Top-quality municipal bonds closed out the year on a strong note in an abbreviated trading session on Friday, as the market got set for some new education deals on the upcoming week's holiday-shortened slate.
Ipreo estimates bond volume for the upcoming New Year week at $3 billion, up from a revised total of $40 million in the previous week, according to updated figures from Thomson Reuters.
Analysts expect the new issues to get a warm reception as the deal calendar begins to build again after the holidays.
"We are seeing the market setting up for a strong January," said Jim Grabovac, senior portfolio manager at McDonnell Investment Management. "Munis have recovered very dramatically from the post-election sell-off and we expect strong demand for bonds next month."
The upcoming calendar is composed of $2.92 billion of negotiated deals and $84.2 million of competitive sales.
"We are sitting on a lot of cash right now -- and I suspect we're not the only ones," said Dawn Mangerson, managing director and senior portfolio manager at McDonnell. "We're looking to put some of that to work," but with a lot of money chasing limited supply, "we may have to wait until the second week of January, just like everybody else."
Barclays Capital is set to price the Board of Regents of the Texas State University System's $570.83 million of Series 2017A revenue financing system revenue and refunding bonds on Thursday. The deal is rated Aa2 by Moody's Investors Service and AA by Fitch Ratings.
JPMorgan Securities is expected to price the Board of Regents of the University of North Texas' $214.92 million of Series 2017A revenue financing system refunding and improvement bonds on Thursday. The deal is rated Aa2 by Moody's and AA by Fitch.
Barclays is set to price the Board of Regents of the University of North Texas' $164.99 million of Series 2017B taxable revenue financing and improvement bonds on Thursday. The deal is rated Aa2 by Moody's and AA by Fitch.
Wells Fargo Securities is expected to price the University of Pittsburgh, Pa.'s $525 million of Series 2017A taxable university refunding bonds on Thursday. The deal is rated Aa1 by Moody's and AA-plus by S&P Global Ratings.
Wells Fargo is also set to price the District of Columbia's $311.52 million of Series 2017 refunding revenue bonds for Georgetown University on Thursday. The deal is rated A2 by Moody's and A by S&P.
Pipe Jaffray is expected to price the El Paso Independent School District, Texas' $184.09 million of unlimited tax school building 17 bonds on Thursday. The deal is rated Aaa by Moody's.
Piper is also set to price the Ysleta Independent School District, Texas' $171.38 million of unlimited tax school building 17 general obligation bonds on Wednesday. The deal is rated triple-A by Moody's and S&P.
In the short-term competitive arena, Colorado is selling $375 million of Series 2016B education loan program tax and revenue anticipation notes next Thursday. The deal is rated MIG1 by Moody's and SP1-plus by S&P.
Secondary Market
The 10-year benchmark muni general obligation yield on Friday ended down two basis points at 2.31% from 2.33% on Thursday, while the yield on the 30-year GO fell one basis point to 3.04% from 3.05%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were stronger on Friday. The yield on the two-year Treasury dropped to 1.19% from 1.22% on Thursday, while the 10-year Treasury yield declined to 2.44% from 2.48%, and the yield on the 30-year Treasury bond decreased to 3.06% from 3.08%.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Dec. 30 were from New York, California and Connecticut, according to
In the GO bond sector, the New York City 0s of 2038 were traded 24 times. In the revenue bond sector, the California Municipal Finance Authority 0.65s of 2021 were traded 22 times. And in the taxable bond sector, the Connecticut 2.52s of 2025 were traded seven times.
Week's Most Actively Quoted Issues
Puerto Rico, New York and California names were among the most actively quoted bonds in the week ended Dec. 30, according to Markit.
On the bid side, the Puerto Rico Commonwealth GO 5s of 2041 were quoted by 58 unique dealers. On the ask side, the New York City GO 4s of 2043 were quoted by 142 unique dealers. And among two-sided quotes, the California taxable 7.6s of 2040 were quoted by 17 unique dealers.
Lipper: Muni Bond Funds Report Outflows
Municipal bond funds again experienced outflows as investors continued to pull cash out of the market, according to Lipper data released late Thursday.
The weekly reporters saw $1.637 billion of outflows in the week ended Dec. 28, after outflows of $1.988 billion in the previous week.
The four-week moving average remained in the red at negative $1.957 billion after being negative $2.068 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 had outflows, losing $583.675 million in the latest week after shedding $1.020 billion in the previous week. Intermediate-term funds had outflows of $703.236 million on top of outflows of $841.292 million in the prior week.
National funds had outflows of $1.196 billion after outflows of $1.580 billion in the previous week. High-yield muni funds reported outflows of $351.680 million in the latest reporting week, after outflows of $346.048 million the previous week.
Exchange traded funds saw inflows of $151.304 million, after inflows of $547.797 million in the previous week.
