Municipal market traders and investors will get a bump up in issuance in the coming week, which they will welcome, as demand has been strong for weeks with little issuance to show for it.
Ipreo estimates volume will increase to $7.32 billion, from a revised total of $5.10 billion in the past week, according to updated figures from Thomson Reuters. The calendar for the week ahead is composed of $6.75 billion of negotiated deals and $569 million of competitive sales.
There are no competitive deals larger than $100 million and there are more taxable bonds scheduled than competitive tax-exempt deals.
"There is definitely a little something for everyone on the calendar next week," said Dawn Mangerson, managing director and senior portfolio manager at McDonnell Investment Management. "Demand has not been lacking, so the slight increase in volume will be a good thing."
The Commonwealth of Massachusetts is set to come with two separate sales totaling $1.08 billion in general obligation, state revolving fund and refunding bonds.
Citi is scheduled to price the larger offering, $778 million of GO green refunding bonds on Thursday. It is anticipated that the deal will be broken down into $400 million of 2017 Series A GO bonds maturing serially from 2032 through 2047, $100 million of Series B green bonds maturing serially from 2023 through 2047and $278 million of Series C refunding bonds maturing serially from 2017 through 2027. The deal is rated Aa1 by Moody's Investors Service and AA-plus by S&P Global Ratings and Fitch Ratings.
"Green bonds are still being floated out there regularly, but there is no big difference in valuation as they are still trading similarly to non-green bonds," Mangerson said. "There is definitely a growing market, but I think we need to flesh out the rules as it continues to increase."
Bank of America Merrill Lynch is expected to price the Bay States' other deal, $305 million of state revolving fund green and refunding bonds, on Wednesday after a one day retail order period. This deal is rated triple-A by Moody's, S&P and Fitch.
BAML is also pricing the New Jersey Health Care Facilities Financing Authority's $620 million of revenue and refunding bonds for the Hackensack Meridian Health Obligated Group on Wednesday.
BAML is slated to price the state Public Works Board of California's $537 million of lease revenue refunding bonds on Thursday, after a one day retail order period. The deal is rated A1 by Moody's and A-plus by S&P and Fitch.
"In general, there is lots of interest for yield," Mangerson said. "The front end of the curve has outperformed, the muni curve has steepened and the Treasury curve has flattened; five years and in is looking pretty rich."
Secondary Market
Top-shelf municipal bonds finished weaker on Friday. The yield on the 10-year benchmark muni general obligation rose one basis point to 2.25% from 2.24% on Thursday, while the 30-year GO yield increased two basis points to 3.05% from 3.03%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were stronger on Friday. The yield on the two-year declined to 1.25% from 1.28% on Thursday, while the 10-year Treasury yield dipped to 2.40% from 2.42%, and the yield on the 30-year Treasury bond decreased to 3.02% from 3.03%.
The 10-year muni to Treasury ratio was calculated at 93.9% on Friday compared with 92.7% on Thursday, while the 30-year muni to Treasury ratio stood at 101.0%, versus 100.1%, according to MMD.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended March 31 were from Connecticut, California and Massachusetts,
In the GO bond sector, the Connecticut 4s of 2037 were traded 87 times. In the revenue bond sector, the San Jose Airport 5s of 2041 were traded 44 times. And in the taxable bond sector, the Illinois 5.1s of 2033 were traded 20 times.
Week's Most Actively Quoted Issues
Puerto Rico, California and Chicago names were among the most actively quoted bonds in the week ended March 31, according to Markit.
On the bid side, the Puerto Rico Commonwealth Aqueduct and Sewer Authority revenue 5.25s of 2042 were quoted by 69 unique dealers. On the ask side, the California Health Facilities Financing Authority revenue 4s of 2042 were quoted by 218 unique dealers. And among two-sided quotes, the Chicago taxable 6.314s of 2044 were quoted by 18 unique dealers.
Lipper: Muni Bond Funds Report Inflows
Investors in municipal bond funds continued to put cash back into the funds in the latest week, according to Lipper data released late Thursday.
The weekly reporters saw $265.041 million of inflows in the week ended March 29, after inflows of $173.473 million in the previous week.
The four-week moving average was in the green at positive $61.827 million, after being in the red at negative $90.990 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 also had inflows, gaining $251.561 million in the latest week after rising $251.521 million in the previous week. Intermediate-term funds had outflows of $15.992 million after outflows of $18.088 million in the prior week.
National funds had inflows of $358.965 million after inflows of $196.828 million in the previous week. High-yield muni funds reported inflows of $277.761 million in the latest reporting week, after inflows of $222.906 million the previous week.
Exchange traded funds saw inflows of $141.468 million, after inflows of $118.730 million in the previous week.
