The municipal market started the week like gangbusters, but Thursday’s primary action was a dud.
With the four-day holiday shortened week approaching, the market only saw a handful of deals sell with even one offering getting pulled at the last moment.
“It was eerily quiet today, but with a holiday right around the corner it is not surprising,” said one New York trader. “The primary was like a ghost town today, the secondary was where all the action was.”
BofA Securities originally put out a preliminary pricing wire on the Metropolitan Water District of Southern California’s ( /AA+/AA+/ ) $153.45 million of subordinate water revenue refunding bonds around 11 a.m. ET but as of 12:42 p.m., the deal was pulled back. BofA had no comment as to why the deal was pulled.
White Bear Lake Independent School District No. 642, Minnesota (NR/AAA/NR/NR) competitively sold $250 million of general obligation school building bonds, which were won by Citigroup with a true interest cost of 2.4262%.
Oakland, Calif., (Aa1/AA/NR/NR) competitively sold of $249.535 million of general obligation and taxable refunding GO bonds in two sales.
Wells Fargo won the $109.435 million taxable transaction with a TIC of 1.9847% while Citi won the $140.1 million tax-exempt transaction with a TIC of 2.4756%.
The biggest deals of the week, Grand Parkway Transportation Corp.’s $793.39 million of tax-exempts and $1.51 billion of taxables, saw robust trading in the secondary market.
The 2050 exempt maturity, originally priced as 3s to yield 2.68%, saw 14 trades on Thursday with a high yield of 2.657%, a low yield of 2.433%, an average of 2.621%. On Wednesday, the 3s of 2050 saw 41 trades with a high yield of 2.68%, a low of 2.65%, an average of 2.675%. According to MMD, the 2050 maturity was trading on average 78.8 basis points above the MMD scale.
The $1 billion New York City GO pricing offered the city a significant yield savings from a September issue, as it was finalized 19 basis points lower in yield in the 15-year range. Upcoming supply such as from the District of Columbia and Massachusetts is likely to come with similar results.
Secondary activity is following suit, and not just in the upper investment-grade range. Illinois GOs have moved materially tighter in recent months — trading in a 5% due 2028 has gone from +153/AAA BVAL to more recent prints at +100/AAA BVAL.
Munis were mixed on Wednesday on the MBIS benchmark scale, with yields rising by six basis points in the 10-year and falling by one basis point in the 30-year maturity. High-grades were weaker with yields on MBIS AAA scale increasing by eight basis points in the 10-year maturity and by one basis point in the 30-year maturity.
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10-year GO and 30-year GO were unchanged from 1.19% and 1.84%, respectively.
The 10-year muni-to-Treasury ratio was calculated at 73.6% while the 30-year muni-to-Treasury ratio stood at 88.8%, according to MMD.
Stocks erased earlier loses after a morning slump on reports of a new method of diagnosing COVID-19 cases results in a rise of reported infections rose to 59,804 and the death total jumping to 1,362. Treasury yields were mixed.
The Dow Jones Industrial Average was down about 0.28%, the S&P 500 index was little changed and up 0.03% and the Nasdaq fell about 0.03%.
The 3-month Treasury was yielding 1.556%, the Treasury two-year was yielding 1.448%, the five-year was yielding 1.439%, the 10-year was yielding 1.620% and the 30-year was yielding 2.072%.
Muni money market funds see outflows
Tax-exempt municipal money market fund assets decreased by $628.9 million, lowering their total net assets to $135.76 billion in the week ended Feb. 10, according to the Money Fund Report, a publication of Informa Financial Intelligence.
The average seven-day simple yield for the 187 tax-free and municipal money-market funds increased to 0.62% from 0.59% in the previous week.
Taxable money-fund assets gained $12.39 billion in the week ended Feb. 11, bringing total net assets to $3.443 trillion. The average, seven-day simple yield for the 803 taxable reporting funds was unchanged from 1.26% the prior week.
Overall, the combined total net assets of the 990 reporting money funds increased $11.76 billion to $3.579 trillion in the week ended Feb. 11.
Muni CUSIP request surge 35.2%
Year-over-year request volume for the aggregate total of all municipal securities — including municipal bonds, long-term and short-term notes, and commercial paper — rose 26.6% versus January 2019 and muni bonds alone were up 35.2%, according to CUSIP global services.
However, on a month-over-month basis, total municipal CUSIP request volume for January 2020 was down 5.5% compared to December 2019.
“So far this year, we’re starting to see pockets of very strong CUSIP request volume emerge in specific asset classes, most notably in corporate debt,” said Gerard Faulkner, director of operations for CUSIP Global Services. “There is some volatility in the data, however, with other asset classes such as international debt and equity and some municipal categories still making big month-to-month moves.”
The CUSIP issuance trends report tracks the issuance of new security identifiers as an early indicator of debt and capital markets activity over the next quarter.
Majority of Bond Buyer indexes slip
The weekly average yield to maturity of the Bond Buyer Municipal Bond Index, which is based on 40 long-term bond prices, was unchnaged from 3.52% the week before.
The Bond Buyer’s 20-bond GO Index of 20-year general obligation yields was lower by two basis points to 2.51% from 2.53% the week before.
The 11-bond GO Index of higher-grade 11-year GOs decreased two basis points to 2.04% from 2.06% the prior week.
The Bond Buyer’s Revenue Bond Index was down two basis points to 3.01% from 3.03% from the previous week.
The yield on the U.S. Treasury’s 10-year note dipped to to 1.62% from 1.64% the week before, while the yield on the 30-year Treasury fell to 2.07% from 2.11%
Previous session’s activity
The MSRB reported 32,887 trades Wednesday on volume of $16.477 billion. The 30-day average trade summary showed on a par amount basis of $11.68 million that customers bought $5.91 million, customers sold $3.83 million and interdealer trades totaled $1.94 million.
Texas, California and New York were most traded, with the Lone Star State taking 18.673% of the market, the Golden State taking 11.592% and the Empire State taking 11.498%.
The most actively traded security was the Puerto Rico Commonwealth GO, 8s of 2035, which traded 32 times on volume of $107 million.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.