Municipal bond supply is dwindling to the last small deals of the week as traders watch long-term muni yields, which continue to trend lower ahead of the biggest supply surge of the year, expected next week.
Secondary Market
U.S. Treasuries were mixed in early trading on Friday. The yield on the two-year Treasury inched up to 0.77% from 0.76% on Thursday, while the 10-year Treasury yield declined to 1.73% from 1.75% and the yield on the 30-year Treasury bond decreased to 2.58% from 2.61%.
Top-rated municipal bonds finished mixed on Thursday. The yield on Municipal Market Data's triple-A 30-year general obligation scale dropped to a record low for a second straight day as it slipped one basis point to 2.44%, according to the final read of MMD's triple-A scale. On Wednesday, the 30-year muni fell to 2.45%, eclipsing its previous low of 2.47% set in November 2012.
Meanwhile, the yield on the 10-year benchmark muni rose one basis point on Thursday, to 1.54% from 1.53% on Wednesday. Its all-time low, also set back in November 2012, is 1.47%, according to MMD.
The 10-year muni to Treasury ratio was calculated at 87.6% on Thursday compared with 88.3% on Wednesday, while the 30-year muni to Treasury ratio stood at 93.4% versus 95.0%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,867 trades on Thursday on volume of $13.94 billion.
The Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended May 13 were from California and New York issuers, according to data released by Markit.
In the GO bond sector, the California 5s of 2026 traded 28 times. In the revenue bond sector, the New York State Thruway Authority 4s of 2056 traded 58 times. And in the taxable bond sector, the St. Lawrence Co. IDA, N.Y., 4.429s of 2056 traded 35 times, Markit said.
The Week's Most Actively Quoted Issues
California, New Jersey and Illinois issues were among the most actively quoted names in the week ended May 13, according to Markit.
On the bid side, the California taxable 7.5s of 2034 were quoted by 16 unique dealers. On the ask side, the New Jersey EDA revenue 5s of 2023 were quoted by 17 unique dealers. And among two-sided quotes, the Illinois taxable 5.1s of 2033 were quoted by 10 dealers.
Primary Market
Traders were going through their inventories and putting the week's new issuance into their books.
Bank of America Merrill Lynch priced the Alameda Corridor Transportation Authority, Calif.'s $601 million of Series 2016 A&B tax-exempt subordinate and second subordinate lien revenue refunding bonds.
The Series A bonds are rated Baa2 by Moody's Investors Service and BBB-plus by S&P Global Ratings and Fitch. The Series B bonds are rated Baa2 by Moody's and BBB by S&P and Fitch -- except for half of the 2034 split maturity, both parts of the 2035 split maturity, two parts of the 2036 triple split maturity and two parts of the 2037 triple split maturity, which are insured by Assured Guaranty and rated A2 by Moody's and AA by S&P. Assured insured a total of $180 million of the deal.
PNC Capital Markets priced Chicago's $505 million sale of second lien water revenue bonds. The issue is rated A by S&P and AA by Fitch and Kroll Bond Rating Agency.
Ramirez & Co. priced Austin's $247.77 million of Series 2016 water and wastewater system revenue refunding bonds. The deal is rated Aa2 by Moody's, AA by S&P and AA-minus by Fitch.
"We had a little over $1.1 billion in orders for about $250 million in bonds, so that's more than four times oversubscribed. That's really good, said PFM Managing Director Dennis Waley, financial advisor on the sale. "We were oversubscribed across the board from 2019 to 2045. Everything was oversubscribed. Only one maturity was less than two times oversubscribed."
He said the deal attracted $35 million in retail orders. The offering included $110 million of refunding that produced present value savings of $16.8 million or more than 15%.
"The demand for munis has been very good," he said, "We're very pleased with how this transaction went."
JPMorgan Securities priced the Central Texas Regional Mobility Authority's $368.71 million of Series 2016 senior lien revenue refunding bonds on Thursday. Traders said the deal was met with an excellent reception. This deal is rated Baa2 by Moody's and BBB-plus by S&P, both of which have stable outlooks on the credit.
Morgan Stanley priced the state of Oregon's $336 million of Series 2016 D, E, F, G and H Article XI-M seismic projects and Article XI-Q state projects general obligation bonds. All series are rated Aa1 by Moody's and AA-plus by S&P and Fitch.
Loop Capital Markets priced the Los Angeles International Airport's $289.21 million of Series 2016A subordinate revenue bonds, subject to the alternative minimum tax. The deal is rated A1 by Moody's and AA-minus by S&P and Fitch.
In the competitive arena, the city and county of San Francisco's Public Utilities Commission sold more than $308 million of bonds in two deals, one of which was a green bond offering.
JPMorgan Securities won the $240.58 million of Series 2016A wastewater revenue green bonds with a true interest cost of 3.21%. JPMorgan also won the $67.82 million of Series 2016B wastewater revenue bonds with a TIC of 3.21%. Both deals are rated Aa3 by Moody's and AA by S&P.
The California Department of Water Resources sold $107.74 million of Series AV Central Valley Project water system revenue bonds. Morgan Stanley won the deal with a TIC of 3.37%. The deal is rated Aa1 by Moody's and triple-A by S&P.
The city and county of Denver's Board of Water Commissioners sold $152.16 million of water bonds in two separate issues. Citigroup won the $90.50 million of Series 2016A master resolution water revenue bonds with a TIC of 2.67%. Citi also won the $61.67 million of Series 2016B master resolution water refunding revenue bonds with a TIC of 2.33%. Both deals are rated triple-A by Moody's, S&P and Fitch.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $3.85 billion to $16.56 billion on Friday. The total is comprised of $5.95 billion of competitive sales and $10.60 billion of negotiated deals.
Muni Bond Funds See Inflows for 32nd Week
For the 32nd straight week, municipal bond funds reported inflows, according to Lipper data released Thursday.
Weekly reporting funds saw $1.212 billion of inflows in the week ended May 11, after inflows of $709.727 million in the previous week, Lipper said. Long-term muni bond funds also experienced inflows, gaining $805.057 million in the latest week after inflows of $446.7076 million in the previous week.
National funds had inflows of $1.062 billion on top of inflows of $595.642 million in the previous week. High-yield muni funds reported inflows of $309.525 million in the latest reporting week, after inflows of $131.628 million the previous week.
