Top-rated municipal bonds were weaker at mid-session, according to traders, who returned to their desks to see a substantially smaller slate of new issues scheduled to hit the market in this holiday-shortened week.
Secondary Market
The yield on the 10-year benchmark muni general obligation was as much as two basis points stronger from 1.60% on Friday, while the 30-year muni yield was one to three basis points stronger from 2.68%, according to a read of Municipal Market Data's triple-A scale.
Treasuries were narrowly mixed on Tuesday. The yield on the two-year Treasury was flat from 0.70% on Friday, while the 10-year Treasury yield increased to 1.77% from 1.75% and the 30-year Treasury bond yield rose to 2.64% from 2.60%.
The 10-year muni to Treasury ratio was calculated on Friday at 91.7% compared to 95.0% on Thursday, while the 30-year muni to Treasury ratio stood at 103.0% versus 105.2%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 28,042 trades on Friday on volume of $7.62 billion.
Last Week's Most Active Sectors
Revenue bonds comprised 52.41% of new issuance in the week ended Feb. 12, down from 53.24% in the previous week, according to Markit. General obligation bonds comprised 40.27% of total issuance, up from 39.91%, while taxable bonds made up 7.32%, up from 6.85%.
Some of the most actively traded issues by type in the week ended Feb. 12 were in Puerto Rico, New York and California,
In the GO bond sector, the Puerto Rico Commonwealth 8s of 2035 traded 30 times. In the revenue bond sector, the New York City Transitional Finance Authority 4s of 2041 traded 110 times. And in the taxable bond sector, the state of California 7.6s of 2040 traded 14 times.
Primary Market
About $5.2 billion of new supply is set for sale this week. And one again, a New York issuer tops the calendar.
Ramirez & Co. is set to price the New York Metropolitan Transportation Authority's $500 million of revenue green bonds which are climate bond certified. A retail order period is slated for Wednesday with the institutional pricing set for Thursday.
The deal is rated A1 by Moody's Investors Service, AA-minus by Standard and Poor's, A by Fitch Ratings and AA-plus by Kroll Bond Rating Agency.
Bank of America Merrill Lynch is slated to price the Florida Municipal Power Agency's $425 million of All-Requirements Power Supply projects refunding revenue bonds on Wednesday. The deal is rated A2 by Moody's and A-plus by Fitch.
JPMorgan Securities is set to price the Oregon Health & Science University's $200 million of Series 2016B revenue bonds on Wednesday. The deal is rated Aa2 by Moody's and AA-minus by S&P and Fitch.
Jefferies is expected to price the Maryland Health & Higher Educational Facilities Authority's $141.18 million of Series 2016A revenue bonds for the Mercy Medical Center. The bonds are rated Baa2 by Moody's and triple-B by S&P.
Piper Jaffray is set to price the Alvin Independent School District, Texas' $127.5 million of 2016 unlimited tax schoolhouse and refunding GOs on Wednesday. The bonds are rated triple-A by Moody's.
The largest competitive sale of the week will come from the Silver State, as Nevada is set to sell $290.79 million of Series 2016 highway revenue motor vehicle fuel tax improvement and refunding bonds on Wednesday. The bonds are rated Aa2 by Moody's, triple-A by S&P and AA-plus by Fitch.
The Massachusetts State College Building Authority is competitively selling $182.49 million of Series 2016A refunding revenue bonds on Wednesday. The bonds are rated Aa2 by Moody's and AA by S&P.
York County, S.C., will competitively sell on Wednesday $108.97 million of general obligation bonds of 2016. The deal is rated Aa1 by Moody's and AA-plus by S&P.
Muni CUSIP Request Volume Continues to Fall
Total requests for new municipal bond CUSIP identifiers fell to 910, a 12% drop from December 2015, CUSIP Global Services reported on Tuesday.
The report tracks the issuance of new security identifiers as an early indicator of debt market activity and suggests a continued slowdown in new municipal bond issuance over the next several weeks.
"The early indications we were seeing in the second half of 2015, which warned of a slowdown in new municipal and corporate debt issuance, are being realized as we kick off 2016," Gerard Faulkner, director of operations for CUSIP Global Services, said in a press release. "While there is still some ambiguity in the marketplace regarding the future of interest rate increases, issuers are clearly taking a more reserved approach in the early part of this year."
On a year-over-year basis, muni identifier requests in January were down 4% from January 2015.
Regionally, municipal bond issuers in Texas demanded the highest volume of new CUSIP identifiers last month, accounting for a total of 125 identifier requests.
"While the uncertainty of the Fed's timing on interest rate increases certainly drove some year-end surges in new debt issuance last year, the trend is now clear for the next several weeks that we expect to see a decrease in new security issuance," said Richard Peterson, senior director, S&P Global Market Intelligence. "With new CUSIP request volume trending down in virtually every major asset class this January, we expect the pace of new securities coming to market to follow suit."
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $1.38 billion to $7.93 billion on Tuesday. The total is comprised of $2.75 billion of competitive sales and $5.17 billion of negotiated deals.
