Municipal volume is forecast to dip to $5.46 billion in the coming holiday-shortened week, after munis rallied on Friday amid declines in equity and commodity markets.
Next week's volume is estimated by Ipreo to consist of $3.13 billion of negotiated deals and $2.33 billion of competitive sales. Volume will decline from the past week's total, which was $7.4 billion, according to Thomson Reuters.
The drop in weekly issuance mainly due to a holiday shortened week, as the market will be closed on Monday in observance of Martin Luther King Day. Most of the pricings for the week will be packed into Wednesday and Thursday.
The largest sale comes from the Pacific Northwest, as Washington State will bring two competitive sales totaling $673 million to market on Wednesday. The $529.360 million of various purpose general obligation funding bonds will be the largest individual sale of the week. The Evergreen State will also sell $143.645 of motor vehicle tax GO refunding bonds. Both deals are rated Aa1 by Moody's Investors Service and AA-plus by both Standard and Poor's and Fitch Ratings.
Moody's said that while Washington's debt levels are higher than the national average, the state's strong economy has held its rating up. The state has a debt portfolio of nearly $20 billion.
"Washington's debt ratios are more than twice Moody's 2015 50-state median level; net tax-supported debt as a percentage of personal income is 6.2%, compared with Moody's 50-state median of 2.5%," Moody's noted. "Despite the significant increase in total debt outstanding during the previous decade, the debt-to-personal income ratio has remained fairly stable due to Washington's strong personal income growth."
Loop Capital Markets is expected to price The District of Columbia Water and Sewer Authority's $372.25 million of public utility subordinate lien revenue refunding bonds on Wednesday. The bonds are scheduled to be due in 2019 and 2029-2039. The deal is rated Aa3 by Moody's, AA by S&P and AA-minus by Fitch.
Secondary Market
Top-rated municipal bonds finished stronger on Friday, traders said, as yields on some maturities fell as much as four basis points. Treasuries rallied as equities fell on concern over China's economy and weakness in oil prices.
The yield on the 10-year benchmark muni general obligation fell four basis points to 1.75% from 1.79% on Thursday, while the 30-year muni yield lost four basis points to 2.70% from 2.74%, according to the final read of Municipal Market Data's triple-A scale.
Yields ended unchanged on the week. On Jan. 8, the yield on the 10-year muni stood at 1.71% while the yield on the 30-year muni was 2.70%.
The yield on the two-year Treasury dropped on Friday to 0.84% from 0.89% on Thursday, while the 10-year Treasury yield fell to 2.02% from 2.09% and the 30-year Treasury bond yield decreased to 2.80% from 2.89%.
The Dow Jones Industrial Average fell about 2.4%, the Nasdaq Composite Index was off by around 2.8% and the S&P 500 Index was down about 2.1%. The price of oil fell below $30 a barrel.
The 10-year muni to Treasury ratio was calculated on Friday at 84.5% compared with 85.2% on Thursday, while the 30-year muni to Treasury ratio stood at 95.4% versus 94.7%, according to MMD.
Primary Market
In other deals in the coming week, Stifel is slated to price Gwinnet County School District, Ga.'s $330 million of GO sales tax bonds on Thursday. The deal is expected to mature serially from 2018-22 and is rated Aaa by Moody's and triple-A by S&P.
According to the official statement, the proceeds of the bonds will be used to pay the costs of acquiring new sites for the construction of new schools, support facilities and athletic facilities and the expansion of existing schools and purchasing and refurbishing of school buses and other transportation vehicles, among other things.
Citi is scheduled to price the Triborough Bridge & Tunnel Authority's $300 million of general revenue bonds on Thursday after a one day retail order period. The transaction is rated Aa3 by Moody's and AA-minus by both S&P and Fitch.
This deal is one of many deals announced by State Comptroller Thomas DiNapoli announced on Jan. 6. The tentative schedule for the first three months of the year includes $3.82 billion of new debt sales across the Empire State including $447.8 million slated for January, $1.45 billion in February and roughly $1.93 billion for March. There were $2.44 billion of new issuance in New York during the 2015 first quarter, according to DiNapoli. The fourth quarter saw $5.68 billion in borrowing.
The Board of Regents for the University of Houston will be selling two competitive sales totaling $285 million on Thursday. The board approved the $101 million 2016A tax-exempt and $183 million Series 2016B taxable bonds in November.
"We expect them to be well received," said Raymond Bartlett, University of Houston treasurer and financial advisor at First Southwest.
About 70% of the deal is new money and the remainder for refunding. UHS expects net present value savings of about $5.1 million or 10.6% on the refunding of 2008 bonds, according to Jim McShan, interim vice chancellor for finance.
The bonds carry ratings of AA from Standard & Poor's and Aa2 from Moody's Investors Service with stable outlooks.
The Week's Most Actively Quoted Issues
New York City, Atlanta and the state of California were among some of the most actively quoted names in the week ended Jan. 15, according to data released by Markit.
On the bid side, the New York City Municipal Water Finance Authority revenue 5.44s 8s of 2043 were quoted by 11 unique dealers. On the ask side, the Atlanta water and waste water revenue 5s of 2040 were quoted by 17 unique dealers. And among two-sided quotes, the state of California revenue 7.55s of 2039 were quoted by 22 dealers.
The Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Jan. 15 were in Illinois, South Carolina and Michigan,
In the GO bond sector, the Chicago 5s of 2038 traded 70 times. In the revenue bond sector, the South Carolina Public Service Authority 3.75s of 2048 traded 64 times. And in the taxable bond sector, the Anchor Bay School District 2.12s of 2020 traded 13 times, Markit said.
Municipal Bond Funds Report Inflows
Municipal bond funds reported inflows for the 15th straight week, according to Lipper data released on Thursday.
Weekly reporting funds said they had $994.811 million of inflows in the week ended Jan. 13, after inflows of $992.749 million in the previous week, Lipper said.
The four-week moving average remained positive at $1.024 billion after being in the green at $851.299 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 $667.366 million in the latest week, on top of inflows of $496.862 million in the previous week. Intermediate-term funds had inflows of $251.084 million after inflows of $316.115 million in the prior week.
National funds saw inflows of $920.013 million after inflows of $924.675 million in the prior week. High-yield muni funds reported inflows of $399.087 million in the latest reporting week, after an inflow of $307.597 million the previous week.
Exchange traded funds saw inflows of $165.154 million, after inflows of $257.265 million in the previous week.
In the week ended Jan. 6, long-term, long-term municipal bond funds saw inflows, according to the Investment Company Institute. Muni funds saw $1.382 billion of inflows after $2.249 billion of inflows in the previous week, ICI reported.
