With few deals this week, all attention is on Fed

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The municipal bond market will see a week of meager issuance, as all eyes are on the Federal Open Market Committee and its meeting this week.

Secondary market
Municipal bonds were mostly stronger on Monday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields dropped less than one basis point in the four- to nine-year, 12- to 17-year and 26- to 30-year maturities. The 13 remaining maturities rose less than a basis point.

High-grade munis were also mostly stronger, with yields calculated on MBIS' AAA scale decreasing less than one basis point in the one- to nine-year, 13- to 16-year and 28- to 30-year maturities. The remaining 14 maturities saw yields higher by no more than one basis point.

Municipals were slightly stronger on Municipal Market Data’s AAA benchmark scale, which showed the yield on both the 10-year muni general obligation and the 30-year muni maturity lower by as much as one basis point.

On Friday, the 10-year muni-to-Treasury ratio was calculated at 83.3% while the 30-year muni-to-Treasury ratio stood at 101.3%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.

Primary market
There are only three negotiated deals on the calendar $100 million or larger, as this week is all about the FOMC and its last meeting of 2018, which is expected to conclude with another 0.25% interest rate hike.

Raymond James & Associates is expected to price the San Juan Unified School District, Sacramento County, Calif.’s $230 million of general obligation bonds on Tuesday. The deal is rated Aa2 by Moody’s Investors Service and AAA by Fitch Ratings.

Citigroup is expected to price on Tuesday the Allentown Neighborhood Improvement Zone Development Authority, Pa.’s $149 million of Series 2018 subordinate tax revenue bonds for the City Center project. The deal is unrated.

On Wednesday, Piper Jaffray is expected to price the Colorado Health Facilities Authority’s $136 million of improvement and refunding revenue bonds consisting of Series 2018A-1 for the Bethesda project, Series 2018A-2 taxable bonds and Series 2018B second tier bonds. The deal is rated A-minus by S&P Global Ratings.

There are no competitive deals on the calendar larger than $100 million. The biggest competitive sale of the week will be Stratford, Conn.’s offering on Wednesday of $70 million GOs, issue of 2018.

Previous session's activity
The Municipal Securities Rulemaking Board reported 40,674 trades on Friday on volume of $12.792 billion.

California, New York and Texas were the municipalities with the most trades, with the Golden State taking 18.156% of the market, the Empire State taking 12.168% and the Lone Star State taking 9.157%.

Treasury auctions discount rate bills
Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were mixed, as the $39 billion of three-months incurred a 2.375% high rate, unchanged from 2.375% the prior week, and the $36 billion of six-months incurred a 2.485% high rate, up from 2.480% the week before.

Coupon equivalents were 2.423% and 2.552%, respectively. The price for the 91s was 99.399653 and that for the 182s was 98.743694.

The median bid on the 91s was 2.360%. The low bid was 2.340%.

Tenders at the high rate were allotted 83.49%. The bid-to-cover ratio was 3.52.

The median bid for the 182s was 2.460%. The low bid was 2.435%.

Tenders at the high rate were allotted 41.78%. The bid-to-cover ratio was 3.13.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Ziad Saba at 212-803-6079 for more information.

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