Municipal bond buyers saw the last of the week’s big deals come to market, led by a tax-exempt sale from the Port Authority of New York and New Jersey, a green bond deal from the New York MTA and a taxable sale from Connecticut.
The municipal market struggled unsuccessfully to maintain Wednesday’s strength amid a flat secondary market, according to Florida trader. “It’s not the same euphoric feeling we had yesterday,” he said Thursday morning, following a day where yields were as much as three basis points lower between one and 30 years.
“The catalyst for a lot of the strength yesterday was the rate rally in Treasuries, and munis followed that, but today as stocks have a bid to them and bonds are giving back gains from yesterday,” he said. “Today, for the muni rally to continue we would need more gains in the rate space, and with Treasuries selling off there’s no encouragement for that,” he continued. “Munis are trying their best not to follow on the downside movement.”
He described the secondary market in early trading as having no strength or weakness — and the tone as “flat to maybe a basis point weaker. There’s really no urgency amongst the secondary to hit bids, but there is a little give in prices as the day has progressed."
Overall, he said the municipal market is trading in a tight rate band and narrow range. “It takes big catalysts, such as a rally in the Treasury space or rate space or significant customer selling, to encourage some sort of change in directionality in the municipal market,” he explained.
Primary market
Citigroup priced and rerpriced the Port Authority of New York and New Jersey’s $400 million of 211th Series of consolidated bonds.
The deal is rated Aa3 by Moody’s Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.
JPMorgan Securities priced the New York Metropolitan Transportation Authority’s $206.785 million of Series 2018B transportation revenue refunding climate bond certified green bonds.
The deal is rated A1 by Moody’s, A by S&P, AA-minus by Fitch and AA-plus by Kroll Bond Rating Agency.
Siebert Cisneros Shank & Co. priced Connecticut’s $250 million of Series 2018A taxable general obligation bonds.
The deal is rated A1 by Moody’s, A by S&P, A-plus by Fitch and AA-minus by Kroll.
Citi received the written award on the Allegheny County Hospital Development Authority, Pa.’s $943.365 million of Series 2018A revenue bonds for the Allegheny Health Network Obligated Group.
The deal is rated A by S&P.
Bank of America received the official award on the Louisiana Public Facilities Authority’s $182.07 million of hospital revenue bonds for the Louisiana Children's Medical Center Project, which consisted of: Series 2015A1 remarketed in fixed-rate mode, Series 2015A2 remarketed in term-rate mode and Series 2015A3 remarketed in term rate mode.
The deal is rated A-plus by S&P.
Thursday’s sales
New York
Connecticut
Louisiana
Pennsylvania
Bond Buyer 30-day visible supply at $6.91B
The Bond Buyer's 30-day visible supply calendar decreased $7.83 billion to $6.91 billion for Thursday. The total is comprised of $2.47 billion of competitive sales and $4.44 billion of negotiated deals.
Secondary market
Municipal bonds were mostly stronger on Thursday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields fell as much as one basis point in the five- to 30-year maturities, rose as much as two basis points in the one-to three-year maturities and were unchanged in the four-year maturity.
High-grade munis were mostly stronger, with yields calculated on MBIS’ AAA scale falling as much as one basis point in the one-year and five- to 30-year maturities and rising less than a basis point in the two- to four-year maturities.
Municipals were steady on Municipal Market Data’s AAA benchmark scale, which showed the yields on both the 10-year muni general obligation and the 30-year muni maturity remaining unchanged.
Treasury bonds were weaker as stock prices rose.
On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 85.2% while the 30-year muni-to-Treasury ratio stood at 99.5%, 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.
Previous session's activity
The Municipal Securities Rulemaking Board reported 42,159 trades on Wednesday on volume of $19.15 billion.
California, Texas and New York were the municipalities with the most trades, with Golden State taking 19.277% of the market, the Lone Star State taking 10.93% and the Empire State taking 9.347%.
ICI: Long-term muni funds saw $723M inflow
Long-term tax-exempt municipal bond funds saw an inflow of $723 million in the week ended Aug. 8, the Investment Company Institute reported.
This followed an inflow of $164 million into the tax-exempt mutual funds in the week ended Aug. 1 and inflows of $600 million, $1.765 billion, $1.028 billion, $356 million, $525 million, $742 million, $326 million, and $648 million, in the eight prior weeks.
Taxable bond funds saw an estimated inflow of $6.135 billion in the latest reporting week, after seeing an inflow of $5.682 billion in the previous week.
ICI said the total estimated inflows to long-term mutual funds and exchange-traded funds were $3.294 billion for the week ended Aug. 8 after inflows of $465 million in the prior week.
Tax-exempt money market funds saw outflows
Tax-exempt money market funds saw outflows of $1.35 billion, lowering total net assets to $128.81 billion in the week ended Aug. 13, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $1.33 billion to $130.16 billion in the prior week.
The average, seven-day simple yield for the 201 weekly reporting tax-exempt funds rose to 0.96% from 0.80% the previous week.
The total net assets of the 832 weekly reporting taxable money funds fell $8.98 billion to $2.688 trillion in the week ended Aug. 14, after an inflow of $25.20 billion to $2.697 trillion the week before.
The average, seven-day simple yield for the taxable money funds increased to 1.57% from 1.56% from the prior week.
Overall, the combined total net assets of the 1,033 weekly reporting money funds fell $10.33 billion to $2.816 trillion in the week ended Aug. 14, after inflows of $23.87 billion to $2.827 trillion in the prior week.
Treasury announces auction details
The Treasury Department announced these auctions:
- $14 billion of four-year eight-month TIPs selling on Aug. 23;
- $45 billion of 182-day bills selling on Aug. 20; and
- $51 billion of 92-day bills selling on Aug. 20.
Gary Siegel contributed to this report.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.
