Top-quality municipal bonds ended weaker on Friday, traders said, ahead of an upcoming $8.6 billion new issue calendar, which is headlined by large deals from California, New York and Nevada issuers.
The coming week's slate will be driven by two sales, from issuers in California and New York, that are greater than $1 billion, with one of them exceeding $2 billion.
Primary Market
Municipal volume for the upcoming week is estimated by Ipreo at $8.6 billion, down from a revised total of $9.4 billion sold in the past week, according to Thomson Reuters. The calendar consists of $7.1 billion of negotiated deals and $1.5 billion of competitive sales.
The largest deal in dollar amount and the most talked about deal will be California's $2.3 billion general obligation sale. Citi is expected to price the deal on Tuesday, after holding a retail order period on Monday. The sale is almost evenly split between new money and refunding and has ratings of Aa3 by Moody's Investors Service, AA-minus by Standard and Poor's and A-plus by Fitch Ratings.
Bank of America Merrill Lynch is set to price the Empire State Development Corporation's $1.23 billion of state personal income tax revenue general purpose bonds on Wednesday, following a retail order period on Tuesday. The deal is rated triple-A by S&P and AA-plus by Fitch.
The Las Vegas Valley Water District is scheduled to come to market with two separate negotiated deals, totaling roughly $716.385 million. The larger deal for $608 million of GO water improvement and refunding bonds will be priced by Citi. The deal is expected to mature serially from 2017-2046 and is rated Aa1 by Moody's and AA by S&P. The smaller deal for $108.385 million of GO limited tax bonds, that have additionally secured by pledged revenues, will be priced by Morgan Stanley and is rated Aa1 by Moody's and AA-plus by S&P. Both deals are scheduled to price on Thursday.
The largest competitive sale will hail from Beantown, as the city of Boston will be selling $140 million of GO bonds on Tuesday. The deal is rated triple-A by Moody's and S&P.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose four basis points to 1.90%, from 1.86% on Thursday, while the 30-year muni yield increased two basis points to 2.90% from 2.88%, according to the final read of Municipal Market Data's triple-A scale.
Benchmark yields moved higher on the week, with the 10-year muni up by 14 basis points and the 30-year muni rising by 10 basis points. On Friday, Feb. 26, the yield on the 10-year muni stood at 1.76% while the 30-year muni yield was at 2.80%.
Treasuries were lower on Friday. The yield on the two-year Treasury rose to 0.87% from 0.84% on Thursday, while the 10-year Treasury yield gained to 1.99% from 1.84% and the 30-year Treasury bond yield increased to 2.71% from 2.66%.
The 10-year muni to Treasury ratio was calculated on Friday at 101.6% compared to 102.2% on Thursday, while the 30-year muni to Treasury ratio stood at 107.4% versus 108.3%, according to MMD.
The Week's Most Actively Quoted Issues
California and Maryland issues were among some of the most actively quoted names in the week ended March 4, according to data released by Markit.
On the bid side, the California taxable 7.55s of 2039 were quoted by 13 unique dealers. On the ask side, the Maryland Health and Higher Educational Facilities Authority revenue 4s of 2042 were quoted by 20 unique dealers. And among two-sided quotes, California taxable 7.3s 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 March 4 were in California, New York and Ohio,
In the GO bond sector, the Los Angeles Unified School District, Calif. 4s of 2040 traded 31 times. In the revenue bond sector, the New York City Municipal Water Finance Authority 4s of 2038 traded 136 times. And in the taxable bond sector, the Ohio State University 3.798s of 2046 traded 64 times, Markit said.
Muni Bond Funds See Inflows for 22nd Straight Week
Municipal bond funds reported inflows for the 22nd straight week, according to Lipper data released on Thursday. Weekly reporting funds saw $212.255 million of inflows in the week ended March 2, after inflows of $696.392 million in the previous week, Lipper said.
The four-week moving average remained positive at $629.577 million after being in the green at $744.844 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 $202.928 million in the latest week after inflows of $654.431 million in the previous week. Intermediate-term funds had inflows of $143.242 million after inflows of $80.040 million in the prior week.
National funds saw inflows of $128.892 million after inflows of $589.237 million in the prior week. High-yield muni funds reported inflows of $27.310 million in the latest reporting week, after inflows of $245.834 million the previous week.
Exchange traded funds saw inflows of $87.289 million, after inflows of $173.593 million in the previous week.
