It's been a few weeks since the muni market has seen 'normal' issuance but this week has picked up right where it left off before the holidays — bond hungry investors are diving back in.
Citi priced the University of Massachusetts Building Authority’s (Aa2/AA-/AA) $451.87 million of federally taxable project revenue refunding bonds and $201.815 million of tax-exempt revenue bonds.
Bank of America Securities priced the State of Ohio’s (A2/A/ ) $342.13 million of hospital revenue bonds.
Wells Fargo priced Philadelphia’s (A2/A/A-) $118.145 million of general obligation federally taxable refunding bonds.
"There is just too much money out there — all the deals did well," said one New York trader. "And it will continue to do so, for the time being."
ICI: Muni funds see $1.5B inflow
Long-term municipal bond funds and exchange-traded funds saw a combined inflow of $1.505 billion in the week ended Dec. 31, the Investment Company Institute reported on Thursday.
It was the 52nd straight week of inflows into the tax-exempt mutual funds, but was a large drop from an inflow of $2.661 billion in the previous week.
Long-term muni funds alone saw an inflow of $1.268 billion after an inflow of $2.387 billion in the previous week; ETF muni funds alone saw an inflow of $237 million after an inflow of $274 million in the prior week.
Taxable bond funds saw combined inflows of $7.782 billion in the latest reporting week after revised inflows of $6.902 billion in the previous week.
ICI said the total combined estimated inflows from all long-term mutual funds and ETFs were $7.740 billion after inflows of $5.531 billion in the prior week. Domestic equities was the biggest loser of the latest week with $3.847 billion of outflows.
Secondary market
Munis were stronger on the MBIS benchmark scale, with yields falling by two basis points in the 10-year maturity and by less than a basis point in the 30-year. High-grades were stronger, with yields on MBIS AAA scale falling by as many as three basis points in the 10-year and by two basis points in the 30-year maturity.
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on the 10-year GO was unchanged from 1.34%, while the 30-year rose one basis point to 1.97%.
The 10-year muni-to-Treasury ratio was calculated at 71.4% while the 30-year muni-to-Treasury ratio stood at 83.4%, according to MMD.
Stocks were in the green as Treasuries yields moved higher. The Treasury three-month was yielding 1.544%, the two-year was yielding 1.577%, the five-year was yielding 1.665%, the 10-year was yielding 1.873% and the 30-year was yielding 2.355%.
The Dow Jones was up 0.92%, The S&P 500 increased by about 0.83% and the Nasdaq was up 1.03%.
“The ICE muni yield curve continues to grind lower, down one basis point again today,” ICE Data Services said in a Wednesday market comment. “Tobaccos are quiet and unchanged along with high-yield. Taxable yields are up as much as four basis points since they are taking their lead from Treasuries. Puerto Rico is broadly unchanged while some bonds are playing catch-up to yesterday’s move, like the new PREPA power revenue bonds that are up as much as 2 3/8 points.”
Wilmington Trust: Recession 2020 unlikely
Wilmington Trust doesn’t expect to see a recession in 2020, according to the firm’s Chief Investment Officer Tony Roth.
“We believe that while there’s probably a 20% of a recession … we don’t expect to see a recession this year,” said Roth, who spoke at the firm’s 2020 capital markets forecast event in Manhattan on Wednesday.
From a market standpoint, the firm expects markets to continue to rise overall for the year with the possibility of volatility coming from the presidential election or geopolitical events.
“But we expect to see a decent year for markets,” Roth said, who said they were overweight equity assets right now.
“We see opportunities in municipal bonds, in some of the lower-tier credit ratings, but were are underweight there,” said Meghan Shue, head of investment strategy.
Previous session's activity
The MSRB reported 36,997 trades Tuesday on volume of $13.008 billion. The 30-day average trade summary showed on a par amount basis of $10.40 million that customers bought $5.49 million, customers sold $3.15 million and interdealer trades totaled $1.76 million.
New York, California and Texas were most traded, with the Empire State taking 14.563% of the market, the Golden State taking 13.506% and the Lone Star State taking 9.271%.
The most actively traded security was the Metropolitan Transportation Authority revenue bond anticipation notes 4s of 2022, which traded 38 times on volume of $60.54 million.
10-year auctioned
The Treasury Department auctioned $24 billion of 9-year 10-month notes with a 1 3/4% coupon at a 1.869% high yield, a price of 98.933819.
The bid-to-cover ratio was 2.45.
Tenders at the high yield were allotted 26.93%. All competitive tenders at lower yields were accepted in full.
The median yield was 1.820%. The low yield was 1.700%.
Chip Barnett and Gary E. Siegel contributed to this report.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.
