Iowa issue kicks off primary action; municipal bonds remain little changed


Traders returned to work on Monday only to see a smaller-than-average new issue calendar of $3.6 billion. The week’s primary action got underway early as an Iowa school district sold over $100 million of general obligation bonds.

Primary market
This week’s slate consists of $2.4 billion of negotiated deals and $1.2 billion of competitive sales.

The Waukee Community School District, Iowa, (Aa2/NR/NR) competitively sold $104.65 million of Series 2019A GO and refunding bonds. Morgan Stanley won the deal with a true interest cost of 2.8095%.

Proceeds will be used to refund some outstanding debt and to finance various school improvements. PFM Financial Advisors is the financial advisor; Ahlers & Cooney is the bond counsel.

On Tuesday, the New York State Thruway Authority (MIG1/SP1/NR) is competitively selling $1.6 billion of Series 2019A general revenue junior indebtedness obligation anticipation notes.

The notes, which are junior to $2.9 billion of the authority’s senior indebtedness will roll over an issue from 2013 that was part of the financing for the $4 billion Mario Cuomo Bridge construction. The 2013 issue is set to mature on May 1. The issue has pledged not to issue any new junior debt while the new notes, which are due Feb. 1, 2020, are outstanding. Public Resources Advisory Group is the financial advisor; Harris Beach is the bond counsel.

In trading on Monday, the Thruway 5% obligations of 2013 traded at a high price of 100.069 cents on the dollar, a low yield of 1.542% and at a low price of 100, a high yield of 4.883%. On Thursday, the securities traded at a high price of 100.118 cents, a low yield of 1.691% and a low price of 100.034, a high yield of 3.388%. The obligations ($1.52 billion principal amount at issuance) were originally priced at 114.104 to yield 2.20%. Volume totaled $25.24 million in 10 trades on Monday compared to $5.15 million in four trades on Thursday.

The City and County of Denver, Colo., (NR/AAA/AAA) is competitively selling $135.23 million of GOs on Tuesday, consisting of $81.91 million of Series 2019A Elevate Denver GOs and $53.32 million of Series 2019B Better Denver and Zoo refunding GOs. Hilltop Securities is the financial advisor; Butler Snow and the Holt Group are the bond counsel.

In the negotiated sector on Tuesday, Morgan Stanley is set to price Austin, Texas’ (A1/A/NR/AA-) $154 million of Series 2019 airport system revenue refunding bonds subject to the alternative minimum tax.

Monday’s bond sale
Click here for the Waukee CSD sale

Bond Buyer 30-day visible supply at $7.93B
The supply calendar is $7.93 billion and is composed of $3.31 billion of competitive sales and $4.63 billion of negotiated deals.

Lipper: More inflows into muni funds
For 15 straight weeks, investors moved cash into municipal bond funds, according to data from Refinitiv Lipper released Thursday.

Mutual funds which report flows weekly saw $678.878 million of inflows in the week ended April 17 after inflows of $956.451 million in the previous week.

Exchange traded muni funds reported inflows of $86.131 million after inflows of $123.407 million in the previous week. Ex-ETFs, muni funds saw inflows of $592.747 million after inflows of $833.045 million in the previous week.

The four-week moving average remained positive at $970.127 million, after being in the green at $1.157 billion in the previous week.

Long-term muni bond funds had inflows of $674.358 million in the latest week after inflows of $906.806 million in the previous week. Intermediate-term funds had inflows of $330.501 million after inflows of $362.119 million in the prior week.

National funds had inflows of $534.695 million after inflows of $849.176 million in the previous week. High-yield muni funds reported inflows of $349.863 million in the latest week, after inflows of $366.867 million the previous week.

On Wednesday, the Investment Company Institute reported long-term municipal bond funds and exchange-traded funds saw a combined inflow of $1.138 billion in the week ended April 10, while long-term muni funds alone saw an inflow of $984 million as ETF muni funds saw an inflow of $154 million.

Secondary market
Munis were little changed on the MBIS benchmark scale Monday, which showed yields rising less than one basis point in the 10-year maturity while slipping less than a basis point in the 30-year maturity. High-grade munis were mixed, with yields rising one basis point in the 10-year maturity and falling a basis point in the 30-year maturity.

On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on the 10-year muni GO was unchanged while the 30-year muni yield fell one basis point.

“It is a quiet start to the week, and the ICE Muni Yield Curve is 1.5 basis points lower in the long end,” ICE Data Services said in a Monday comment. “High-yield, tobaccos and Puerto Rico are unchanged. The taxable sector is up 2.6 basis points in yield at the long end, with the rest of the curve more muted.”

Treasuries were mixed as stocks also traded mixed.

The 10-year muni-to-Treasury ratio was calculated at 75.3% while the 30-year muni-to-Treasury ratio stood at 89.8%, according to MMD.

“The frenzied, tax-driven clamor for tax-exempts should help maintain tight [muni-to-Treasury] ratios and low tax-exempt yields throughout the summer months,” according to Peter Block, managing director of credit strategy at Ramirez & Co. “We also expect reinvestment (maturities, calls, some coupon) to add to the scrum as flows should peak during the summer.”

Ramirez estimates positive net reinvestment flows of around $74 billion in May through August, including $6 billion in May, $18 billion in June, $22 billion in July and $28 billion in August).

“It’s possible the muni market experiences relatively cheaper levels thereafter — in September-October — although this highly depends on the Treasury market and various other muni-macro factors, including the absolute level of gross supply (which should accelerate) and/or whether or not current high muni valuations begins to adversely affect fund flows,” Block wrote in a Monday market comment.

He added the firm favors a barbell posture, with effective duration of between eight- and nine-years consisting of 70% in one- to six-year maturities and 30% in 18- to 21-year maturities. The shorter duration portion includes laddered fixed-rate non-call bonds and/or floating rate bonds, while longer maturities (20- to 30-years) have cheaper eight- to 10-year calls.

“This barbell strategy captures 95% of the yield curve, limits volatility, and maximizes credit spread and roll down in the seven- to 13-year range, the historical sweet spot for rolldown.”

Previous session’s activity
The MSRB reported 24,176 trades on Thursday on volume of $9.93 billion. The 30-day average trade summary showed on a par amount basis of $11.64 million that customers bought $5.5 million, customers sold $3.99 million and inter-dealer trades totaled $2.15 million

California, Texas and New York were most traded, with the Golden State taking 17.404% of the market, the Lone Star State taking 11.08% and the Empire State taking 10.711%. The most actively traded security was the Tuscaloosa County Industrial Development Authority, Ala.’s Series 2019A revenue 5.25s of 2044 which traded 74 times on volume of $100.56 million.

Week’s actively traded issues
Revenue bonds made up 53.71% of total new issuance in the week ended April 19, down from 53.88% in the prior week, according to IHS Markit. General obligation bonds were 42.06%, up from 41.66%, while taxable bonds accounted for 4.23%, down from 4.46%.

Some of the most actively traded munis by type in the week were from California, Alabama and Puerto Rico issuers.

In the GO bond sector, the California 5s of 2029 traded 97 times. In the revenue bond sector, the Tuscaloosa County IDA 5.25s of 2044 traded 53 times. In the taxable bond sector, the Puerto Rico Sales Tax Financing Corp. 4.55s of 2040 traded 14 times.

Week’s actively quoted issues
Puerto Rico and North Carolina names were among the most actively quoted bonds in the week ended April 19, according to IHS Markit.

On the bid side, the COFINA revenue 5s of 2058 were quoted by 123 unique dealers. On the ask side, the Durham Capital Financing Corp., N.C., revenue 4s of 2043 were quoted by 230 dealers. Among two-sided quotes, the COFINA revenue 5s of 2058 were quoted by 28 dealers.

Treasury auctions discount rate bills
Tender rates for the Treasury Department’s latest 91-day and 182-day discount bills were higher, as the $42 billion of three-months incurred a 2.400% high rate, up from 2.380% the prior week, and the $36 billion of six-months incurred a 2.400% high rate, up from 2.390% the week before. Coupon equivalents were 2.455% and 2.470%, respectively. The price for the 91s was 99.393333 and that for the 182s was 98.786667.

The median bid on the 91s was 2.370%. The low bid was 2.350%. Tenders at the high rate were allotted 54.31%. The bid-to-cover ratio was 2.91. The median bid for the 182s was 2.380%. The low bid was 2.355%. Tenders at the high rate were allotted 9.48%. The bid-to-cover ratio was 3.26.

Gary E. 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. Click here for a brief tour of the Workstation, or contact Ziad Saba at 212-803-6079 for more information.

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