Municipalities were little changed in secondary trading, driven by higher yield-led mutual fund inflows and a $770 million note deal from the Triborough Bridge and Tunnel Authority. US Treasuries were weak and stocks ended in the black.
The three-year muni-UST ratio is at 60%, the five-year at 67%, the 10-year at 72% and the 30-year at 100%, according to Refinitiv MMD’s 3pm reading. ICE data services had three at 61%, five at 67%, 10 at 76% and 30 at 101% at 4 hours of reading.
Refinitiv Lipper reported that municipal mutual funds added $46.912 million to municipal mutual funds in the week ending Wednesday, after $1.394 billion in spending a week earlier.
After spending $590.461 million a week ago, peak production was at $552.127 million, while foreign exchange funds brought in an additional $952.134 million after last week’s $745.970 million income.
“Municipalities are caught in a play-or-pray situation — perform at current levels or wait for some return after seeing them gain 60 basis points or more,” said Kim Olson, senior vice president of municipal bond marketing at FHN Financial.
If fundamentals are any indication, Olson said, “any hopes for a meaningful production pullback could be several weeks away.”
“Pre-supply is close to neutral at $10 billion, a level that typically falls short of meeting new commitments and support needs,” he said. It depends,” she said.
She said, “As inventory grew to more than $10 billion at the end of November, up nearly 10% month over month, sellers are seeing strong demand from distributors to increase inventory.”
Auction details show that “a limited amount of vintage low-coupon bonds and current calls were raised through Bloomberg’s auction system in blocks under $5 million,” Olson says.
In the year Senior bonds issued between 2015 and 2018 “carrying 20-year maturities with 10-year call options yielded an average of 2.69%, according to MMD data,” she said.
Current 20-year 5s are trading around 3.25%, leading to tax-loss themes, she said. Similarly, “the 2020-2021 period, when long-dated 2s and 3s triumphant in new issue, have left their coupon value or more at a loss this year, creating another tax-loss trade,” she said.
On a broader level, he said, “The calendar is giving more leverage to sellers, and it’s a constructive outlook for aggressive momentum in the coming months.” He said that any edition for the rest of the year is expected to have an audience because of this.
Hilltop Securities, managing director of municipal research, said the trend of lower issuance seen in November will continue into December. The bond buyer’s 30-day visible supply sits at $9.42 billion.
“We’ll be lucky to get anywhere from $10 billion to $20 billion this month. We’ve seen it for a long time.”
Kozlik said he expects that trend to continue next year, as slow economic growth, rising interest rates and past federal bailouts put fiscal cushions aside.
“In my mind, there’s not much that pushes the limit forward,” he said. HilltopSecurities projects a total of $350 billion by 2023.
On the buy side, he believes there is money ready to go to work. Investors added money to mutual funds this week and several weeks ago, and Kozlik said additional income streams are likely.
In the main Thursday, Barclays Capital issued to the Los Angeles Department of Water and Power (Aa2/AA+/AA/) $399.780 million water system revenue bonds, 2022 Series D, due 5s of 7/2023 at 2.26%, 5s of 2027 at 2.28%, 5s of 2032. at 2.36%, 5s of 2037 at 3.10%, 5s of 2042 at 3.48%, 5s of 2047 at 3.67% and 5s of 2052 at 3.76% at 3.76%, callable 3/203/2032
In a competitive market, the Triborough Bridge and Tunnel Authority, New York, sold a total of $770 million of MTA Payroll Mobility Tax Bonds, Series 2022B.
The authority sold $370 million to JP Morgan Securities, due 12/2024 5s at 2.72%.
The authority sold $100 million to Wells Fargo, due 12/2024 5s at 2.69%.
In addition, the authority sold 5s due 12/2024 at 2.69%, and another $50 million to Citigroup Global Markets, 5s due 12/2024 at 2.72% to Citigroup Global Markets for $50 million.
The officer sold $50 million to Goldman Sachs & Co., 5s due 12/2024 at 2.72%, and another $50 million to Goldman Sachs & Co., 5s due 12/2024 at 2.68%.
Authority sold $50 million to Jefferies, 12/2024 5s at 2.70%.
The authority sold $50 million to Morgan Stanley & Co., 12/2024 5s at 2.68%, as well.
The Board of Education of the City of Cherry Hill, New Jersey (Aa2///) sold $300 million of school bonds, series 2022, to JP Morgan Securities, 3s due 2023 at 2.55%, 3s due 2027 at 2.71%, 3s 2032. 3.30%, 2037 4s at 3.68%, 2042 4s at 4.15%, callable on 8/1/2029.
California 5s 2023 at 2.28% from 2.33% on Tuesday. North Carolina Build 2024 Vision 5s at 2.43%-2.42%.
Connecticut 5s of 2025 at 2.47 percent. Maryland 5s 2025 at 2.43% Prince George’s County, Maryland, 5s 2025 at 2.44%.
California 5s are subject to a 2031 New Mexico severance tax of 2.56 percent. 5s by 2031 at 2.58%. Mecklenburg County, Maryland, 5s of 2034 at 2.66% from 2.72% Monday. New York City 5s of 2034 at 2.97%.
New York City TFA 5s 2044 at 3.86%-3.84% from 4.02%-3.95% Wednesday. New York UDC PIT 5s of 2050 at 4.01%. New York City Water 5s is 2052 at 4.12%.
The Refinitiv MMD index was unchanged: 2.39% in one year and 2.41% in two years. The five-year is 2.47%, the 10-year is 2.53% and the 30-year is 3.46%.
ICE AAA’s yield curve is cut at the front end of the curve: 2.41% (+2) in 2023 and 2.42% (+1) in 2024. The five-year yield was 2.45% (inch), the 10-year was at 2.58% (inch) and the 30-year yield was 3.47% (inch) at 4 pm.
The IHS Markit municipal yield is 2.37% (unch) in 2023 and 2.41% (unch) in 2024. The five-year was at 2.48% (unch), the 10-year was at 2.54% (unch) and the 30-year yield was at 3.44% (unch) at the 4 pm reading.
Bloomberg BVAL is little changed: 2.41% (inch) in 2023 and 2.43% (-1) in 2024. Five-year 2.47% (unch), 10-year 2.57% (unch) and 30-year at 3.44% (unch) at 4 p.m.
Treasures are lost.
The two-year UST was 4.318% (+8), the three-year at 4.058% (+8), the five-year at 3.713% (+8), the seven-year at 3.632% (+9), the 10-year The yield is closing at 3.490% (+7), the 20-year at 3.694% (+2) and the 30-year Treasury at 3.439% (+1).
Mutual fund details
Refinitiv Lipper reported earnings of $46.912 million for the week ending Wednesday, following outflows of $1.394 billion last week.
Exchange-traded funds reported inflows of $952.134 million after inflows of $745.970 million last week. Prior to ETFs, muni funds saw outflows of $905.221 million after last week’s outflow of $2.140 billion.
The long-term muni bond fund had $448.245 million in earnings last week after $1.112 billion in outflows. Medium-term funds withdrew $228.166 million after last week’s withdrawal of $247.709 million.
National funds inflowed $226.343 million after outflows of $1.086 billion last week, while high-yield muni funds reported outflows of $552.127 million after outflows of $590.461 million the week before.