamily conduit revenue bonds for the Wood Ridge Homes Project on Tuesday.
BAML: No End of Year Rush to Market
Worry about the Federal Reserve's actions and gains in short rates had a dampening effect on municipal issuance for the last few weeks of the year.
"The rising short-term rates, however, were enough to limit refunding volumes so that the anticipated year-end rush to market did not occur," according to a new report from Bank of America Merrill Lynch Global Research. "Lower issuance and pent-up demand drove performance much more than concern about the Fed."
Issuance for the month was $19.8 billion as of Dec. 17, according to BAML, down 46.4% compared to the same period last year.
For the year to date, issuance is $393.6 billion, up 16.8% compared to the same time period in 2014. Of the total issuance so far this year, 62.2% is related to refundings versus 57.1% in the same period last year.
Meanwhile, municipal bond performance was solid in December, BAML said.
The BAML Municipal Master Index returned 0.519% in December, with the long-end outperforming the short-end of the curve by a wide margin. The 22-year-plus index returned 0.847% versus the one- to three-year index's return of -0.062%.
The BAML Muni Master Index has returned 3.270% for the year-to-date through Dec. 10 and outperformed both the Treasury Master Index and the U.S. Corporate IG Master Index which had total returns of 1.074% and -0.379%, respectively.
The best performance in munis for the year-to-date has been in the 22-year-plus maturities and the triple-B sector.
