Top-rated municipal bonds finished weaker on Monday, according to traders, who face a smaller-than-usual $4 billion primary calendar this week with the Federal Reserve set to meet in Washington.
The yield on the 10-year benchmark muni general obligation rose five basis points to 2.36% from 2.31% on Friday, while the yield on the 30-year increased five basis points to 3.17% from 3.12%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were narrowly mixed. The yield on the two-year Treasury inched up to 1.14% from 1.13% on Friday, the 10-year Treasury was unchanged from 2.48%, while the yield on the 30-year Treasury bond was flat from 3.17%.
"Treasuries opened by falling in price fairly dramatically. But at the moment we see it's stabilized and retracing its losses. Munis are following along," said a Northeast trader. "Munis are a vulnerable product at the moment."
The 10-year muni to Treasury ratio was calculated at 95.3% on Monday compared with 93.8% on Thursday while the 30-year muni to Treasury ratio stood at 100.3% versus 98.8%, according to MMD.
Referring to the way yields fell in the beginning of last week, another Northeast trader said that "some people were saying it's over, the 'Trump Tantrum' is done. I don't think that really held any water for a second."
Mass. DOT Sale in a 'Hold Situation'
Due to the recent volatile rate environment, the Massachusetts Department of Transportation's sale of $445 million of Series 2016A metropolitan highway system senior revenue refunding bonds and $197 million of Series 2016A metropolitan highway system revenue refunding bonds, subordinated commonwealth contract assistance secured, were placed on day-to-day status last week.
"Rates shot up 82 basis points in 16 days and there was a violent reaction in the marketplace. And that really gave away all of our potential savings," MassDOT chief financial officer David Pottier said at the sixth annual Massachusetts investor conference in Boston last week. "We're in a hold situation."
MassDOT was also awaiting a possible rate hike by the Federal Reserve this week.
"We still see some opportunity on a larger scale. We may look at it on a series by series basis and see if there is any meaningful savings," said Pottier.
MassDOT deputy CFO Michelle Ho added: "We were disappointed not to have the refunding, because we have significant capital needs."
Prior Week's Actively Traded Issues
Revenue bonds comprised 60.33% of new issuance in the week ended Dec. 9, down from 60.48% in the previous week,
Some of the most actively traded issues by type were from New York, New Jersey and California. In the GO bond sector, the New York City 4s of 2043 were traded 156 times. In the revenue bond sector, the New Jersey Economic Development Authority 5s of 2041 were traded 49 times. And in the taxable bond sector, the California 7.55s of 2039 were traded 12 times.
Previous Week's Top Underwriters
The top negotiated and competitive underwriters of last week included JPMorgan Securities, Jefferies, Citigroup, Bank of America Merrill Lynch and Morgan Stanley, according to Thomson Reuters data.
In the week of Dec. 4-Dec. 10, JPMorgan underwrote $2.14 billion, Jefferies $866.9 million, Citi $809.3 million, BAML $795.5 million and Morgan Stanley $693.4 million.
Primary Market
The week's new issue volume is estimated at $4.01 billion, consisting of $3.24 billion of negotiated deals and $771.2 million of competitive sales. Most of the week's deals will be jammed into Tuesday, ahead of the Federal Open Market Committee's announcement on interest rates on Wednesday.
On Tuesday, Citigroup is expected to price the New York State Housing Finance Agency's $223 million of affordable housing revenue bonds.
The issue is comprised of Series 2016H climate bond certified green bonds and Series 2016I revenue bonds. The deal is rated Aa2 by Moody's Investors Service.
Jefferies is expected to price the Westchester Tobacco Asset Securitization Corp., N.Y.'s $178.83 million of taxable Series 2016A tobacco settlement senior bonds and taxable Series 2016C tobacco settlement subordinate bonds as early as Tuesday.
Morgan Stanley is set to price the University of Pittsburgh's $200 million of revenue bonds on Tuesday.
In the competitive arena on Tuesday, the Minneapolis Special School District No. 1, Minn., will be selling about $125 million of bonds backed by the state's school district credit enhancement program in three separate offerings.
The deals consist of $56.09 million of Series 2016B general obligation long-term maintenance bonds, $46.43 million of Series 2016A GO school building bonds, and $23.77 million of Series 2016C full term certificates of participation.
All three deals are rated Aa1 by Moody's and AA-plus by S&P Global Ratings and Fitch Ratings.
Also this week, Barclays Capital is expected to price the Chicago Board of Education's $500 million of dedicated capital improvement tax bonds. There is no exact date for the sale, as the timing of the deal depends on market conditions.
The bonds are rated A by Fitch and BBB by Kroll Bond Rating Agency.
