Bond yields at a glance

MBIS benchmark (~AA)

MBIS AAA

MMD AAA

U.S. Treasuries

10 year

2.655

2.573

2.42

2.82

30 year

3.100

3.018

2.97

3.13

MBIS indices are updated hourly on the Bond Buyer Data Workstation.

The municipal market is starving for supply and it will remain that way with another meager weak of issuance.

Despite positive fund flows, investors are keeping their cash on the sidelines amid ongoing equity volatility.

Ipreo estimates volume will drop further to $3.52 billion, from the revised total of $3.79 billion sold in the past week, according to updated figures from Thomson Reuters. The calendar for the week ahead is composed of $2.70 billion of negotiated deals and $824 million in competitive sales.

There is a lot of volatility in all markets right now and although flows continue to remain decent in terms of reallocating assets, there are lots of people sitting on the sidelines,” said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management. “Investors are hesitant to commit to longer-term bonds despite the attractiveness of munis.”

Heckman said although there is a lot of cash coming in from calls and maturities but there is not enough supply for people to put their money back to work. Although it is been a tough start to the year for munis, he mentioned one positive sign.

“Given the environment, the demand for the little new issuance we have seen, has been relatively good,” he said. “All things considered, the muni market is holding in reasonably well.”

The upcoming schedule is light in both par amount and number of transactions, as there are only eight deals scheduled of 100 million or larger – two of which will come competitively. The largest deal is greater than $1 billion but then it drops down to $202 million for the second largest deal, a taxable offering.

Sources Friday said the municipal market has generally followed the direction of the U.S. Treasury market towards higher yields following the release of the non-farm payroll data a week earlier.

“On relative value basis we have seen the 10-year portion of the curve maintain ratios, whereas the 30-year portion of the curve has outperformed with ratios approximately 3 percentage points lower relative to Treasuries,” explained Christopher Brigati, managing director, head of municipal trading at Advisors Asset Management.

“To some degree, the higher yield environment brought some cash into the market as investors picked up paper at the most attractive yields we have seen since mid-March of last year,” he explained. “It appears, however, that with an expectation for further Fed tightening and hopes for still higher yields in the future, investors remain cautious and are not aggressive in their purchasing of bonds,” he said.

He said the interest rate pressure and the equity market sell-off created attention-grabbing headlines that dominated the attention of investors for much of the past seven days. At the same time, municipal investors typically shy away from extreme volatility in the rates market, and prefer to make investing decisions with a more stable market dynamic.

“Looking forward, investors are expected to remain cautious until we see signs of more stability in the domestic equity and debt markets; or the municipal and rates markets achieve still higher yields,” Brigati predicted.

Jefferies is expected to price the Commonwealth Financing Authority’s $1.39 billion of tobacco master settlement payment revenue bonds on Tuesday. The deal is rated A1 by Moody’s Investors Service, A by S&P Global Ratings and A-plus by Fitch Ratings.

Wells Fargo is slated to price the Community Health Network Inc.’s $202 million of taxable bonds on Tuesday. The deal is rated A2 by Moody’s and A by S&P.

The largest competitive sale will take place on Tuesday, when Mounds View, Minn., Independent School District No. 621 sells $153.575 million of general obligation school building bonds. The deal is rated AA-plus by S&P.

Week's actively traded issues
Some of the most actively traded bonds by type in the week ended Feb. 9 were from New York, Georgia and Illinois issuers, according to Markit.

In the GO bond sector, the New York City zeroes of 2042 traded 28 times. In the revenue bond sector, the Main Street Natural Gas Inc. of Ga.’s 4.125s of 2045 traded 25 times. And in the taxable bond sector, the Illinois 5.1s of 2033 traded 17 times.

Week's actively quoted issues
California and New Jersey names were among the most actively quoted bonds in the week ended Feb. 9, according to Markit.

On the bid side, New Jersey Economic Development Authority taxable 7.425s of 2029 were quoted by 36 unique dealers. On the ask side, the California taxable 7.5s of 2034 were quoted by 110 dealers. And among two-sided quotes, the California taxable 7.5s of 2034 were quoted by 24 unique dealers.

Lipper: Muni bond funds saw inflows
Investors in municipal bond funds again put cash into the funds in the latest week, according to Lipper data released on Thursday.

The weekly reporters saw $674.908 million of inflows in the week of Feb. 7, after inflows of $235.926 million in the previous week.

Exchange traded funds reported inflows of $53.734 million, after outflows of $16.893 million in the previous week. Ex-ETFs, muni funds saw $621.174 million of inflows, after inflows of $252.819 million in the previous week.

The four-week moving average was positive at $717.654 million, after being in the green at $815.115 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 inflows of $36.688 million in the latest week after inflows of $170.114 million in the previous week. Intermediate-term funds had inflows of $391.078 million after inflows of $264.852 million in the prior week.

National funds had inflows of $686.135 million after inflows of $347.233 million in the previous week.

High-yield muni funds reported outflows of $572.375 million in the latest week, after outflows of $143.414 million the previous week.

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.

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