Municipal bonds weakened at mid-session, traders said, with yields on some top shelf maturities strengthening by as much as one basis point.
Action in the primary market kicked off with the pricing of a large New York transportation issue.
Secondary Market
The yield on the 10-year benchmark muni general obligation was as much as one basis point weaker from 1.92% on Friday, while the 30-year yield was as much as one basis point weaker from 2.80%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasury bonds were lower on Monday as the yield on the two-year rose to 0. 92% from 0.89% on Friday while the 10-year yield gained to 2.17% from 2.14% and the 30-year Treasury increased to 2.92% from 2.88%.
The 10-year muni to Treasury ratio was calculated on Friday at 89.9% compared to 88.1% on Thursday, while the 30-year muni to Treasury ratio stood at 97.3% compared to 95.8%, according to MMD.
Primary Market
The municipal bond market saw the start of the last full trading week of the year, which will be marked with a Federal Reserve monetary policy meeting and a small new issue calendar. This week's slate is estimated at only $2.1 billion, which consists of about $1.5 billion of negotiated deals and over $564 million of competitive sales.
On Monday, Citigroup priced the New York Transportation Development Corp.'s $167.86 million of Series 2015 special facility revenue refunding bonds for the Terminal One Group Association Project.
The issue, which is subject to alternative minimum tax, was priced to yield from 1.00% with a 5% coupon in 2017 to 2.47% with a 5% coupon in 2023. The bonds were rated Baa1 by Moody's Investors Service and A-minus by Fitch Ratings.
According to the official statement, the bonds are "among other things, to refinance the construction of a new passenger terminal facility to John F. Kennedy International Airport known as Terminal One and [pay] certain costs of issuance related to the issuance of the Series 2015 bonds."
On Tuesday, the largest deal of the week is coming in the competitive sector when Jacksonville, Fla., will competitively sell $200.27 million of transportation refunding revenue bonds. The deal is rated A1 by Moody's and AA-minus by Standard & Poor's and Fitch.
RBC Capital Markets is expected to price the Spring Independent School District in Harris County, Texas' $137.97 million of Series 2015 unlimited tax refunding bonds on Tuesday. The deal is wrapped by Permanent School Fund Guarantee Program and is rated triple-A by both Moody's and S&P.
RBC is also scheduled to price Ohio Water Development Authority's $105.68 million Series 2015B of water pollution control loan fund revenue refunding bonds on Monday.
Barclays Capital is slated to price Utah Housing Corp.'s $100 million of Series 2015D single-family mortgage bonds on Thursday.
The Previous Week's Sectors
Revenue bonds comprised 55.05% of new issuance in the week ended Dec. 11, up from 54.60% in the previous week, according to Markit. General obligation bonds comprised 36.54% of total issuance, down from 37.77%, while taxable bonds made up 8.41%, up from 7.63%.
New York & New Jersey, California, and Puerto Rico were some of the most actively quoted names in the week.
On the bid side, the New York & New Jersey Port Authority taxable 4.81s of 2065 were quoted by 17 unique dealers. On the ask side, the California taxable 7.55s of 2039 were quoted by 15 unique dealers. And among two-sided quotes, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 13 dealers, Markit said.
Fed Ahead
The Federal Open Market Committee meets Tuesday and Wednesday, with expectations of a 25 basis point increase in the federal funds rate target announced after the meeting.
This year's voters are: Board Chair Janet L. Yellen, New York President William C. Dudley, Governor Lael Brainard, Federal Reserve Bank of Chicago President Charles L. Evans, Governor Stanley Fischer, Federal Reserve Bank of Richmond President Jeffrey M. Lacker, Federal Reserve Bank of Atlanta President Dennis P. Lockhart, Governor Jerome H. Powell, Governor Daniel K. Tarullo, and Federal Reserve Bank of San Francisco President John C. Williams.
Yellen, Dudley, Fischer, Lacker, Lockhart and Williams have all either clearly stated or made statements that can be interpreted as they would be comfortable increasing rates at this meeting. Brainard has urged caution. Tarullo called it "a mixed picture" and noted his concern about low inflation. Evans seems to have eased off his staunch no increase position, although he still says he has "some nervousness" and would "prefer to have more confidence" of higher inflation. Powell has not commented since early August.
Even if rates aren't increased at this meeting, and most observers believe they will be, it seems the Fed is getting closer.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 33,659 trades on Friday on volume of $9.40 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $430.2 million to $4.32 billion on Monday. The total is comprised of $1.37 million competitive sales and $2.95 billion of negotiated deals.
