Prices of top-rated municipal bonds were stronger at mid-session, traders said, as yields on some maturities weakened by as much as two basis points.
The municipal bond market is looking ahead to next week's $6.3 billion new-issue calendar, which features deals from Michigan, New York, Texas and Virginia.
Secondary Market
The yield on the 10-year benchmark muni general obligation was off as much as one basis point from 2.21% on Thursday, while the yield on the 30-year GO was down by as much as two basis points from 3.16%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were mixed on Friday, with the yield on the two-year Treasury note falling to 0.68% from 0.69% on Thursday, while the 10-year yield fell to 2.27% from 2.28% and the 30-year yield remaining at 2.98%.
The 10-year muni to Treasury ratio was calculated on Thursday at 97.2% versus 96.6% on Wednesday, while the 30-year muni to Treasury ratio stood at 106.3% compared to 105.4%, according to MMD.
Primary Market
Volume for next week is estimated at $6.32 billion, consisting of $5.12 billion of negotiated deals and $1.20 billion of competitive sales.
Volume for this week came in at a revised total of $8.39 billion, consisting of $6.82 billion of negotiated deals and $1.56 billion of competitive sales, according to Thomson Reuters.
Topping the calendar, JPMorgan will price the Michigan State Building Authority's $990 million of Series 2015 I revenue and revenue refunding bonds on Thursday. The issue, tentatively structured as serials running from 2015 through 2050, is rated Aa3 by Moody's Investors Service, A-plus by Standard & Poor's and AA-minus by Fitch Ratings.
New York City's $750 million of Fiscal 2016 Series A&B general obligation bonds are set to be priced by Siebert Brandford Shank. A retail order period will be held on Tuesday and Wednesday ahead of the institutional pricing on Thursday. The issue is rated Aa2 by Moody's and AA by S&P and Fitch.
Citigroup is expected to price San Antonio, Texas' $422 million of general improvement and refunding combination tax and revenue certificates of participation. The issue is tentatively structured as $43 million of taxables due 2016 to 2035 and $379 million of tax-exempts due 2016 to 2035. The bonds, which are set to be priced on Tuesday, are rated triple-A by Moody's, S&P and Fitch.
Citi is also slated to price the New York City Industrial Development Agency's special facilities revenue bonds for American Airlines. The deal, which has a one-year hard put, is expected to be priced on Wednesday.
On Wednesday's competitive slate, Columbus, Ohio, is coming to market with nearly $319 million of bonds in three separate sales, consisting of $230.66 million of Series 2015A unlimited tax various purpose bonds, $74.69 million of Series 2015B limited tax various purpose bonds, and $13.64 million of Series 2015C taxable limited tax various purpose bonds. The issue is rated triple-A by Moody's, S&P and Fitch.
On Tuesday, the Virginia College Building Authority is selling $290 million of Series 2015D educational facilities revenue bonds under the 21st Century College and Equipment Program on Tuesday. The issue is rated AA-plus by Fitch.
The last time the authority competitively sold comparable bonds was on May 1, 2014, when Bank of America Merrill Lynch won $27.99 million of Series 2014B educational facilities revenue refunding bonds with a true interest cost of 1.70%.
Also on Tuesday, Fort Worth, Texas, is selling $256 million of bonds in two separate sales, consisting of $128.39 million of Series 2015A general purpose refunding and improvement bonds and $127.63 million of Series 2015A water and sewer system revenue refunding and improvement bonds. The general purpose bonds are rated Aa1 by Moody's and AA-plus by S&P and Fitch and the water bonds are rated Aa1 by Moody's and AA by S&P and Fitch.
Back in the Black: Municipal Bond Funds See Inflows
For the first time in 12 weeks, municipal bond funds reported cash inflows.
The weekly reporting funds saw $125.410 million of inflows in the week ended July 22, after seeing outflows of $29.255 million in the previous week, according to the latest Lipper data.
This brings to 16 out of 30 weeks this year that the funds have seen cash infusions. For the year to date, muni bond funds have attracted a net inflow of $3.334 billion.
The four-week moving average remained negative at $352.090 million after being in the red at $409.882 million in the previous week. The moving average has now been negative for nine weeks in a row. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds also experienced inflows, gaining $39.114 million in the latest week, after seeing inflows of $34.223 million in the previous week. Intermediate-term funds again recorded inflows, of $152.569 million after seeing inflows of $20.109 million in the prior week.
And exchange traded funds saw inflows of $108.499 million, after experiencing inflows of $45.314 million in the previous week.
High-yield muni funds, however, saw outflows of $3.550 million in the latest reporting week, after seeing an inflow of $14.513 million the previous week. In the past 12 weeks, high-yield funds have seen outflows nine times totaling $1.707 billion and inflows three times totaling $78.785 million.
"Negative returns and the flight from Puerto Rico have driven high-yield muni mutual fund outflows," Bank of America Merrill Lynch said in a recent report. "The correlation between the total return of high-yield index and fund flows is high."
Barclays Municipal Research also said in a report that it was concerned about high-yield muni fund flows, which it said may continue to be affected by Puerto Rico woes.
The Week's Most Actively Quoted Issues
Puerto Rico and California were some of the most actively quoted names in the week ended July 24, according to data released by Markit.
On the bid side, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 13 unique dealers. On the ask side, the California tax 7.55s of 2020 were quoted by 19 dealers. And among two-sided quotes, the Puerto Rico commonwealth GO 5 3/4s of 2041 were quoted by 19 dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues in the week ended July 24 were in Texas, Maryland, and California.
In the revenue bond sector, the Harris County, Texas, Cultural Educational Facilities Financing Corp.'s 4s of 2045 were traded 73 times. In the GO bond sector, the Maryland 3s of 2028 were traded 72 times. And in the taxable bond sector, the Vernon, Calif., electric system revenue 4.05s of 2023 were traded 20 times, according to Markit.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,431 trades on Thursday on volume of $12.346 billion.
The most active bond, based on the number of trades, was the New York City Fiscal 2012 Series F GO 5s of 2026, which traded 278 times at an average price of 115.257, an average yield of 0.525%. The bonds were initially priced at 119.09.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $150.3 million to $11.57 billion on Friday. The total is comprised of $4.18 billion competitive sales and $7.39 billion of negotiated deals.
