Municipal bonds will come priced aggressively in the primary in the coming week even though volume is expected to rise, market participants said.
This is because municipal bonds are following Treasuries which continue to strengthen. Total volume next week is scheduled to come in at $6.3 million, up from $4.88 billion in the past week.
Even though the bonds priced will be expensive, investors will still go in on the deals, traders said.
"You want anything you can get your hands on these days," a trader in New York said.
This past week the market's strengthening allowed deals that came to market to reprice at lower yields. The $450 million L.A. Water and Power deal was able to lower yields on some maturities as much as 10 basis points during its repricing on Thursday. Yields on the L.A. bonds had already been lowered from two to three basis points from the bonds retail order period the day before their institutional pricing.
The $437 million Cypress-Fairbanks Independent School District also dropped its yields, lowering them by as much as eight basis points on some bonds.
Investors said buyers' high demand for munis is shown best in the municipal mutual fund flows, which more than tripled, according to the latest report from Lipper FMA. Inflows surged to $762.2 million for the week ending Oct. 8 from $236.5 million the previous week.
Assets of all weekly reporting municipal funds rose to $313 billion from $311.8 billion the week before. The four-week moving average inflow grew to $446 million from $373 million.
Inflows for long-term muni funds increased too, totaling $441.7 million from $119.1 million previously.
Long-term municipal mutual fund assets rose to $164.5 billion from $163.7 billion last week. The four-week moving average of the long-term fund was an inflow of $244.8 million, up from $200.1 million last week.
High yield fund inflows jumped to $259.9 million from $170.91 million the week before. Assets increased to $475.7 billion from $472.3 billion. The four-week moving average was $198.4 million, up from $192.4 million.
Municipal bonds strengthened on Friday with yields for bonds maturing in four years falling by as much as one basis point, according to data provided by Municipal Market Data. They fell by as much as two basis points for bonds maturing in five to 10 years, up to one basis point for bonds maturing in 11 to 14 years, and by as much as two basis points for bonds maturing in 15 to 20 years.Bonds maturing in 21 to 30 years strengthened by as much as one basis point.
Treasuries strengthened on Friday with the 10-year falling by three basis points to 2.31%, and the 30-year dropping three basis points to 3.04%. The two-year note fell by one basis point to 0.45%.
