Prices of top-quality municipal bonds were steady on Friday as the market was in full holiday mode ahead of the early market close and the full close on Monday for Memorial Day. Trading will stop at 2 p.m., EDT, and resume Tuesday.
Secondary Market
The yield on the 10-year benchmark muni general obligation was steady from 2.30% on Thursday, while the yield on the 30-year GO was unchanged at 3.28%, according to Municipal Market Data's triple-A scale.
Treasury prices were mostly lower on Friday as the yield on the two-year Treasury note increased to 0.61% from 0.57% from Thursday, while the 10-year yield rose to 2.21% from 2.18% and the 30-year yield was unchanged at 2.98%.
The 10-year muni to Treasury ratio was calculated on Thursday at 105.2% versus 103.1% on Wednesday, while the 30-year muni to Treasury ratio stood at 110.2% compared to 108.1%, according to MMD.
Primary Market
There were no major deals slated on Friday in the competitive or negotiated sectors.
Looking ahead to next week, the two big deals on the calendar in terms of interest and size are from Chicago and Pennsylvania.
Chicago will fold its conversion to fixed-rate of $800 million in floating-rate general obligation paper into one transaction pricing next Wednesday with Bank of America Merrill Lynch running the books.
Citi, Ramirez, and Siebert Brandford Shank will be co-senior managers. Another eight firms round out the syndicate on the transaction. Columbia Capital Management is advising the city on the deals.
The sale comes hard on the heels of the city's downgrade to Ba1 with a negative outlook from Moody's Investors Service over the challenges posed to city pension reforms by a state Supreme Court ruling voiding state reforms.
Fitch Ratings and Standard & Poor's then downgraded the city within investment grade territory, to BBB-plus and A-minus, respectively, citing liquidity risks posed by the Moody's downgrades. Kroll Bond Rating Agency affirmed the city's A-minus rating and stable outlook.
Also on Wednesday, the state of Pennsylvania will sell $1.2 billion of general obligation bonds, consisting of $460 million of second Series of 2015 and $770.2 million of first refunding Series of 2015. The bonds are rated Aa3 by Moody's.
Pennsylvania last sold bonds competitively on Feb. 3 when Bank of America Merrill Lynch won $1 billion of First Series of 2015 GOs with a true interest cost of 2.99%.
Other deals on the calendar for next week include the St. Paul Housing and Redevelopment Authority's $494 million of health care facilities revenue refunding bonds to be priced by Piper Jaffray; the Miami-Dade County School Board's $461 million of Series 2015B certificates of participation to be priced by Citi; and the Montgomery County Industrial Development Authority, Pa.'s $455 million of Series 2015A health system revenue bonds to be priced by Bank of America Merrill Lynch.
Tax-Exempt Bond Funds Saw Outflows
For the third week in a row, municipal bond funds posted outflows.
The funds which report weekly posted $91.046 million of outflows in the week ended May 21, after experiencing outflows of $32.398 million in the week ended May 13, according to the latest Lipper data.
The four-week moving average remained positive at $36.683 million after being in the green at $193.106 million in the prior week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds also saw outflows, losing $150.257 million in the latest week, after experiencing outflows of $109.874 million in the previous week. Intermediate-term funds saw inflows of $93.520 million after seeing inflows of $99.505 million in the prior week.
High-yield muni funds recorded an outflow of $132.141 million in the latest reporting week, after seeing outflows of $126.365 million the previous week.
However, exchange-traded funds had inflows of $82.057 million, after seeing inflows of $53.986 million in the previous week.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $1.32 billion to $12.20 billion on Friday. The total is comprised of $6.36 billion competitive sales and $5.85 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 44,032 trades on Thursday on volume of $13.659 billion.
The most active bond, based on the number of trades, was the Riverside County Public Financing Authority, Calif.'s Series 2015 capital facilities project lease revenue bonds 4 1/8s of 2040, which traded 219 times at an average price of 99.541 with an average yield of 4.152%. The bonds were initially priced at 98.201 to yield 3.52%.
Yvette Shields contributed to this report
