Muni Update

September 30, 2019


In this week’s Municipal Market Update, we highlight the following:


Municipal Market Recap

Municipal prices strengthened across the curve on Monday and Tuesday. On Wednesday prices were steady across the curve. On Thursday prices were mixed, as the front-end was steady, while bonds maturing 10 years and longer weakened. On Friday municipal prices were once again steady across the curve. Issuance for the trading week is forecasted to be $9.26B, which is above last week’s revised total of $6.03B in new-issue paper that came to market. This week’s projected issuance, together with secondary market opportunities should provide market participants with a number of opportunities, especially given the continued strong demand in the municipal market. Driving this strong demand in the municipal market is the continuing combination of high redemption flows and inflows into municipal bond mutual funds, which continues to be strong at this time.

Investors in municipal bond funds put cash into funds for a 38th week, as weekly reporting funds experienced inflows of $1.637B, after experiencing inflows of $209.318MM the week prior. The four-week moving average was a positive $899.269MM, after being a positive $873.824MM the week prior. Investors still facing low or negative rates overseas continue to find higher-yielding U.S. assets attractive, especially since municipal bonds are off to their best start in five years. Municipal securities have been bolstered by low supply and strong demand. All these factors, should have both traditional and non-traditional market participants continuing to look for opportunities in the U.S. municipal market.

Last week the yields on the two-, 10-, and 30-year maturities on the MMD Triple-A Scale were unchanged from Thursday to Friday and they ended the week at 1.22%, 1.42%, and 2.01%, respectively. Overall, week-over-week the yield on the two-year General Obligation (GO) bond fell three basis points (bps), while the yield on the 10-year GO bond fell five bps and the yield on the 30-year GO bonds fell six bps.

Last week the yields on the two- and 30-year maturities on the MMA Triple-A Scale were unchanged from Thursday to Friday and they ended the week at 1.19% and 2.19%, respectively. Meanwhile the yield on the 10-year maturity on the MMA Triple-A Scale rose one bp from Thursday to Friday and ended the week at 1.57%. Overall, week-over-week the yields on the two- and 10-year GO bonds each fell four bps, while the yield on the 30-year GO bonds fell five bps.


New-Issue Volume is Forecasted to Be Just Over $9.26B for Trading Week

Total new issuance for the coming trading week per IHS Markit Ipreo is estimated to be $9.26B, which is up from a revised total of $6.03B in new issue paper that came to market last week. This week’s trading calendar consists of $7.04B of negotiated deals and $2.22B of competitive offerings. There are 29 deals scheduled that are $100.0MM or larger in par, with seven of them being competitive offerings.

The largest deal of the week will be New York City’s $850.0MM negotiated offering of GO bonds on Thursday. Also on Thursday New York City will competitively offer $150.0MM of taxable GO bonds. The deals are rated Aa1 by Moody’s Investors Service (Moody’s) and AA by Standard and Poor’s Global Ratings (S&P) and Fitch Ratings (Fitch). Also on Thursday the Maryland Department of Housing and Community Development plans to offer $350.0MM of residential revenue bonds, featuring tax-exempt, non-alternative minimum tax (Non-AMT), and taxable bonds. The deal is rated Aa2 by Moody’s and AA by Fitch.

The State of Wisconsin plans to offer $330.005MM of taxable GO refunding bonds on Tuesday. The deal is rated Aa1 by Moody’s and AA by S&P. On Wednesday, the Massachusetts Department of Transportation plans to price $491.5MM of metropolitan highway system revenue refunding senior bonds. The deal is rated A2 by Moody’s, and A+ by S&P and Fitch.

The largest competitive deal of the week will come from the Maryland Department of Transportation, which plans to price $490.0MM of consolidated transportation bonds on Wednesday. The deal is rated Aa1 by Moody’s, AAA by S&P, and AA+ by Fitch.


Municipal Bond Funds Post Inflows for a 38th Week

Investors in municipal bond funds put cash into funds for a 38th week, as weekly reporting funds experienced inflows of $1.637B in the latest week, after experiencing inflows of $209.318MM the week prior. This marks the eighth time in the past 12 weeks that inflows have exceeded $1.0B and the first time in four weeks. The four-week moving average was a positive $899.269MMB, after being a positive $873.824B the week prior.

Long-term municipal bond funds had inflows of $ 1.516B in the latest week after experiencing inflows of $3.242MM the week prior. Intermediate-term funds had inflows of $267.395MM after inflows of $26.324MM in the week prior. National funds had inflows of $1.386B after experiencing inflows of $147.277MM the week prior. High-yield municipal funds reported outflows of $427.837 in the latest week, after outflows of $166.757MM the week prior week. Exchange traded funds reported inflows of inflows of $275.726MM after inflows of $97.611MM the week prior.


Demand in the Bank Qualified (BQ) Market Remains Strong

BQ market participants expect demand to continue to outpace supply again this week and therefore will focus on opportunities in both the primary and secondary markets. BQ participants continue to have significant demand for municipal paper due in large part to having to replace rolloffs due to redemptions. BQ participants continue to find attractive opportunities, both in size and structure in both BQ and in general market paper, due in part to the lower tax rates from tax reform and attractive yields.

We continue to encourage participants to look at credit clean-up of their portfolio in this current environment. Week-over-week, bank qualified spreads widened across the curve, with the largest widening occurring in the one-year maturity, seven bps.


Daily Overview of the General Market for the Week Ending September 27th

Last Monday prices on municipals strengthened, as the first of the week’s major deals came to market. On the day, the yield on the two-year GO bond fell two bps, while the yield on the 10-year GO bond fell four bps and the yield on the 30-year GO bond fell five bps, according to the final read of the MMD Triple-A Scale.

Prices on U.S. Treasurys also strengthened, as U.S. stocks were mixed for the session. The Dow and S&P were relatively unchanged on the day, while the NASDAQ 0.06%, respectively. On the day, the yields on the two- and 30-year maturities each fell one bp, while the yield on the 10-year maturity fell two bps. The 10-year municipal-to-Treasury ratio fell to 83.1% on Monday from last Friday’s level of 84.5%, while the 30-year municipal-to-Treasury ratio fell to 93.5% Monday from last Friday’s level of 95.4%.

Last Tuesday prices on municipals strengthened again, as a number of deals came to market. On the day, the yield on the two-year GO bond fell one bp, while the yield on the 10-year GO bond fell three bps and the yield on the 30-year  GO bond fell four bps, according to the final read of the MMD Triple-A Scale.

Prices on U.S. Treasurys strengthened, as U.S. stocks posted losses for the session. The Dow was down 0.53%, while the S&P was down 0.80% and the NASDAQ was down 1.50%. The yields on the two- and 10-year maturities each fell eight bps, while the yield on the 30-year maturity fell seven bps. The 10-year municipal-to-Treasury ratio rose to 85.4% on Tuesday from Monday’s level of 83.1%, while the 30-year municipal-to-Treasury ratio rose to 94.7% on Tuesday from Monday’s level of 93.5%.

Last Wednesday municipal prices were steady, as once again a number of new issue offerings came to market. On the day, the yields on the two-, 10-, and 30-year GO bonds were unchanged, according to the final read of the MMD Triple-A Scale.

Prices on U.S. Treasurys weakened, as U.S. stocks posted gains for the session. The Dow rose 0.61%, while the S&P rose 0.60% and the NASDAQ rose 1.05%. On the day, the yield on the two-year maturity rose eight bps, while the yields on the 10- and 30-year maturities each rose nine bps. The 10-year municipal-to-Treasury ratio fell to 80.9% on Wednesday from Tuesday’s level of 85.4%, while the 30-year municipal-to-Treasury fell to 90.8% on Wednesday from Tuesday’s level of 94.7%.

Last Thursday prices on municipals were mixed, as the last of the week’s offerings came to market and were easily digested, as demand continues to outpace supply. On the day, the yield on the two-year GO was unchanged, while the yield on the 10-year GO bond rose two bps and the yield on the 30-year GO bond rose three bps, according to the final read of the MMD Triple-A Scale.

U.S. Treasury prices strengthened, as U.S. stocks fell for the. The Dow was down 0.30%, while the S&P was down 0.24% and the NASDAQ fell 0.58%. On the day, the yield on the two-year GO bond fell two bps, while the yields on the 10- and 30-year maturities each fell three bps. The 10-year municipal-to-Treasury ratio rose to 83.5% on Thursday from Wednesday’s level of 80.9%, while the 30-year municipal-to-Treasury ratio rose to 93.5% on Thursday from Wednesday’s level of 90.8%.

On Friday prices on municipals were steady, as market participants were looking ahead to the coming trading week’s $9.26B in new long-term debt offerings. On the day, the yields on the two-, 10-, and 30-year GO bonds were unchanged, according to the final read of the MMD Triple-A Scale.

U.S. Treasury prices finished the day stronger, as U.S. stocks posted losses for the session. The Dow was down 0.26%, while the S&P and the NASDAQ fell, 0.53% and 01.13%, respectively. On the day, the yield on the two-year maturity fell three bps, while the yield on the 10-year maturity fell one bp and the yield on the 30-year GO bond fell two bps. The 10-year municipal-to-Treasury ratio rose to 84.0% on Friday from Thursday’s level of 83.5%, while the 30-year municipal-to-Treasury ratio rose 94.4% on Friday from Thursday’s level of 93.5%.


Taxable Market






Dennis Porcaro

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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