The municipal market is grinding down to a halt, as the long holiday weekend approaches, and market technicals are strong and should remain that way once everyone returns.

"We are in a good spot right now, its super sleepy right now but we are in a good spot and we will soon see the June first redemptions when we get back, which will hopefully be followed by good issuance the first full week of the month," said one New York trader.

The action is few and far between today, but Morgan Stanley is expected to receive the written award on Jefferson County, Ala.'s $112 million of GO refunding warrant bonds. The deal is rated AA-minus by Fitch Ratings.

ICI: Long-term muni funds see $450M inflow
Long-term municipal bond funds saw an inflow of $450 million in the week ended May 16, the Investment Company Institute reported on Thursday.

This followed an inflow of $352 million of the tax-exempt mutual funds in the week ended May 9 and outflows of $163 million, $96 million, and $830 million in the three prior weeks.

Taxable bond funds saw an estimated inflow of $4.73 billion in the latest reporting week, after seeing an inflow of $2.38 billion in the previous week.

ICI said the total estimated inflows to long-term mutual funds and exchange-traded funds were $12.43 billion for the week ended May 16 after inflows of $4.23 billion in the prior week.

Tax-exempt money market funds saw inflows
Tax-exempt money market funds experienced inflows of $2.75 billion, raising their total net assets to $139.45 billion in the week ended May 22, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $2.09 billion on to $136.70 billion in the previous week.

The average, seven-day simple yield for the 202 weekly reporting tax-exempt funds fell to 0.92% from 1.02% the previous week.

The total net assets of the 833 weekly reporting taxable money funds fell to $2.20 billion to $2.653 trillion in the week ended May 21, after an inflow of $15.51 billion to $2.655 trillion the week before.

The average, seven-day simple yield for the taxable money funds nudged up to 1.38% from 1.37% from the prior week.

Overall, the combined total net assets of the 1,035 weekly reporting money funds increased $550.4 million to $2.793 trillion in the week ended May 21, after inflows of $17.60 billion to $2.792 trillion in the prior week.

Secondary market
Municipal bonds were mostly stronger on Thursday, according to a midday read of the MBIS benchmark scale.

Benchmark muni yields fell as much as one basis point in the six- to 30-year maturities, while the first five maturities rose by less than a basis point.

High-grade munis were also mostly stronger, with yields calculated on MBIS’ AAA scale falling as much as one basis point in the seven- to 30-year maturities, with the first six maturities increasing by no more than one basis point.

According to Municipal Market Data’s AAA benchmark scale, municipals strengthened with yields falling as much as two basis points in the 10-year general obligation muni and dipping between one and three basis points in the 30-year maturity.

On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 84.0% while the 30-year muni-to-Treasury ratio stood at 95.4%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasuries with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasuries; if it is below 100%, munis are yielding less.

Previous session's activity
The Municipal Securities Rulemaking Board reported 44,955 trades on Wednesday on volume of $13.880 billion.

California, New York and Texas were the states with the most trades, with the Golden State taking 18.813% of the market, the Empire State taking 12.538% and the Lone Star State taking 10.939%.

Treasury announcements:

  • $42 billion 182-day bills selling on May 29
  • $48 billion 91-day bills selling on May 29
  • $40 billion four-week bills selling on May 29

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.

Gary E. Siegel contributed to this report.

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