The rally municipal bonds began in the first week of 2014 extended through the week ending Jan. 24, with limited supply forcing traders to take bonds at low yields.
"The supply-demand scenario is more favorable to the issuer right now," Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management, said in an interview. "There's been good demand, supply has been very light."
Total sales this week came to $4.57 billion, according to Thomson Reuters data. Volume next week could reach $4.89 billion, according to Bond Buyer and Ipreo data.
"Light new issue volume and strong reinvestment flows have provided propellant for falling muni yields, with less than $5 billion in pricings expected next week, placing January volume well below last year's $27 billion pace," Janney Capital Markets said in its daily report Friday.
The Municipal Market Data 10-year triple-A benchmark yield has fallen more than 30 basis points since Jan. 1, while the 30-year benchmark on MMD has fallen by more than 40 basis points. The rally has pushed bond yields down from January post-financial crisis levels, but has yet to touch the levels seen in January 2011 and 2012.
Munis largely mimicked Treasuries, with Treasury notes falling by about nine basis points on the 10-year note and about eight on the 30-year note. The typically static two-year Treasury also fell a few basis points on the week.
Though total issuance remained low, severable sizeable deals this past week were received well, sources said.
In the competitive arena, Citigroup Global Markets Inc. won the bid for $316.89 billion of Fairfax County, Va., public improvement and refunding bonds, and Bank of America Merrill Lynch took $100 million of Berkeley County School District, S.C., general obligation bonds.
Market participants said two negotiated deals, a New York State Thruway Authority sale, and $1 billion of taxable New York and New Jersey Port Authority bonds, got the most attention.
"It was a very quiet week issue-wise, apart from the big taxable deal, which came and went in about two seconds," a New York-based trader said in an interview.
Barclays priced the $676.5 million Thruway revenue bonds, increasing the size of the deal by $26 million on Wednesday from Tuesday's retail order period. The bonds are rated A2 by Moody's and A by Standard & Poor's.
Yields ranged from 0.64% with coupons of 4.00% and 5.00% in a split maturity in 2017 to 4.70% with a 4.625% coupon in 2044. Credits maturing in 2015 and 2016 were offered in a sealed bid. Yields on debt maturing through 2023 were lowered between two and seven basis points from retail order period pricing.
Bank of America Merrill Lynch priced the Port Authority taxable bonds, structured as two bullet maturities in 2046. They are rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's and Fitch Ratings.
The first series, $500 million, yields 4.96% priced at par in 2046. The credits were priced to yield 120 basis points over comparable Treasuries.
The second series, also $500 million, yields 5.31% priced at par in 2046. The credits were priced to yield 155 basis points over comparable Treasuries.
