Muni yields static while $1.4 billion of cash rolls into funds

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Municipals were little changed on light trading Thursday as the last of the week’s large new issues priced while Refinitiv Lipper reported $1.4 billion of inflows into municipal bond mutual funds but showed small outflows from exchange-traded funds.

Triple-A municipal benchmark yields were little changed while U.S. Treasuries saw yields fall a basis point or two across the curve. Ratios held in a range Thursday with the municipal-to-Treasury ratios at 51% in five years, at 70% in 10 years and 79% in 30 years, according to Refinitiv MMD’s 3 p.m. read. ICE Data Services had the five-year at 51%, the 10 at 73% and the 30 at 80%.

The last of the week’s primary priced. Wells Fargo Corporate & Investment Banking priced for Mississippi (Aa2/AA/AA/) $1.225 billion of tax-exempt and taxable general obligation bonds. The $166.14 million of tax-exempt GOs, saw 5s of 10/2032 at 1.16%, 5s of 2036 at 1.24% and 4s of 2041 at 1.49%, callable in 10/1/2028. The $838.2 million of taxable refunding bonds, saw bonds priced at par: 1.226% in 2026, 1.637% in 2031, 2.068% in 2036, callable in 10/1/2031. The $126.82 million of taxables, priced at par: 1.226% in 2026, 1.637% in 2031 and 1.644% in 2032.

BofA Securities priced for the Dormitory Authority of the State of New York (Aa3//A+/) $336 million of taxable and tax-exempt State University of New York dormitory facilities revenue bonds. The taxables, $245.485 million, priced at par: 0.644% in 7/2023, 1.591% in 2026, 2.384% in 2031, 2.784% in 2036, 2.873% in 2041, and 2.973% in 2048, subject to a make-whole redemption.

The exempts, $90.516 million, saw 5s of 7/2028 at 1.06%, 5s of 2031 at 1.39%, 4s of 2036 at 1.78%, 3s of 2041 at 2.29%, and 3s of 2045 at 2.44%, callable in 7/1/2032.

In the competitive market, the San Francisco Public Utilities Commission (Aa2/AA//) sold $218.355 million of green wastewater revenue notes (climate bond certified, Sustainalytics verified) to J.P. Morgan Securities. The notes mature in 10/2025 with a 1% coupon to yield 0.73%, callable in 7/1/2025.

The issuer also sold $127.91 million of green wastewater revenue notes (climate bond certified, Sustainalytics verified) to Citigroup Global Markets. The notes mature in 10/2026 with a 1% coupon to yield 0.78%, callable in 7/1/2026.

Month over month, the municipal market is in a much better position as heavy demand and flows continue to drive it, according to Jonathan Law, vice president and portfolio manager at Advisors Asset Management.

Part of that is seasonal, according to Law, who said supply is historically elevated during November as issuers look to price their final deals before year-end.

“This trend typically leads to a weaker market and lower performance but this year, we’re not seeing any of that,” Law said. “It’s ironic that we’re seeing this renewed interest in tax-exempt paper at a time when the prospects for higher individual and corporate taxes — that many anticipated for much of the first half of the year — have significantly declined.”

Improved valuations and somewhat stabilized rate conditions are two factors responsible for the market’s fairly “bullish” tone, Law noted.

Inflows through the first three weeks of November are more reminiscent of the first half of 2021 with strong interest in new issuance and large deals getting repriced higher due to the increased interest, he said.

Overall market technicals bode well for performance, Law said.

More than halfway through the month, broad municipals are returning 0.52% month to date, “significantly outpacing” Treasuries, which are returning negative 0.45% and corporates, which are returning negative 0.82% over the same time frame, Law noted. High-yield has returned 0.96% so far in November while taxable munis have lost 0.27%.

Due to the month-to-date outperformance, muni-to-Treasury ratios have fallen over the last several trading sessions. “With the 10-year ratio at 69%, municipal valuations may be lower than their averages in September-October, but they are still above their lows from the first half of the year,” Law said.

Refinitiv Lipper reports $1.4B inflow
In the week ended Nov. 17, weekly reporting tax-exempt mutual funds saw $1.399 billion of inflows, Refinitiv Lipper said Thursday. It followed an inflow of $1.899 billion in the previous week.

Exchange-traded muni funds reported outflows of $56.3 million, after inflows of $671.670 million in the previous week. Ex-ETFs, muni funds saw inflows of $1.077 billion after inflows of $1.202 billion in the prior week.

The four-week moving average remained positive at $768.916 million, after being in the green at $409.586 million in the previous week.

Long-term muni bond funds had inflows of $1.042 billion in the latest week after inflows of $1.810 billion in the previous week. Intermediate-term funds had inflows of $367.022 million after inflows of $162.894 million in the prior week.

National funds had inflows of $1.355 billion after inflows of $1.817 billion while high-yield muni funds reported inflows of $548.643 million in the latest week, after inflows of $1.223 billion the previous week.

Secondary trading
Washington 5s of 2022 at 0.17%-0.16%. Washington Suburban Sanitation District 5s of 2022 at 0.14%. Georgia 5s of 2023 at 0.24%-0.22% versus 0.26% Tuesday.

California 5s of 2024 at 0.41%. Howard County, Maryland 5s of 2025 at 0.45%. Ohio 4s of 2025 at 0.51%. Wisconsin 5s of 2026 at 0.58%.

Princeton 5s of 2027 at 0.73%-0.72%. California 5s of 2028 at 0.91%-0.86% versus 0.97% Wednesday. Maryland 5s of 2030 at 1.06% versus 1.11% Wednesday.

Michigan Trunkline 5s of 2035 at 1.36%. Connecticut 5s of 2036 at 1.50%-1.47%. Connecticut 5s of 2041 at 1.65%-1.62%. New York EFC green bonds 4s of 2041 at 1.67%-1.66% (1.66% original). Energy Northwest 5s of 2041 at 1.59% versus 1.59%-1.56% Wednesday. Washington 5s of 2042 at 1.55%-1.52%.

New York City 5s of 2047 at 1.84% versus 1.89%-1.88% Wednesday. New York Dorm PITs 5s of 2049 at 1.85% versus 1.88% Wednesday. Los Angles DWP 5s of 2049 at 1.59% (1.71% on 11/3). Triborough 5s of 2051 at 1.86%-1.85%.

AAA scales
Refinitiv MMD’s scale was unchanged: the one-year at 0.15% in 2022 and at 0.25% in 2023. The 10-year sat at 1.11% and at 1.56% in 30.

The ICE municipal yield curve showed its one-year fall one basis point to 0.18% in 2022 and down one to 0.27% in 2023. The 10-year maturity sat at 1.11% and the 30-year yield was unchanged at 1.59%.

The IHS Markit municipal analytics curve was also unchanged: 0.17% in 2022 and at 0.25% in 2023. The 10-year yield was steady at 1.08% and the 30-year yield at 1.56%.

The Bloomberg BVAL curve was also unchanged at 0.17% in 2022 and 0.23% in 2023. The 10-year yield sat at 1.11% and the 30-year yield steady at 1.58%.

Treasuries were better and equities were mixed.

The five-year UST was yielding 1.216%, the 10-year at yielding 1.579%, the 20-year at 1.995% and the 30-year Treasury was yielding 1.967% at the close. The Dow Jones Industrial Average lost 60 points or 0.17%, the S&P was up 0.34% while the Nasdaq rose 0.45% at the close.