Top shelf municipal bonds were weaker at mid-session, traders said, as the first of the week’s new issues began to sell. The market is looking at a short week, with trading closed on Friday ahead of the Easter holiday.
Secondary Trading
The yield on the 10-year benchmark muni general obligation was as much as one basis point stronger from 1.83% on Friday, while the 30-year muni yield was as much as one basis point stronger from 2.79%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries were lower on Monday. The yield on the two-year Treasury rose to 0.86% from 0.84% on Friday, while the 10-year Treasury yield gained to 1.90% from 1.87% and the 30-year Treasury bond yield increased to 2.70% from 2.67%.
The 10-year muni to Treasury ratio was calculated on Friday at 97.7% compared to 97.3% on Thursday, while the 30-year muni to Treasury ratio stood at 104.3% versus 103.9%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 34,950 trades on Friday on volume of $11.30 billion.
Primary Market
Most of this week’s primary deals are jammed into Tuesday and Wednesday, with almost all coming in the negotiated sector. There is only one competitive sale over $100 million and that sold on Monday.
The Florida Department of Transportation competitively sold $106.21 million of Series 2016B turnpike revenue refunding bonds. Bank of America Merrill Lynch won the issue with a true interest cost of 1.98%. The issue was priced to yield from 0.66% with a 5% coupon in 2017 to 2.56% with a 2.625% coupon in 2027.
The bonds are rated Aa2 by Moody’s Investors Service and AA by Fitch Ratings.
Since 2012, the DOT has sold about $3 billion of bonds, with the biggest issuance coming in 2012 when it offered $745 million of bonds and the least being in 2014 when $629 million came to market.
Morgan Stanley priced the Kentucky Turnpike Authority’s $229.85 million of Series 2016A economic development road revenue refunding bonds for revitalization projects for retail investors ahead of the institutional pricing on Tuesday.
The issue was priced for retail to yield from 1.21% with 3% and 4% coupons in a split 2019 maturity to 3% at par in 2029. The bonds are rated Aa2 by Moody’s, AA-minus by Standard & Poor’s and A-plus by Fitch.
Citigroup priced DeKalb County, Ga.’s $142.25 million of Series 2016 special transportation, parks and greenspace and libraries tax district general obligation refunding bonds.
The issue was priced to yield from 0.98% with a 3% coupon in 2018 to 2.76% with a 4% coupon in 2030. The deal is rated Aa3 by Moody’s and AA-minus by Fitch.
The biggest deal of the week is coming on Tuesday from Houston, Texas, when Loop Capital Markets will price the city’s $581.99 million of Series 2016A public improvement refunding bonds. The deal is rated Aa3 by Moody’s and AA by S&P.
Also on Tuesday, Citi is expected to price the city and county of Denver, Colo.’s $353 million of tax revenue refunding bonds consisting of tax-exempt and taxables. The deal is rated Aa3 by Moody’s and AA-minus by S&P.
RBC Capital Markets is set to price the Board of Regents of the Texas A&M University System’s $325.75 million of Series 2016B taxable revenue financing bonds on Tuesday. The bonds are rated triple-A by Moody’s and expected to be rated AA-plus by S&P.
In the short-term competitive arena on Tuesday, the New York Metropolitan Transportation Authority is selling $700 million of bond anticipation notes in two separate sales. The MTA will offer $500 million of Series 2016 Subseries 2016A-1 due Oct. 1, and $200 million of Series 2016 Subseries 2016A-2 due Feb. 1, 2017. The BANs are rated MIG1 by Moody’s, SP1-plus by S&P and F1 by Fitch.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $280.4 million to $9.21 billion on Monday. The total is comprised of $2.31 billion of competitive sales and $6.90 billion of negotiated deals.
The Prior Week's Most Actively Traded Issues
Revenue bonds comprised 51.82% of new issuance in the week ended March 18, down from 52.64% in the previous week, according to Markit. General obligation bonds comprised 40.067% of total issuance, up from 39.57%, while taxable bonds made up 8.12%, up from 7.79%, according to Markit.
Some of the most actively traded issues by type were in California and New York, In the GO bond sector, the California 3s of 2033 traded 49 times. In the revenue bond sector, the New York City Transitional Finance Authority 4s of 2045 traded 132 times. And in the taxable bond sector, the California 7.55s of 2039 traded 23 times, Markit said.
RBC: Muni Bond Fund Inflows Stay Strong
Municipal bond funds are continuing to see strong inflows, according to Lipper, and have seen cash infusions for 24 straight weeks.
“We have yet to see the traditional spring fund flow weakness materialize,” Chris Mauro, Head of Municipals Strategy at RBC Capital Markets, wrote in a market comment on Monday. “If this solid trend continues, the 2016 tax season would be the first since 2009 without outflows.”
Since the recent streak of muni inflows began, weekly and monthly reporting funds have posted a cumulative $21.6 billion in net inflows, Mauro wrote.
