Top quality municipal bonds finished unchanged on Friday, traders said, as the market looks ahead to a robust supply slate.
The largest sale of the week will be coming out of the Empire State — the third week in a row a New York issuer has topped the new-issue calendar.
Municipal bond volume for the week is estimated at $6.8 billion, according to Ipero, a big increase from the revised total of $3.6 billion in the past week, according to Thomson Reuters. The total is comprised of $4.4 billion of negotiated deals and $2.4 billion of competitive sales.
On Friday, Jefferies priced the week's biggest deal — New York City's $800.02 million of Fiscal 2016 Series C and D general obligation bonds on day one of a two-day retail order period. The bonds will be offered to institutions on Tuesday.
The $750 million of Series C bonds were priced to yield from 0.78% with 3% and 5% coupons in a split 2019 maturity to 2.13% with a 5% coupon in 2027 and from 2.63% with a 5% coupon in 2033 to 3% with a 4% coupon in 2035. The 2017 and 2018 maturities were offered as sealed bids and no retail orders were taken in the 2028-2032 maturities.
The $50.02 million of Series D bonds were priced to yield from 0.78% with a 3% coupon in 2019 to approximately 3.138% with a 3% coupon in 2035; the 2016-2018 maturities were offered as sealed bids.
Proceeds from the sale will be used to refund outstanding GO bonds and pay costs of issuance.
The issue is rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
Fitch said when assigning the rating that highly effective budget management, an adequate cushion, solid economic underpinnings and high long-term liabilities are key rating drivers.
"Our rating reflects the city's tight budget monitoring and control as demonstrated by its ability to achieve consistent balance and manage out-year gaps," Fitch said in a press release. "While the city does not carry a meaningful fund balance, growing budgetary reserves and expense prepayments provide adequate protection against unforeseen conditions."
Fitch said the city has a broad economic base and serves a unique role as a national and international center for commerce, culture, and tourism. While New York City's diverse revenue structure captures most economic activity, Fitch said, the Big Apple is also vulnerable to fluctuations in the financial services industry.
Moving South, two issuers from the Tar Heel State will be coming to market with the second and third largest deals of the week.
Bank of America Merrill Lynch is set to price the University of North Carolina at Chapel Hill's $401 million of taxable Series 2016C general revenue refunding bonds on Tuesday. The deal is rated triple-A by Moody's, S&P and Fitch.
According to the preliminary official statement, proceeds will be used primarily to advance refund some of the university's outstanding bonds.
The largest competitive sale of the week will come from the state of North Carolina, as the Old North State will be selling $330 million of GO refunding bonds on Wednesday. The deal is rated triple-A by Moody's, S&P and Fitch.
Secondary Market
The yield on the 10-year benchmark muni general obligation was steady from 1.66% on Thursday, while the 30-year muni yield was flat at 2.78%, according to the final read of Municipal Market Data's triple-A scale.
On Friday, Feb. 12, the 10-year muni yield stood at 1.60% while the 30-year muni yield was at 2.68%.
Treasuries were mixed on Friday. The yield on the two-year Treasury rose to 0.74% from 0.71% on Thursday, while the 10-year Treasury yield was flat from 1.76% and the 30-year Treasury bond yield decreased to 2.61% from 2.63%.
The 10-year muni to Treasury ratio was calculated on Friday at 95.0% compared to 94.3% on Thursday, while the 30-year muni to Treasury ratio stood at 106.8% versus 105.7%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 40,619 trades on Thursday on volume of $9.74 billion.
The Week's Most Actively Quoted Issues
California and Ohio were among some of the most actively quoted names in the week ended Feb. 12, according to data released by Markit.
On the bid side, the California taxable 7.5s of 2034 were quoted by 11 unique dealers. On the ask side, the Ohio hospital revenue 4s of 2046 were quoted by 18 unique dealers. And among two-sided quotes, the California taxable 7.55s of 2039 were quoted by 12 dealers.
The Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Feb. 12 were in Texas, New York and California, according to Markit.
In the GO bond sector, the Dallas Independent School District, Texas, 3s of 2036 traded 30 times. In the revenue bond sector, the New York City Transitional Finance Authority 4s of 2041 traded 66 times. And in the taxable bond sector, the California 7.55s of 2039 traded 19 times, Markit said.
Municipal Bond Funds See Inflows for 20th Week
Municipal bond funds reported inflows for the 20th straight week, according to Lipper data released on Thursday.
Weekly reporting funds saw $668.964 million of inflows in the week ended Feb. 17, after inflows of $940.697 million in the previous week, Lipper said.
So far this year, muni mutual funds have seen about $5.40 billion of inflows.
The four-week moving average remained positive at $719.442 million after being in the green at $684.623 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 $460.258 million in the latest week after inflows of $746.051 million in the previous week. Intermediate-term funds had inflows of $191.155 million after inflows of $331.761 million in the prior week.
National funds saw inflows of $575.066 million after inflows of $770.988 million in the prior week. High-yield muni funds reported inflows of $99.768 million in the latest reporting week, after inflows of $284.065 million the previous week.
Exchange traded funds saw inflows of $90.824 million, after inflows of $124.647 million in the previous week.
