Municipal volume is set to plunge in the coming week as the market takes time off for Veterans Day after the Presidential election..
Primary Market
Volume for the week ending Nov. 11 is forecast by Ipreo to sink down to $3.12 billion, from a total of $6.31 billion in the past week, according to revised data from Thomson Reuters. The upcoming slate is composed of $2.36 billion of negotiated bond deals and $758 million of competitive bond sales.
"Tuesday is the election, but it will be important not only who wins the presidential election but also the House and the Senate," said Ron Schwartz, portfolio manager of the RidgeWorth Seix investment grade tax-exempt municipal bond fund. "It is certainly understandable there is limited issuance next week given the events on the calendar."
The market is closed for Veterans Day on Nov. 11. The light calendar features only 10 deals of $100 million or more and the largest deal of the week is just $348 million.
Bank of America Merrill Lynch is expected to price the Chesapeake Bay Bridge and Tunnel District, Va.'s $348 million of first tier general resolution revenue bonds on Tuesday. The deal is rated Baa2 by Moody's Investors Service and BBB by S&P Global Ratings.
Morgan Stanley is slated to run the books on the state of Mississippi's $226.56 million of general obligation bonds on Wednesday.
Stifel is on the docket to price Sacramento Area Flood Control Agency, Ca.'s $220 million of consolidated capital assessment district No. 2 assessment revenue bonds on Wednesday. The deal is rated Aa3 by Moody's and AA by S&P.
There were only two competitive deals scheduled as of press time that exceed $100 million. The first will take place on Monday, when Pasadena, Ca. plans to sell $122.07 million of electric revenue and refunding bonds. The deal is rated AA-minus by S&P and AA by Fitch Ratings.
Sequoia Union High School District, Ca. will be selling $120 million of GO election of 2014 bonds on Thursday. The deal is rated Aa1 by Moody's and AA by S&P.
"This past week munis outperformed pretty strongly and if the global market doesn't get shaken up too badly next week, I think they will continue to outperform, as there is enough demand versus the supply," Schwartz said. "We have reasonable supply and if we can get through the election with no major events, I think it could be smooth sailing and perhaps the following week we will see an increase in issuance."
Secondary Market
Top shelf municipal bonds ended stronger on Friday, traders said.
The yield on the 10-year benchmark muni general obligation fell one basis point to 1.69% from 1.70% on Thursday, while the yield on the 30-year dropped one basis point to 2.52% from 2.53%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were also stronger on Friday after the jobs report for October came in weaker than expected. Non-farm payrolls rose 161,000 last month; economists surveyed by IFR Markets had predicted a gain of 175,000 jobs. The October unemployment rate fell to 4.9% from 5.0%, in line with analysts' forecasts.
The yield on the two-year declined to 0.80% from 0.81% on Thursday, the 10-year Treasury dropped to 1.79% from 1.82% and the yield on the 30-year Treasury bond decreased to 2.57% from 2.61%.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Nov. 4 were from Puerto Rico, New York & New Jersey and Texas,
In the GO bond sector, the Puerto Rico Commonwealth 8s of 2035 were traded 20 times. In the revenue bond sector, the Port Authority of New York & New Jersey 5.25s of 2056 were traded 64 times. And in the taxable bond sector, the New Hope Cultural Education Facilities Finance Corp., Texas, 4.032s of 2014 were traded 19 times.
Week's Most Actively Quoted Issues
Minnesota, Ohio and New Jersey issues were among the most actively quoted bonds in the week ended Nov. 4, according to Markit.
On the bid side, the Minneapolis & St. Paul Metropolitan Airports Commission revenue 5s of 2021 were quoted by 120 unique dealers. On the ask side, the Ohio Higher Educational Facilities Commission revenue 3.25s of 2034 were quoted by 279 unique dealers. And among two-sided quotes, the New Jersey Economic Development Authority revenue 2.421s of 2018 were quoted by 19 unique dealers.
Lipper: Muni Bond Funds See Outflows
Municipal bond funds said investor money once again made an about-face and left the market, according to Lipper data released on Thursday.
The weekly reporters saw $323.644 million of outflows in the week ended Nov. 2, after inflows of $334.917 million in the previous week.
The four-week moving average barely remained positive at $5.662 million after being in the green at $167.723 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 experienced outflows, losing $297.795 million in the latest week after inflows of $216.109 million in the previous week. Intermediate-term funds had outflows of $35.461 million after inflows of $90.083 million in the prior week.
National funds had outflows of $264.054 million after inflows of $337.143 million in the previous week. High-yield muni funds reported outflows of $191.896 million in the latest reporting week, after inflows of $33.092 million the previous week.
Exchange traded funds saw inflows of $14.713 million, after inflows of $79.104 million in the previous week.
