Top-quality municipal bonds were stronger at mid-session, traders said, as market participants wait to see some new deals come their way, with the bulk of the $3 billion calendar set for sale on Thursday.
Secondary Market
The 10-year benchmark muni general obligation yield fell as much as two basis points from 2.32% on Tuesday, while the yield on the 30-year GO was down as much as one basis point from 3.05%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries were narrowly mixed on Wednesday. The yield on the two-year Treasury rose to 1.23% from 1.22% on Friday, while the 10-year Treasury yield gained to 2.46% from 2.45%, and the yield on the 30-year Treasury bond was unchanged from 3.05%.
The 10-year muni to Treasury ratio was calculated at 94.6% on Tuesday compared with 94.6% on Friday, while the 30-year muni to Treasury ratio stood at 99.3%, versus 100.0%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 42,309 trades on Tuesday on volume of $12.40 billion.
Nuveen: High Demand for High-Yield
The high yield municipal market ended 2016 with unusually firm demand and light trading, according to Nuveen Asset Management.
"Inflows totaled $3.7 billion for the year, as investors added $9.5 billion in the first three quarters of the year and redeemed $5.8 in the fourth quarter," John V. Miller, Nuveen co-head of fixed income, wrote in a Wednesday market comment. "High-yield municipal credit spreads (excluding Puerto Rico) are higher than at any time since the end of 2013. Spreads are 35 basis points wider than the beginning of the year, and 70 bps wider than the 2016 low."
However, Nuveen said, high-yield supply is expected to be light over the next few weeks.
"High-yield municipal yields have increased 70 basis points more than AAA municipals and 80 basis points more than U.S. Treasuries since the 2016 low," Miller wrote, "offering investors attractive relative performance, a cushion from rising rates and potentially attractive returns from higher yields."
Primary Market
The market will remain pretty subdued until Thursday. The calendar is made up of $2.92 billion of negotiated deals and $84.2 million of competitive sales.
Barclays Capital is set to price the Board of Regents of the Texas State University System's $570.83 million of Series 2017A revenue financing system revenue and refunding bonds on Thursday. The deal is rated Aa2 by Moody's Investors Service and AA by Fitch Ratings.
JPMorgan Securities is expected to price the Board of Regents of the University of North Texas' $214.92 million of Series 2017A revenue financing system refunding and improvement bonds on Thursday. The deal is rated Aa2 by Moody's and AA by Fitch.
Barclays is set to price the Board of Regents of the University of North Texas' $164.99 million of Series 2017B taxable revenue financing and improvement bonds on Thursday. The deal is rated Aa2 by Moody's and AA by Fitch.
Wells Fargo Securities is expected to price the University of Pittsburgh, Pa.'s $525 million of Series 2017A taxable university refunding bonds on Thursday. The deal is rated Aa1 by Moody's and AA-plus by S&P Global Ratings.
Wells Fargo is also set to price the District of Columbia's $311.52 million of Series 2017 refunding revenue bonds for Georgetown University on Thursday. The deal is rated A2 by Moody's and A by S&P.
Since 2007, the District of Columbia has sold roughly $14.89 billion of securities, with the largest issuance occurring in 2008 when it sold $2.09 billion. In that time frame, the nation's capital failed to sell more than $1 billion only in 2013 and 2014.
Also on Thursday, Piper Jaffray is expected to price the El Paso Independent School District, Texas' $184.09 million of unlimited tax school building bonds. The deal is rated Aaa by Moody's.
Piper is expected to price the Ysleta Independent School District, Texas' $171.38 million of unlimited tax school building general obligation bonds. The deal is rated triple-A by Moody's and S&P.
Citigroup is set to price the New York State Housing Finance Agency's $120 million of affordable housing Series 2017A climate bond certified green bonds and Series 2017B revenue bonds on Thursday.
In the competitive arena, the Cheery Creek School District Number 5, Colo., will sell $150 million of Series 2017 general obligation bonds on Thursday. The deal is rated Aa1 by Moody's and AA by S&P.
In the short-term competitive arena, Colorado is selling $375 million of Series 2016B education loan program tax and revenue anticipation notes Thursday. The deal is rated MIG1 by Moody's and SP1-plus by S&P.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $465 million to $10.09 billion for Wednesday. The total is comprised of $1.87 billion of competitive sales and $8.22 billion of negotiated deals.
