Prices of top-shelf municipal bonds finished weaker on Friday, traders said, with yields on some maturities rising by as much as two basis points. Traders and other market participants are now turning their attention towards next week deals, in anticipation of some "chunkier" issues.
Municipal volume is estimated at $6.2 billion for the week of Sept. 28, according to Ipreo, compared with a revised total of $4.49 billion that came to market in the past week, according to Thomson Reuters.
"The market is chock full of various issuers coming with large sized issuance," a New York trader said. "Hopefully it will kick start the market and wake it up again, as it has been a little sleepy."
The primary market has seen only couple of large deals in each of the past few weeks, while medium and small deals were more plentiful. This week that trend will reverse.
"Muni issuance will grow but continue to be manageable this week," said Daniel Berger, Senior Market Strategist, Thomson Reuters/Municipal Market Data. Although the week will feature a slightly higher volume total, "it is still under the 2015 averaged issuance of $7.3 billion."
A total of 18 deals of at least $100 million are on the calendar, with the states of Connecticut and Washington leading the pack.
"We expect the new issue market to do reasonably well next week, as the secondary market seems to have thinned out a touch in terms of available supply," said Michael Pietronico, chief executive officer at Miller Tabak Asset Management.
Washington State will be selling a total of roughly $983.28 million which will be comprised of one negotiated offering and four competitive sales. On Monday the state will sell its first ever green bond, as Bank of America Merrill Lynch will be pricing the $39 million of various purpose general obligation green bonds, Series 2016A-2.
On Wednesday, the Evergreen State will be selling four competitive issues. There will be $60.71 million of GO taxable bonds, Series 2016T; $191.99 million of motor fuel tax GO bonds, Series 2016B; $193.77 million of various purpose GO refunding bonds, Series R-2016A; and $497.80 million of various purpose GO bonds, Series 2015A-1. All of the deals are rated Aa1 by Moody's Investors Service and AA-plus by Standard and Poor's and Fitch Ratings.
RBC Capital Markets will be pricing the State of Connecticut's $840 million of special tax obligation bonds for transportation infrastructure, Series 2015 A and Series 2015 B (the B series will be refunding bonds). This deal has a scheduled retail order period on Wednesday followed by institutional pricing on Thursday.
Barclays Capital is expected to price Miami-Dade Co.'s educational facilities authority's $650 million of revenue and revenue refunding bonds for the University of Miami on Wednesday. Tentatively, the deal is split up for $400 million of tax-exempt and $250 million of taxable, Series' 2015A and B.
RBC is also scheduled to price the State of Public Works Board of the California's $551.6 million of lease revenue refunding bonds, Series 2015 F and G. The retail order period is scheduled to take place on Monday, followed by institutional pricing on Tuesday.
Ramirez & Co., is slated to price the Massachusetts Bay Transit Authority's $279.77 million of senior sales tax bonds, Series 2015 A and B on Wednesday.
"We see a bias lately to stronger credits by institutional investors," said Pietronico. "The demand for each deal seems to be reflective of the market's perception of its credit quality. We see a bias lately to stronger credits by institutional investors."
Secondary Trading
The yield on the 10-year benchmark muni general obligation was one basis point stronger at 2.09% from 2.08% on Thursday, while the yield on the 30-year GO was two basis points stronger at 3.10% from 3.08%, according to the final read of Municipal Market Data's triple-A scale.
On Friday, Sept. 18, the yield on the 10-year muni stood at 2.14% while the yield on the 30-year muni was at 3.13%.
Treasury prices were also lower on Friday after Federal Reserve Chair Janet Yellen said she is ready to raise interest rates this year.
"Most of my colleagues and I anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year," she said Thursday in a speech in Amherst, Mass.
The yield on the two-year Treasury note rose to 0.69% from 0.68% on Thursday, while the 10-year yield climbed to 2.16% from 2.12% and the 30-year yield increased to 2.95% from 2.90%.
The 10-year muni to Treasury ratio was calculated on Friday at 96.5% versus 98.4% on Thursday, while the 30-year muni to Treasury ratio stood at 104.8% compared to 106.2%, according to MMD.
The Week's Most Actively Quoted Issues
New Jersey and Illinois were some of the most actively quoted names in the week ended Sept. 25, according to data released by Markit.
On the bid side, the New Jersey State Turnpike Authority taxable revenue 7.414s of 2040 were quoted by 13 unique dealers. On the ask side, the New Jersey Economic Development Authority revenue 4 1/4s of 2026 were quoted by 18 dealers. And among two-sided quotes, Illinois taxable 5.1s of 2033 were quoted by 20 dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues in the week ended Sept. 25 were in New York and California, according to Markit.
In the revenue bond sector, the New York City Transitional Finance Authority 5s of 2035 were traded 86 times. In the GO bond sector, the California 5s of 2045 were traded 66 times. And in the taxable bond sector, the Sacramento Public Financing Authority lease revenue 5.637s of 2050 were traded 22 times, Markit said.
