"I don't think the New Jersey GO bond offering is going to suffer any yield penalty at all," said J.R. Rieger, owner of Rieger Report LLC. "The demand for bonds seems to be looking the other way and bond funds will hold their nose and suck the bonds in."

Moody's Investors Service and Fitch Ratings both affirmed New Jersey at A3 and A-minus, respectively, with negative outlooks. Kroll Bond Rating Agency affirmed New Jersey bonds at A with a stable outlook.

Bank of America is lead underwriter for the transaction. Acacia Financial Group is financial advisor. Chiesa Shahinian & Giantomasi PC and M. Jeremy Ostow are bond counsel.

The state is hitting the market amid rising COVID-19 infections with 296,000 cases and more than 16,000 deaths as of Nov. 11.

After being slammed in the early months of the pandemic along with neighboring New York City, New Jersey enjoyed a relatively calm summer before new case numbers began rising sharply in October, according to the state's data.

Gov. Phil Murphy ordered restaurants to close at 10 p.m. this week in an effort to curb spread of the virus.

Dan Berger, senior market strategist at Refinitiv's Municipal Market Data, said in general New Jersey GOs are thinly traded with the bonds maturing in 2042 last trading at Sept. 23 at 75 basis points above the MMD triple-A scale. He said there might be a penalty on the new GOs due to the downgrade, but strong demand from high-yield investors may limit the cost.

"The market levels will be tested by this deal and it is a lot for the market to digest," said Berger, noting that only Illinois trades at higher spreads than New Jersey for state GOs. "There are people who will take advantage of this who are yield buyers."

Berger noted that New Jersey appropriation bonds, which are rated one notch lower than the GOs and comprise around 90% of the state's outstanding debt, have traded at higher spreads recently. An approximately $2 million block of bonds issued for the New Jersey Economic Development Authority maturing in 2033 traded at 186 bp above the triple-A benchmark last week. A block of $15 million in NJEDA bonds maturing in 2024 also traded on Sept. 29 at a 200 bp spread.

Michael Pietronico, CEO of Miller Tabak Asset Management, expects strong investor reception to the New Jersey deal despite the S&P downgrade.

"Spreads could widen initially on the deal because of its size but given the lack of yield available in the market our guess is the bonds will eventually tighten and perform in line with Moody's rating as opposed to S&P," Pietronico said.

The state last sold GOs in January with two competitive deals totaling $325 million marking its first GO issuance since December 2016. The long-range bonds from the deal maturing in 2042 priced at spreads at 28 bps compared to 120.6 on 2037 maturities in the 2016 deal.

Howard Cure, director of municipal bond research at Evercore Wealth Management, said he does not foresee much of a spread penalty because New Jersey GOs trade much tighter to the AAA scale than the state's appropriation debt. The state has $33.4 billion of outstanding debt with only $1.6 billion comprised of GOs.

Cure also stressed that New Jersey will benefit from floating such a large issue at a time when there is little supply in the market just before the Thanksgiving holiday.

"The low supply should also help tighten spreads," Cure said. "They are going to be the dominant issuer next week."

The deal arrives four months after Murphy signed the New Jersey COVID-19 Emergency Bond Act authorizing the debt to combat revenue losses resulting from the virus. The state's current 6.625% sales tax and local property taxes collected by municipalities will be increased if general budget revenues are insufficient to meet debt service requirements, according to the bill.

The bonds will be sold in 12-year maturities.

State Treasurer Elizabeth Maher Muoio previously forecast in August that 2021 fiscal year revenues would be $5.6 billion less than February's projections issued before Murphy unveiled his initial budget proposal before COVID-19 cases began to mount.

Murphy signed a shortened nine-month $32.7 billion state budget in late September that relies on $4.5 billion of proceeds from new borrowing to offset revenue losses. The spending plan also hinges on $700 million of new revenues from tax increases including a long-sought millionaire's tax that raises the marginal rate on annual income above $1 million to 10.75% from 8.97%.

On Nov. 6, the state treasury revised the state revenue outlook upward by $398 million from the projection certified in the state budget. As a result, the emergency bond authorization was decreased by the same amount.

New Jersey had previously explored utilizing Federal Reserve's Municipal Liquidity Facility with short-term debt for part of the deal before BofA advised it to sell long-term bonds instead due to market conditions.

The state treasury department's press office did not immediately respond for comment on the upcoming bond sale.

Muoio said in a Nov. 6 statement after the S&P downgrade that the bonding approach is part of a multi-pronged strategy to confront an "unprecedented" financial crisis resulting from the virus.

"From the outset, we have taken a balanced, e market this month.

Yields tumbled by about 20 basis points across maturities, driving those on 10-year benchmark securities to 1.86% in early trading. Those on the shortest-dated securities dropped to 1.60%.

The gains come after the $3.9 trillion market had the biggest one-day advance since 1993 on Wednesday, when yields tumbled by more than 60 basis points.

The rally signals optimism that the federal stimulus package will help mitigate the impacts of the coronavirus pandemic that has shut down large swaths of the economy. That's threatening to deliver a major financial blow to states, cities, public transit systems and others that have sold tax-exempt debt.

Late Wednesday, the Senate approved a $2 trillion rescue plan that includes about $500 billion in loans and assistance for companies, including struggling airlines, as well as states and cities. The act allows the Fed to leverage that money to support the financial markets, including the one for municipal bonds.

The House of Representatives is scheduled to vote on the legislation Friday and President Donald Trump said he would sign it immediately.

Citigroup Inc. strategists led by Vikram Rai said there's "no doubt" that the stimulus plan will help state and local governments.

"Now that the Fed purchases can include municipal bonds, municipalities will now have a strong buyer helping to stem volatility and lower funding rates," the strategists said. "This should go a long way towards aiding state and local governments in their time of need."

Related: Here's What's in the $2 Trillion Virus Stimulus Package

The movement toward enacting the stimulus plan and the Federal Reserve's earlier steps to shore up the market for the shortest-dated securities arrested what had been a mounting liquidity crisis in the municipal market, where waves of panicked selling erupted as investors yanked out cash. Even with the recent advance, that's still left investors with the deepest losses since 1981.

There are signs that investors may be wading back into the municipal market. They added $84 million to municipal-bond exchange-traded funds on Wednesday, with the Vanguard Tax-Exempt Bond ETF seeing a $46.6 million inflow after a wave of outflows the past two weeks.

"Municipal bonds as an asset class have been backstopped by both Congress and the Federal Reserve and with all of that are still very cheap historically to U.S. Treasuries," said Michael Pietronico, chief executive officer at MT Asset Management LLC. Earlier this week top-rated tax-exempt municipals were yielding 365% of comparable Treasury bonds.

Julio Bonilla, a portfolio manager at Schroders, said the historic rout this month provided buying opportunities. He said he's looking to purchase bonds sold by issuers with large cash reserves that can weather increased costs caused by the virus responses.

"You don't have to go down in credit quality now," he said. "That's the beauty of it. You're able to buy really high quality issues at distressed prices."

--With assistance from Amanda Albright.

To contact the reporter on this story:
Danielle Moran in New York at dmoran21@bloomberg.net

To contact the editors responsible for this story:
Elizabeth Campbell at ecampbell14@bloomberg.net, William Selway

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Munis Play Catch-Up on Short End After Fed's Latest Moves

Tuesday, March 24, 2020
By Lynne Funk

Most municipal benchmark yields were steady Monday, while ICE's muni curve saw short-end yields decline by 20 to 25 basis points following the Fed's move to add variable rate demand notes to its list of assets it would purchase.

Most market participants agreed the recent Fed decisions had munis playing catch-up.

The Fed added VRDNs to a list of assets eligible to be used as collateral by financial institutions, which contributed to some stability in the secondary market.

"The muni market starts the week stronger, with most of the strength evident from 10 years and in," ICE said in a market statement. "This may partly be a reaction to the Fed's announcement Friday to allow certain one-year and shorter munis to be used as collateral ... and it may also be a rebound from seemingly oversold conditions at the end of trading Friday. Muni-Treasury ratios are still extraordinarily high."

"An hour-to-hour theme prevailed for several days, but Friday's session found some balance following the Fed's announcement to buy munis out to one-year maturities," said Kim Olsan, senior vice president at FHN Financial in a market comment.

Monday saw similar moves, sources said.

"Dealers are not cutting prices as fast and as much as last week," Michael Pietronico, chief executive officer at Miller Tabak Asset Management, said on Monday afternoon.

At the same time, dealers were being more flexible to keep inventory moving, he said.

"The municipal bond market saw some buyers stick their heads up at these distressed levels, which has to be viewed as constructive," Pietronico said.

"The sense we have is that participants now fully expect a lifeline from both the Federal Reserve, and Congress at some point," he said. "In short, the market is attempting to form a bottom, however, should defaults begin to emerge another leg lower in prices cannot be ruled out."

A New York trader said municipals are no longer tracking the Treasury market, but tracking the stock market, and traders like him are just looking at absolute yields for value.

"I am lookinicipation Notes due August 2020 tightened to 3%-range bid-sides from the prior day's 3.30% or higher bidsides.

"Although the monetary action will be positive, it still leaves the very short end of the curve inverted as sellers are finding better liquidity from more willing buyers in ultra-short (i.e. very defensive) bonds," she said. "Maturities of one to three years saw a 3% spike in volume last week as compared to the prior 30 days, according to MSRB data," Olsan said.

Meanwhile, Moody's said in a report released Monday that the coronavirus-driven market turmoil "is exposing municipal issuers to interest rate and liquidity risks related to outstanding short-term and variable rate debt."

"The disruption comes as many issuers may need to raise cash to address sharp revenue declines and wide budget imbalances. Even borrowers with ample self-liquidity and ones with committed facilities from banks with strong balance sheets are experiencing the highest interest rates since the global financial crisis," Moody's said noting SIFMA's weekly reset rate on VRDBs climbed to 520 basis points on March 18, a 400-basis-point increase from the prior week.

There were others who said the Fed move hasn't brought enough relief.

Brian Musielak, senior portfolio manager for Commerce Trust Co., said that there has been no material impact yet on the short term market from the Fed's plan to help the muni market.

"Given this unprecedented move, we feel the market needs to see the program up and running before levels are impacted," he said. "Including munis will go a long way to stabilizing the short end of the market which has gotten pummeled in the last week."

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New York City GOs Reprice to Higher Yields in a Busy Primary

Thursday, February 13, 2020
By Aaron Weitzman

The municipIGN="JUSTIFY">The other sale for $133.645 million was won by JP Morgan with a TIC of 1.5857%. The deal is structured mature in 2021 and 2022. The transaction saw 10 bidders.

The city said the $1.5 billion GO offering was successful and that proceeds will be used to refund outstanding bonds.

During the two-day retail order period for the tax-exempts, the city received $302 million of orders from individual investors, the NYC Comptroller's Office said.

Staying in the competitive arena, Washington State (Aaa/AA+/AA) sold a total of $728.5 million in two separate sales.

Wells Fargo won $608.08 million of various purpose GO bonds with a TIC of 2.7301%. The 10-year with a 5% yielded 1.30%, 5s of 2040 yielded 1.83% and 5s of 2045, the long bond on the deal, yielded 1.98%.

JP Morgan won $120.420 million of motor vehicle fuel tax and vehicle related fees GO bonds with a TIC of 2.7811%.

Citi also priced Chester County Health and Education Facilities Authority's (Aa3/AA/AA/NR) $132.44 million of health system revenue bonds for Main Line Health System.

SECONDARY MARKET

Munis were mixed on Wednesday on the MBIS benchmark scale, with yields rising by six basis points in the 10-year and falling by no more than one basis point in the 30-year maturity. High-grades were also mixed with yields on MBIS AAA scale increasing six basis points in the 10-year and decreasing less than a 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 one basis point higher to 1.19% and 1.84%, respectively.

The 10-year muni-to-Treasury ratio was calculated at 73.0% while the 30-year muni-to-Treasury ratio stood at 88.1%, according to MMD.

Stocks rallied and were back in the green as data shows and 2.99% on Jan. 2.

The 10-year muni-to-Treasury ratio was calculated at 84.7%, while the 30-year muni-to-Treasury ratio stood at 94.1% on Nov. 22, according to MMD.

"The best value that we have seen has been in A-rated and some double-A-rated paper as the spreads versus triple-A have slightly widened" between 20 and 80 basis points, Howard Mackey, managing director at NW Financial in Hoboken, New Jersey, said in late November.

Spreads on A-rated bonds have widened even more, he said, citing the $350 million New Jersey Health Care Facilities Authority deal on behalf of Valley Health Systems, which was oversubscribed for its attractive yields on Nov. 20.

The single-A-rated deal's spreads extended to nearly 100 basis points over the double-A and triple-A market, with most of the value on the long end, appealing to large mutual funds that are otherwise credit sensitive, Mackey said.

The availability of 3% and 4% coupons, instead of the standard 5% coupons, helped sell the deal, he said. Its 3% coupons due in 2049 were priced attractively at a 3.15% yield, seven basis points lower than the initial pricing yet still at a spread of 106 basis points to the benchmark triple-A scale tracked by Refnitiv Municipal Market Data.

At the time of the pricing, the generic, triple-A general obligation scale in 2049 yielded 2.09%.

Meanwhile, the 4% coupon bonds were 25 to 30 basis points higher in yield than the standard 5% coupons in comparable deals at the time of pricing, Mackey said.

He said he is watching deals of similar credit quality, yield, and structure to add value to clients' portfolios as 2019 closes.

"I would say the strategy is going to be looking at where there is value and the credit quality you are comfortable with," he said, adding that a spread differential of between 20 and 30 basis points or more on double-A and single-A paper would continue to pique interest among investors through year end.

"If you have flexibility in credit, you might be able to find some value with bonds that are not triple-A rated," even though the demand is high and the supply limited of lower-rated paper, particularly in specialty states like New Jersey.

"You have to look for bonds that are going to give you yield where the credit works for you and where you do your credit work," Mackey said, adding select triple-B credits to his list of potential yield opportunities.

Adding value is also high on the list of year-end priorities for other managers.

Michael Pietronico, chief investment officer at Miller Tabak Asset Management, is striving to keep all of the firm's separately-managed account clients as fully invested as possible for the remainder of the year.

"The recent spike up in supply has been a benefit to investors as it created an environment where multiple investment choices were available all along the yield curve," he said earlier this month. "That, combined with the back up in rates, has opened our eyes to much better entry points to put cash to work," he said.

Lower coupon bonds have worked well so far, according to Pietronico.

He said he intends to continue buying that structure as the year comes to an end, because the lower coupons "offer significant spread to 5% coupons and are better suited to outperform should rates continue to decline as we expect."

Pietronico is keeping an eye on overseas developments, too.

"Global growth will remain somewhat challenged for the immediate future, and as such reinvestment risk should be the greatest concern for fixed-income investors," Pietronico said. "We are positioned neutral to our benchmarks at the moment, but should a trade deal be reached between China and the United States we would expect to see rates move higher and the curve steepen."

Under that scenario, he said he would extend duration into weakness and position for a new cyclical low to be reached in U.S. Treasury yields.

"We remain concerned that global growth will underwhelm, even if a trade deal is reached, and as such, buying on weakness should remain a theme here," he continued.

From a technical standpoint, Pietronico added, the tax-free municipal space could see greater demand for less bonds if the current spike in taxable municipal bond supply remains a constant feature.

Laddered and barbell strategies

Managers like Sean Carney, head of municipal strategy at BlackRock Inc. (BLK), are flexing their municipal muscle by taking advantage of the yield and liquidity available in bonds maturing in zero to five years, while adding income by allocating to the 20-year part of the curve,

"One can achieve 93% of the entire curve by just going out 20 years while accepting less duration risk than going out on the curve," he said, explaining the benefits of the barbell strategy.

For the remainder of the year, he expects to continue to look for opportunities that have created alpha, such as adding securities subject to the alternative minimum tax, when and where appropriate, given the additional issuance and spread to non-AMT securities.

Like others, Carney favors lower-rated investment grade securities, such as A-rated bonds, that have outperformed the market by more than 50 basis points year to date with a very similar duration measure, he said.

"Since the crisis, the A-rated space has, on average, outperformed the broad market by 100 basis points, which is meaningful in a low-rate environment," Carney said.

"We also look for opportunities in structure, where there is an appropriate spread between 4% and 5% coupons in the same deal or when a call feature offers additional spread that the market is not properly pricing," he said.

Others say year-end will bring a chance to benefit from a laddered municipal bond structure and the taxable municipal product available this year.

Alan Schankel, managing director and municipal strategist at Janney Capital Markets, said his firm is recommending clients "stay the course" as the end of 2019 approaches.

With interest rates near historic lows as 2.09% in 30 years, he suggests clients keep target portfolio duration in the mid-range, at four to seven years, in order to balance the yields available from longer maturities with interest rate risk.

Schankel is also using a 15-year laddered structure that favors a mix of 4% and 5% coupons, which provide cash flows and some defensive characteristics.

"We recommend that clients take advantage of the recent surge behavior.

"When you look at the massive flows into bond funds this year it becomes worrisome, as those could be outflows in a bond market which surprises on upside yields," Mousseau said.

The one thing that no one is counting on is a possible tax loss swap season, he said.

As a result, he advises municipal investors to always "expect the unexpected" as the market bids farewell to 2019.

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D.C. Prices its Largest Deal Ever as Influx of Issuance Goes Down With Ease

Wednesday, November 13, 2019
By Aaron Weitzman

The municipal market was hit with a ton and a half of new issuance with bond-hungry investors waiting with open arms and cash in hand.

"Today was all about new issues," a New York trader said. "With the 10-year Treasury having backed off from 1.45% to 1.87% now and with wider spreads from thee MMD scale. The 2044 maturity was triple split as 3s to yield 2.95%, 4s to yield 2.63% and 5s to yield 2.37%. Those yields are 78 basis points, 46 and 20 BPs above MMD's 2.17%.

District of Columbia 5s of 2029 traded 1.63% on November 5. The high was 1.87% in recent trading and the low was 1.40%.

Meanwhile, California (Aa2/AA-/AA) sold $682.435 million of various purpose GO and refunding bonds, which were won by Citi with a true interest cost of 2.70495.

The 2029 maturity was priced as 5s to yield 1.70%, which is 10 basis points above the MMD spread. The long bond, which in this case is a 2039 maturity was priced as 5s to yield 2.16%, resulting in a spread to MMD of plus 12.

The long California bond, 5s of 2049, traded at 2.12% on October 30, with the original September yield at 2.07%, in line with how the market has moved since then.

Bank of America Securities priced Pennsylvania Higher Educational Facilities Authority's (Aa3/AA/ ) $537.225 million of revenue bonds for the University of Pennsylvania Health System.

Bank of America Securities priced Washington State's (Aaa/AA+/AA+) $400.710 million of motor vehicle fuel tax general obligation refunding forward delivery bonds.

Citi ran the books on Clark County, Nevada's (Aa3/ / ) $370.90 million of airport system subordinate lien refunding revenue non-alternative tax bonds.

BofAS priced Lower Colorado River Authority's ( / A/AA-) $139.350 million of refunding revenue bonds.

BofAS also priced Lower Colorado River Authority's ( /A/AA-) $139.350 million of refunding revenue bonds.

Loop Capital Markets priced Parish of East Baton Rouge, Louisiana's (Aa3/AA+/AA) $130.180 million of capital improvement sales tax revenue bonds.

"We saw solid demand and firm pricing beginning to creep into the market as the correction to higher yields seems to have run its course in the short run," Michael Pietronico, CEO, Miller Tabak Asset Management said. "Paper on the shorter end of the market is getting harder to find and that should not be a surprise as the year-end 'roll' is coming more into focus by money managers."

ICI: Muni funds see $2.1B inflow

Long-term municipal bond funds and exchange-traded funds saw a combined inflow of $2.182 billion in the week ended Nov. 6, the Investment Company Institute reported on Wednesday.

It was the 45th straight week of inflows into the tax-exempt mutual funds and followed an inflow of $1.665 billion in the previous week.

Long-term muni funds alone saw an inflow of $1.792 billion after an inflow of $1.343 billion in the previous week; ETF muni funds alone saw an inflow of $389 million after an inflow of $322 million in the prior week.

Taxable bond funds saw combined inflows of $10.484 billion in the latest reporting week after inflows of $9.613 billion in the previous week.

ICI said the total combined estimated inflows from all long-term mutual funds and ETFs were $8.217 billion after revised inflows of $3.281 billion in the prior week.

Secondary market

Munis were stronger on the MBIS benchmark scale, with yields falling by two basis points in the 10-year and by less than a basis point in the 30-year maturity. High-grades were mixed, with yields on MBIS AAA scale decreasing by less than a basis point in the 10-year and increasing by no more than two basis points in the 30-year maturity.

On Refinitiv Municipal Market Data's AAA benchmark scale, the yield on 10- year was lower by two basis points to 1.58% and the 30-year GO was down three basis points to 2.19%.

The 10-year muni-to-Treasury ratio was calculated at 84.4% while the 30-year muni-to-Treasury ratio stood at 93.1%, according to MMD.

Treasuries were lower and stocks were mixed, with the Dow and the S&P 500 in the green. The Treasury three-month was up and yielding 1.574%, the two-year was down and yielding 1.634%, the five-year was down and yielding 1.688%, the 10-year was down and yielding 1.882% and the 30-year was down and yielding 2.365%.

Previous session's activity

The MSRB reported 38,279 trades Monday on volume of $9.33 billion. The 30-day average trade summary showed on a par amount basis of $10.43 million that customers bought $5.82 million, customers sold $2.77 million and interdealer trades totaled $1.84 million.

California, New York and Texas were most traded, with the Golden State taking 16.165% of the market, the Empire State taking 13.927% and the Lone Star State taking 9.485%.

The most actively traded securities were Michigan State Housing Development Authority revenue, 3.1s of 2044 traded 14 times on volume of $35.125 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.

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Ransomware Hits 23 Texas Local Governments

Tuesday, August 20, 2019
By Aaron Weizman and Richard Williamson

A ransomware attack on 23 Texas local governments appears to be coming from a single source, according to state agencies investigating the latest episode of online criminals holding public data hostage.

"At this time, the evidence gathered indicates the attacks came from one single threat actor," the Texas Department of Information Resources said in a press statement. "Investigations into the origin of this attack are ongoing; however, response and recovery are the priority at this time."

A cryptocurrency mining rig. Ransomware attackers of Baltimore and a small Florida city demanded payment in bitcoin.

Ransomware is a computer program that locks up an organization's systems until the victim pays a ransom is paid or files are recovered. Ransomware damages computer hardware and connected devices, sometimes shutting down systems for days or weeks.

The Texas governments reported a ransomware attack on Friday morning. Although state officials did not name them, the majority were smaller local governments. The State Operations Center was activated with a day and night shift.

"It appears all entities that were actually or potentially impacted have been identified and notified," officials said. "Twenty-three entities have been confirmed as impacted. Responders are actively working with these entities to bring their systems back online."

The State of Texas systems and networks have not been impacted, official said.

Some cities and counties that were not attacked shut down Internet access to avoid the threat.

In January, the City of Del Rio, Texas, had to abandon electronic services after a ransomeware attack froze servers. Del Rio reverted to pin and paper as tech experts worked to prevent further spread of the malware. City officials notified the FBI and Secret Service.

Michael Pietronico, CEO of Miller Tabak Asset Management, said in a commentary piece Monday that his firm's internal ratings reflect issuers' overall resilience to manage and respond to changes in its operating environment, including risks associated with cyberattacks.

A May 7 attack on Baltimore hobbled its ability to collect water bills, property taxes, and parking revenue. It also shut down the system to process home sales. The city's online payment portal is still offline. Baltimore has refused to pay the ransom.

"Although it is too early to assess the full monetary effect of the cyberattack, we understand the city's estimated costs to date total about $18 million," Pietronico said. "Despite the significant cost, we do not anticipate the breach will lead to a credit event, given Baltimore's sizable reserves equal to $385.3 million at fiscal year-end 2018, or 20% of operating expenses, as well as its liquidity equal to 52% of total governmental expenditures, which we consider very strong."

The cyberattack in Baltimore follows last year's high profile ransomware attack in Atlanta, which cost the city an estimated $17 million to fix, about 2.6% of the City's budget.

Riviera Beach, in Palm Beach County, Florida, authorized its insurer to pay a ransom of almost $600,000 to hackers that unleashed a virus crippling the city's computer systems. According to the Miller Tabak piece, the city of about 35,000, approved the payment of 65 bitcoins, valued at $592,000.

"The growth of Internet of Things (IoT), interconnected sensors embedded in technology, such as WIFI networks, building maintenance systems, medical devices, and traffic sensors, further contribute to cyber riskPietronico said. IoT devices outnumbered the world's population in 2017 and are projected to double by 2020, according to Gartner technology consultants," Pietronico wrote.

"Cyberattacks also threaten to erode public confidence in government, and can suggest weak governance," he wrote. "Cyberattacks can hurt issuers' reputations, evidenced by the fact that many cities and states avoid reporting them."

Pietronico added that the lack of consistent reporting of cyberattacks could leave many issuers complacent about the risks or unaware of some of their own vulnerabilities.

Pietronico recommends sharing details of attacks broadly with the municipal bond market and law enforcement. Public entities should also report the attacks through an event notice on the Municipal Securities Rulemaking Board website, EMMA.

"Only with consistent and transparent disclosure can the evolving sophistication of cyber criminals be recognized, and prudent mitigation measures taken and disseminated," he wrote. "Investors need to determine whether states and local governments take cybersecurity seriously as a risk, and issuers need to assess and share information about the defenses in place against cyberattacks."

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MTAM Predicts The 10 Year Treasury Note Yield Bottoms at 0.98%

Monday, August 19, 2019

Michael Pietronico expects muni yields to remain at historic lows for a number of years.

Michael Pietronico, CEO of Miller Tabak Asset Management, said that his firms' belief is that the 10-year Treasury note yield will bottom at 0.98% and afterward will trade in a range of 1.25% to 1% for roughly three years.

"We expect another 40 basis point rally in long-term tax-free bond yields before a small correction occurs," he said. "We expect municipal bond yields to remain at historic lows for a number of years also."

He said reasons for the drop in rates have been the ongoing China/U.S. Trade war, the rapidly slowing Chinese and Europe economies, the European Central Bank stimulus plans and that fact that the U.S. Federal Reserve will be lowering rates for the next 12 months.

"Thirty-year Treasury bond rates falling below 2% are no big deal, as it remains one of the cheapest sovereign bonds in the world," Pietronico said. "We do not expect a massive pick up in municipal bond issuance due to rates falling."

Municipal yields have been moving lower, primarily in response to falling Treasury bond yields, according to Alan Schankel, managing director and municipal strategist at Janney.

"It would not surprise me to see yields fall further in coming months, although I do not see negative yields as likely in this economic cycle," Schankel said. "Fed fund futures project a 100% probability of a 25 to 50 basis point cut from the FOMC in September, which would likely pull shorter-term rates lower, and lack of inflationary pressures in the system suggest to me that long rates could drop further, especially if we see further signs of economic slowing on the horizon."

Schankel noted that he does not think many issuers are on the sidelines awaiting lower rates, so, unfortunately, recent rate reductions will not boost municipal bond issuance, except on the margins.

Cheaper muni ratios are especially appealing to the crossover buyer and so this is a dynamic worth monitoring, according to Jeffrey Lipton, head of municipal research and strategy at Oppenheimer & Co. Inc.

"Should weekly new-issue volume ebb, we can reasonably expect ratios to resume their march toward richer levels, possibly reaching new lows for the year, thus providing a buying opportunity at this time," Lipton said in a weekly research report. "Pent-up demand for the product is likely to continue in the face of diminishing supply despite anticipated easing of reinvestment needs."

He added that as investors continue to see the appeal of taxable munis for foreign buyers in search of yield, and with so much of global sovereign debt showing negative yields, munis certainly meet the need.

"As we expect demand for munis to remain strong and tax-exempt yields to see further downward pressure through year-end, applying the appropriate investment strategy may be challenging," he said. "For the more conservative investors, we continue to stress that credit quality should not be compromised given the need to fortify portfolios ahead of the next down-cycle."

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In a first, Lansing utility deal prices bonds using BVAL

Tuesday, June 18, 2019
By Lynne Funk Posner, Yvette Shields, and Chip Barnett

In what deal participants say is a first in the municipal market, Michigan's Lansing Board of Water and Light last week priced its $325 million deal using the Bloomberg's BVAL AAA curve instead of the widely used MMD benchmark.

The issuer choosing to use BVAL was a "collective decision by the banking syndicate" led by senior manager JPMorgan Securities and co-senior Citigroup along with financial advisor PFM Financial Advisors LLC and the issuer's chief financial officer, Heather Shawa's team, said deal advisor Chris Lover, a managing director at PFM.

Primary market use of BVAL is a growing topic of interest in discussions among various market participants, Lover and other sources said. Other benchmarks including IHS Markit, BondWave S&P Municipal Bond Index and MBIS are used in various ways in the market, but not to the extent that MMD is to price new issues.

The vast majority of the industry uses the MMD Refinitiv AAA benchmark to price deals in the primary market and for trading in the secondary.

"The MMD AAA curve is available with intraday updates and is the common language used by leading industry partners for new-issue pricing in addition to secondary trades, news, risk, evaluated pricing models and more," said Domenic Vonella, head of U.S. municipals at MMD. Interdependent historical relationships between the 250-plus MMD curves help users track different structures. These interdependent MMD curves are "used to confidently build models and new-issue recommendations with great accuracy over long periods of time," Vonella said.

"We've been hearing from investors that they are starting to look to BVAL more than MMD and we thought it was a good time to start working in that direction," Lover said. "It's gaining momentum and using it on the Lansing deal could further discussions of the differences between the indexes and which one is the most relevant."

Just how much of a threat BVAL poses to the industry stalwart MMD index is an open question and depends on whether others follow, market participants said.

Vonella said that MMD research and intraday analysis "helps sophisticated market participants reduce the amount of 'noise' and make timely and meaningful decisions based on real-time market activity."

He said MMD has partnered with "best-in-class muni-centric data available on www.tm3.com and likewise MMD users can find the MMD AAA scale available on many external applications."

Investors and other sources said choosing BVAL shows how technology is playing a larger role in the municipal market.

Michael Pietronico, CEO of Miller Tabak Asset Management, said the greater use of technology could drive the use of BVAL.

"I find it interesting only because MMD has had such a strong hold on new-issue pricing," said Michael Pietronico, chief executive officer and senior portfolio manager at Miller Tabak Asset Management.

But "competition is always good," Pietronico said.

Pietronico said he doesn't have a preference between MMD and BVAL, and would prefer the "old-fashioned" method by which underwriters didn't use a particular scale but set prices based on credit merits.

"MMD does a very good job and has a lot of respect. But like anything else, things change and technology is getting more ingrained in the day-to-day workings" of the market, Pietronico said.

For Bloomberg, whose market clients pay as much as $24,000 a year for a single terminal, it's "only logical" that they'd move into the index space, as the company has "sort of a captive audience" and subscribers benefit by getting "something extra" from Bloomberg, he said.

The BVAL is populated with high-quality U.S. municipal bonds with an average rating of AAA from Moody's Investors Service and S&P Global Ratings. The yield curve is built using non-parametric fit of market data obtained from the MSRB, new issues calendars, and other proprietary contributed prices.

How Lansing chose BVAL

"We have been looking at BVAL over the past six months and saw that it tracked closely with other AAA benchmarks," said Todd Fraizer, head of PFM's Pricing Group. "There are a number of reasons that BVAL compares favorably with other benchmarks; it's available publicly to everyone via the MSRB, it comes out hourly from 9 a.m. to 4 p.m. and if you have a Bloomberg terminal, it includes market observations that go into that read. You can see live trading that goes into the read."

Fraizer said PFM had been discussing the idea with other market participants at various firms for four or five months. "As we know, everybody's internal systems are set to use other benchmarks, so we needed to make sure that sales and trading desks were comfortable and they needed to make sure investors were comfortable with it.

"We found the right opportunity with the right client that trusted us and a broker-dealer that was willing to try it," Fraizer said.

JPMorgan was the senior manager. Citi was the co-senior manager. BofA Securities, Goldman Sachs and Piper Jaffray were co-managers. Representatives from JPMorgan did not respond to requests for comment.

The Lansing deal offered a good candidate for the inaugural outing due to its size, structure with sizable term bonds with broad investor appeal and solid double-A level ratings. It was also accompanied by a good story, as the bonds are financing the public utility's new natural gas-fired combined cycle generating facility known as Delta Energy Park, part of its continuing transition to cleaner energy away from coal-fired power.

PFM didn't see any downsides in trying BVAL out as it was not expected to influence the pricing for better or worse. Shawa said after the finance team walked her and her team through the pricing with the assurance that there was little risk, she was comfortable and supportive in moving forward.

The deal was two times oversubscribed with the true interest cost landing at 3.6%.

It's hard to gauge beyond anecdotal talk whether additional investors might have considered or ended up placing orders, Lover said.

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'Underwhelming' $6.7B calendar led by $2.1B California deal

Friday, April 5, 2019
By Aaron Weitzman, Christine Albano, and Chip Barnett

With plenty of cash looking to go to work, investors are not loving the calendar or what small allocations they will be allotted as we draw near the end of tax season.

Demand is so strong that even $6.69 billion in new volume expected next week is "underwhelming" and won't satisfy the investor appetite, according to Reid Smith, director of fixed income strategies, Ziegler Capital.

Inflows this week of $714 million into municipal mutual funds show continued interest even with the relative richness of munis beyond five years, Smith said.

"A key statistic shows that at the end of the month, dealer fixed coupon inventory is down by 32% since the beginning of the year," he said. "We think as with this week, deals will do well and spreads will be tight."

Smith said the demand is so heavy it is bucking the normal seasonal trend.

"Normally tax time is a time of predictable outflow to pay the IRS," he said. "Instead we have been witnessing record inflows."

"It seems like investors have awoken to the details of tax reform and have found munis a great place to be," Smith added.

Michael Pietronico, chief executive officer of Miller Tabak Asset Management, said the muni market right now is "trending sideways," until the summer months and from there he expects long-term yields to decline slightly from current levels.

"Our number one message to our clients is to continue to allocate into this asset class when they have available cash as municipals will remain a very tax efficient and low volatility investment," he said. "We view 12-year to 15-year 3% coupons at a price below 100 as the best value in the market right now."

The biggest municipal bond issuer so far in 2019 is coming back to the market to push them further away from the rest of the pack. California (Aa3/AA-/AA-) is expected to come with another $2.1 billion of general obligation bonds just weeks after the Golden State came with $2.29 billion on March 6. The deal will be led by Morgan Stanley and is set for a retail order period on Wednesday, followed by institutional pricing on Thursday.

"It should be well subscribed for as there is plenty of cash around looking for a home," Pietronico said.

Goldman Sachs is scheduled to price the Tuscaloosa County Industrial Development Authority's (NR/NR/NR) $612 million for Hunt Refining Company.

Siebert Cisneros Shank & Co., L.L.C is expected to price $450 million of tax-exempt, fixed rate Second General Resolution Revenue Bonds for the New York City Municipal Water Finance Authority (Aa1/AA+/AA+) for retail investors on Monday with institutions on Tuesday. About $150 million of bond proceeds will be used to fund capital projects and the remaining willrefund certain outstanding bonds.

After that, the next seven biggest deals range from $100-$194 million.

Secondary market

Munis were stronger on the MBIS benchmark scale Friday, which showed yields falling no more than one basis point in both the 10-year and 30-year maturities. High-grade munis were also stronger, with yields dropping less than one basis point in both the 10-year maturity and 30-year maturity.

On Refinitiv Municipal Market Data's AAA benchmark scale, the yield on both the 10-year and the 30-year remained unchanged.

The 10-year muni-to-Treasury ratio was calculated at 77.2% while the 30-year muni-to-Treasury ratio stood at 92.8%, according to MMD.

Lipper: More inflows into muni funds

For the 13th week in a row, cash rushed into municipal bond funds, according to data from Refinitiv Lipper released late Thursday.

Mutual funds which report flows weekly saw $713.606 million of inflows in the week ended April 3 after inflows of $1.532 billion in the previous week.

Exchange traded muni funds reported outflows of $73.425 million after inflows of $290.529 million in the previous week. Ex-ETFs, muni funds saw inflows of $787.031 million after inflows of $1.241 billion in the previous week.

The four-week moving average remained positive at $1.329 billion, after being in the green at $1.350 billion in the previous week.

Long-term muni bond funds had inflows of $430.846 million in the latest week after inflows of $1.129 billion in the previous week. Intermediate-term funds had inflows of $296.500 million after inflows of $318.839 million in the prior week.

National funds had inflows of $648.963 million after inflows of $1.339 billion in the previous week. High-yield muni funds reported inflows of $320.861 million in the latest week, after inflows of $491.916 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 $2.356 billion in the week ended March 27, while long-term muni funds alone saw an inflow of $2.032 billion as ETF muni funds saw an inflow of $324 million.

Week's actively traded issues

Some of the most actively traded munis by type in the week ended April 5 were from Connecticut, Florida and Oregon issuers, according to IHS Markit.

In the GO bond sector, the Connecticut 4s of 2038 traded 45 times. In the revenue bond sector, the Florida DFC 6.5s of 2049 traded 147 times. In the taxable bond sector, the Port of Portland 4.237s of 2049 traded 23 times.

Week's actively quoted issues

Puerto Rico and Oregon names were among the most actively quoted bonds in the week ended April 5, according to IHS Markit.

On the bid side, the COFINA revenue 5s of 2058 were quoted by 137 unique dealers. On the ask side, the Lane County School District No. 4., Ore., GO 3s of 2038 were quoted by 197 dealers. Among two-sided quotes, the COFINA revenue 5s of 2058 were quoted by 32 dealers.

Previous session's activity

The MSRB reported 39,771 trades Thursday on volume of $12.52 billion.

California, New York and Texas were most traded, with the Golden State taking 17.58% of the market, the Lone Star State taking 11.771% and the Empire State taking 10.86%.

The most actively traded issue was the Philadelphia IDHA Series 2014 revenue 4s of 2044 which traded 64 times on volume of $29.11 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. Contact Ziad Saba at 212-803-6079 for more information.

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Proposed claw back of fees for Puerto Rico GOs could backfire

Wednesday, April 3, 2019
By Robert Slavin

Municipal market analysts say that an effort to claw back fees paid for Puerto Rico general obligation bonds would be counterproductive to the commonwealth's long-term interests.

Twenty-three members of Congress sent a letter Monday to the Puerto Rico Oversight Board urging it to claw back fees paid to underwriters, bond counsel and others involved in Puerto Rico's general obligation bonds from 2012 to 2014. The Oversight Board argues that the $6 billion of bonds sold then are null regardless because they exceeded the island's constitutional debt limit.

In mid-January the board filed a legal challenge to the validity of three general obligation bonds that Puerto Rico sold in 2012 and 2014. It told the United States District Court for Puerto Rico that the rightful resolution is for Puerto Rico's government to not pay the bonds.

The lead underwriters of the GO bonds being challenged were UBS, Barclays, JPMorgan, Morgan Stanley, and RBC Capital Markets. Morgan Stanley and Barclays declined to comment for this story. The others didn't respond to a request for comment.

Greenberg Traurig served as bond counsel for the bonds. O'Neill & Borges served as underwriter's counsel. Neither firm responded to a request for comment.

O'Neill & Borges is a local legal advisor to the Puerto Rico Oversight Board.

"It's similar, in a way, to how Orange County [California]'s swap counterparty wound up paying the county for getting it entangled in derivatives not allowed by the county's investment policy," said Matt Fabian, partner at Municipal Market Analytics. "But I haven't heard of an issuer going after banking fees before in this way. You'd have to assume this will make it harder for the commonwealth to sign an underwriter in the future."

Pietronico said, "It's likely that underwriters will claim that the issuer (Puerto Rico) made false representations to them regarding the constitutional debt limit. We believe this scenario does not provide appropriate incentive for Puerto Rico to file an objection. The risk/reward ratio is far too high, given the relatively low stakes and the reputational costs."

Triet Nguyen, managing partner at Axios Advisors, said, "Any effort to claw back fees, assuming there is any legal basis for it, should come aftera formal invalidation of the 2012-2014 bond issues by the courts, not before. We believe the very process of trying to invalidate the GO issues would set a very bad precedent in the municipal market. Bondholders need to have confidence that the legal and constitutional representations made by [any] administration will not be used as a cover for actual unwillingness to pay by subsequent administrations."

George Friedlander, Court Street Group Research Managing Partner, addressed the morality of the Congress members' proposal. Friedlander rejected that the bonds were invalidly issued. Assuming that they were invalid, another issue the letter raises is whether that means the underwriting fees and other professional fees should be clawed back.

"The other issue seems more open, but still doesn't seem well resolved by requiring repayment of underwriting fees: did the underwriters properly do their due diligence on late-stage Puerto Rico debt before offering it for sale to the public?" Friedlander asked.

"Even in this case, the harmed party if the due diligence were inadequate would seem to be investors, not the issuer," Friedlander continued. For the issuer to claim that they had no obligation to assure the validity and viability of their own debt before it is offered for sale seems wrong. If that is the case, why would the underwriters have any obligation to unwind their underwriting fees?"

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SALT, Fed Drive Municipal Bonds to Best Yearly Start Since 2014

Monday, March 18, 2019
By Claire Ballentine

(Bloomberg) -- State and local-government bonds are headed for their strongest start to a year since 2014, propelled by an influx of cash into municipal-debt mutual funds as investors seek out tax havens and the Federal Reserve holds off on interest-rate increases.

The securities have returned 1.8 percent in 2019, putting them on track for the best first-quarter showing in five years. That's roughly double the gain for Treasuries, according to Bloomberg Barclays indexes.

The outperformance has been driven in part by a push among investors to cut their tax bills after the new limit on state and local deductions was ushered in, a trend that Bank of America Corp. analysts said they expect to continue. The Fed's decision to step back from tightening monetary policy is also boosting fixed-income investments.

"SALT is creating elevated demand, especially on the two coasts," said Michael Pietronico, chief executive officer of Miller Tabak Asset Management. "The perception that the Federal Reserve is on hold has helped pull cash off the sidelines."

Investors have added about $12.6 billion to municipal-bond mutual funds since early January, with about $1.6 billion sent in during the week ended March 13, the tenth straight weekly gain, according to Lipper US Fund Flows data. At the same time, the pace of new bond issuance hasn't kept up with demand, analysts say, a factor that helped push the prices of top"10">

As tax season gets set to begin, people who work on their filings will come to realize what municipal bonds bring to the table -- if they haven't already, says Dan Heckman, Senior Fixed-Income Strategist at U.S. Bank Wealth Management.

"Demand shouldn't decrease, there is a strong motivation by taxpayers and high-income individual to reassess their allocations," he said, adding that the market could use more volume, as the supply drought that began last year persists.

"There are lots of bonds being called and matured, a trend that will continue and only make the supply/demand imbalance even worse," he said. "We have been hoping for a serious pick-up in supply and although it may happen, we haven't seen it yet."

Heckman said that supply could pick up if spreads and yields get tight and low.

"I think in this current environment, investors need to be patient," he said. "Hoping for issuance is not a plan. You gotta do research when new issues come and try to pick your spots to put money to work -- don't continue to wait on the sidelines."

He added that he is advising investors to not go down in credit quality and don't overpay for anything.

"If anything, move up on the on the credit quality ladder and find value," Heckman said. "You also have to look at the yield curve, extend the duration and don't stay too short."

And in a plot twist on two of the week's largest deals will help keep spreads historically tight, Peter Delahunt, Managing Director of Municipals at Raymond James & Associates, predicted.

As current refundings, the $2.3 billion California general obligation sale and New York City's $914.24 million GO sale will have bonds called away from existing holders rather than having them pre-refunded, he noted on Friday.

"Historically, we have seen larger multi-billion dollar California GO deals lead to wider spreads, which revert back in as the outstanding supply dissipates over the following weeks," he said.

The new California deal will see "embedded demand" among the mostly mutual fund holders that will need to replace their called bonds, Delahunt pointed out. That should "keep spreads more contained than typical for a pricing of this size," he said.

Meanwhile, he said the NYC pricing is weighted to the shorter and intermediate part of the curve "where much of the demand has currently migrated" and will attract inherent demand due to its specialty state status.

"While this part of the curve has certainly become quite rich relative to taxable comparisons, New York paper continues to be attractive versus taxable equivalents due to higher tax rates and the elimination of SALT deductions," Delahunt said. "Again, this is a current refunding, where bonds will be called away and replacement demand should surface."

Anthony Valeri, Portfolio Manager at Zions Bancorp, said the upcoming supply next week could be a catalyst to ease expensive valuations -- especially in the short and intermediate parts of the curve -- or could be met with obstacles.

Next week's slate is coming at a challenging time, he said on Friday, as the 10-year triple-A municipal-to-Treasury yield ratio has dropped to a multi-year low of 79% and the average 10-year triple-A muni yield has declined to 2.17% -- a 13-month low.

While municipals have outperformed their Treasury counterparts so far in 2019 and have shown good resilience in the last few days to modest global government bond weakness, the combination of more expensive valuations relative to Treasuries and lower absolute yields may deter some investors, he said.

But, since the increase in supply isn't that onerous and the bulk of the new-issue volume next week hails from California and New York -- where investor demand is particularly strong -- Valeri believes the deals will get done.

"The cap on SALT deductions hits investors particularly hard in each [state] and municipals are one of the only ways to truly limit tax exposure," he said.

He noted that both California and New York are expensive compared to national averages because of the hearty investor demand "and that's not likely to change," he said.

State level debt obligations trade at yield levels that are in line, or slightly below, comparable triple-A national levels, he noted.

"While valuations, as measured by muni/Treasury ratios reflect expensive valuations for 10-year debt, they are not egregious," Valeri said. "The 30-year triple-A municipal-Treasury ratios reflect a fair valuation compared to the 10-year."

Overall going forward, he predicted that any weakness from supply is likely to be mild and possibly short-lived.

iate portion of the yield curve," he added.

Pietronico believes 3% coupons at a slight discount around 15 years in both California and New York make sense to consider given both the absolute yield and recent spread to 5% coupons.

Primary market

Municipal bond buyers are looking forward to more supply. IHS Markit Ipreo forecasts weekly bond volume will increase to $5.84 billion from a revised total of $4.71 billion in the prior week, according to updated data from Refinitiv. The calendar is composed of $4.58 billion of negotiated deals and $1.27 billion of competitive sales.

Topping the slate is the $2.3 billion general obligation bond deal from California (Aa3/AA-/AA-).

The Golden State offering consists of $2.05 billion of various purpose refunding GOs and $250 million of various purpose new-money GOs.

Citigroup and BofA Securities are lead managers on the deal, with PRAG as the financial advisor and Orrick as bond counsel.

Also on tap is a $914.245 million GO offering from New York City (Aa1/AA/AA).

On Friday, Moody's Investors Service upgraded the city's GO to Aa1 from Aa2 in an action that affects about $38 billion of outstanding GO debt.

"The upgrade to the general obligation rating reflects continued strengthening and diversification of New York City's economy, reducing its reliance on volatile financial services," Moody's said. "The upgrade also reflects the city's ongoing strong financial management, including stronger reserves that position it better to withstand an economic downturn. Budgetary and financial management are strong and frequent updates to multi-year financial plans provide the city a transparent view of future budget pressures New York City's revenue base is large and diverse."

Siebert Cisneros Shank is set to price the city's Fiscal 2019 Series E and F tax-exempt bonds on Wednesday after a two-day retail order period. BofA Securities, Citigroup, Goldman Sachs, JPMorgan Securities, Jefferies, Loop Capital Markets, Ramirez & Co. and RBC Capital Markets are co-senior managers.

On Wednesday, the city will competitively sell $71.89 million of taxable Fiscal 2019 Series F, Subseries F-2 GOs. The financial advisors are Public Resources Advisory Group and PFM Financial Advisors. The bond counsel are Norton Rose and Bryant Rabbino.

Also in the competitive market, Boston (Aaa/AAA/NR) is selling $145.13 million of GOs on Tuesday.

Proceeds will be used to finance the city's various capital projects.

The financial advisor is PFM Financial Advisors. The bond counsel is Locke Lord.

Bond Buyer 30-day visible supply at $7.57B

The supply calendar increased $2.83 billion to $7.57 billion for Friday. The total is composed of $2.73 billion of competitive sales and $4.84 billion of negotiated deals.

Lipper: Muni bond funds see inflows

Investors in municipal bond funds kept their confidence and put cash into them in the latest week, according to Lipper data released on Thursday.

The weekly reporters saw $1.705 billion of inflows in the week ended Feb. 27 after inflows of $1.469 billion in the previous week.

Exchange traded funds reported inflows of $144.400 million, after inflows of $95.270 million in the previous week. Ex-ETFs, muni funds saw inflows of $1.560 billion after inflows of $1.374 billion in the previous week.

The four-week moving average remained positive at $1.444 billion, after being in the green at $1.283 billion in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

Long-term muni bond funds had inflows of $1.110 million in the latest week after inflows of $919.663 million in the previous week. Intermediate-term funds had inflows of $469.295 million after inflows of $377.716 million in the prior week.

National funds had inflows of $1.515 billion after inflows of $1.291 billion in the previous week. High-yield muni funds reported inflows of $472.731 million in the latest week, after inflows of $397.226 million the previous week.

Secondary market

Municipal bonds were mixed Friday, according to the MBIS benchmark scale, with muni yields falling as much as one basis point in the two- to seven-year, nine-year, 13- to 15-year, 17-year, 21-year, 25-year and 27- to 30-year maturities, rising as much as one basis in the 10- and 11-year, 18- to 20-year and 22- to 24-year maturities and remaining unchanged in the one-year, eight-year and 12-year maturities.

High-grade munis were mostly weaker, with yields falling less than one basis point in the three and four-year maturities, rising as much as two basis points in the one- and two-year, five-year and seven- to 30-year maturities and remaining unchanged in the six-year maturity.

Investment-grade municipals were weaker on Refinitiv Municipal Market Data's AAA benchmark scale, which showed the yield on both the 10-year and 30-year muni rising two basis points.

Treasury bonds were weaker as stock prices traded little changed.

On Friday, the 10-year muni-to-Treasury ratio was calculated at 77.2% while the 30-year muni-to-Treasury ratio stood at 96.4%, according to MMD.

Previous session's activity

The MSRB reported 42,385 trades on Thursday on $12.34 billion of volume.

California, Texas and New York were most traded, with the Golden State taking 13.796% of the market, the Lone Star State taking 11.042% and the Empire State taking 10.547%.

Week's actively traded issues

Some of the most actively traded munis by type in the week ended March 1 were from Puerto Rico issuers, according to IHS Markit.

In the GO bond sector, the Puerto Rico Commonwealth 8s of 2035 traded 5 times. In the revenue bond sector, the COFINA 5s of 2058 traded 104 times. In the taxable bond sector, the COFINA 5s of 2058 traded 31 times.

Week's actively quoted issues

Puerto Rico and Nevada names were among the most actively quoted bonds in the week ended March 1, according to IHS Markit.

On the bid side, the COFINA revenue 5s of 2058 were quoted by 328 unique dealers. On the ask side, the Clark County, Nev., GO 5s of 2048 were quoted by 103 dealers. Among two-sided quotes, the COFINA revenue 5s of 2058 were quoted by 58 dealers.

Robust demand ahead

Overall steady municipal performance and strong demand -- especially for the 10-year slope of the yield curve -- are demonstrating investors' ongoing preference for the tax-exempt market, Jeffrey Lipton, head of municipal research and strategy and municipal capital markets at Oppenheimer & Co. Inc. said in a new report.

In fact, the demand component, he noted, could see an increase in the midst of individual income tax season and due to other market and policy factors.

"High net worth investors will be even more compelled to allocate cash to the municipal asset class given expanded tax liabilities for many filers -- despite the fact that the Tax Cuts and Jobs Act lowered the top marginal tax rate for individuals," Lipton wrote in his Feb. 26 weekly "Basis Points" report.

"Most high net worth muni investors pay their federal taxes at a sub-30% tax rate," he said.

Heightened demand could surface, he said, as a result of a less-threatening legislative environment and a more "market-friendly" Federal Reserve Board as investors are demonstrating a willingness to move further out along the yield curve, Lipton observed.

"The short-end had become rich as concerns over monetary policy and thinner participation from certain institutional buyers on the longer end tempered duration psychology and kept the muni yield curve steep relative to the Treasury curve -- which continues to remain flat," he explained.

The municipal 10- and 30-year yield curve presently stands at 89 basis points, versus 37 basis points for the comparable U.S. Treasury curve, Lipton pointed out.

He said 10-year munis "remain relatively expensive" with the benchmark ratio at 79%, and the 30-year ratio just under parity.

Lipton noted that he expects the 10-year range to hold its current demand and not cheapen much in the current environment.

"We suspect that if interest for longer-dated munis accelerates -- particularly from institutional buyers -- then we could see 30-year tax-exempts becoming somewhat more expensive relative to same maturity U.S. Treasuries," he wrote.

Due to the recent steepening of the muni yield curve, Lipton said the firm is finding value from 17 to 21 year maturities -- extending its previous target range by a few years.

Using the MMD benchmark triple-A yield curve, 88% of the long-bond yield can be captured by purchasing the 17-year maturity, while 95% can be attained by investing in the 21-year maturity, he noted.

In other strategic moves, Lipton said the firm recommends high net worth investors trade up in credit quality where appropriate -- owning a balance of general obligation and revenue bonds with dedicated revenue streams -- to maintain proper diversification that will help insulate portfolios from the "vagaries of economic, political and market behavior."

"The positive benefits of the Tax Cuts and Jobs Act along with other fiscal stimulus measures have begun to taper, yet we do think that Fed policy will help to keep the recovery on track for a while longer," Lipton added.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Contact Ziad Saba at 212-803-6079 for more information.

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Subdued issuance continues, as FOMC and competitive deals take lead

Friday, January 25, 2019
By Aaron Weitzman and Chip Barnett

Although the muni market will see more new supply than in the past holiday-shortened week, issuance will stay below average as Federal Reserve policy makers meet in Washington.

Ipreo forecasts weekly bond volume will creep up to about $3.7 billion from a revised total of $2.9 billion this week, according to updated data from Thomson Reuters. The calendar is composed of $2.5 billion of negotiated deals and $1.3 billion of competitive sales.

The Federal Open Market Committee is expected to hold the benchmark interest rate steady at its two-day monetary policy meeting. Observers will pay close attention to any discussion of balance sheet reduction for hints of flexibility.

Michael Pietronico, chief executive officer of Miller Tabak Asset Management, said that in general the firm believes issuance will surprise on the downside this year as economic growth slows and tax receipts follow suit.

"As such we see governments tn Jan. 2 and Jan. 3 respectively.

"Things will become more interesting as the year progresses as states begin working on FY 2020 budgets," said Schankel.

The market's focus for the week will be in the competitive arena, where several large offerings are set for sale.

Topping the slate are two sales coming from the New York Metropolitan Transportation Authority totaling over $1 billion.

The offerings to be sold on Thursday consist of $462.8 million of Series 2019A transportation revenue climate bond certified green bonds and $750 million of Series 2019A transportation revenue bond anticipation notes.

Moody's Investors Service rates the bonds A1 and assigns a MIG1 rating to the BANs.

"The A1 rating on MTA's Transportation Revenue Bonds is based on its essential service to a vast and economically robust service area, strong political and financial support from New York State (Aa1 stable) and New York City (Aa2 stable), and bondholder protection provided by strong governance and a gross pledge of the authority's diverse revenue sources," Moody's said. "The MIG1 rating reflects the expectation that MTA will have strong market access at BAN maturity (Feb. 3, 2020) given the MTA's satisfactory long-term credit quality (A1 negative), strong BAN takeout management plans, and the MTA's status as a sophisticated, frequent issuer of bonds and notes. Moreover, in the unlikely event of a market dislocation that impedes timely long-term debt issuance, we believe ample liquidity will be available to redeem the BANs."

On Monday, the Wauwatosa School District in Wisconsin will sell $124.9 million of general obligation school building and improvement bonds in two offerings, consisting of $63 million of Series 2019A GOs and $61.9 million of Series 2019B GOs. Proceeds will be used to finance various school improvements. The deals are rated Aa1 by Moody's Investors Service.

On Tuesday, Fairfax County, Virginia, is selling $270.3 million of public improvement bonds and refunding bonds in two offerings consisting of $225.395 million of Series 2019A bonds and $44.88 million of Series 2019 taxable refunding bonds. Proceeds will be used to finance various public and school improvements and to refund some outstanding debt. The deal is rated triple-A by Moody's, S&P Global Ratings and Fitch Ratings.

Shelby County, Tennessee, is selling $243.325 million of GO public improvement and school bonds in two offerings consisting of $170.865 million of Series 2019A GOs and $72.46 million of Series 2019B GO refunding bonds. The deal is rated AA-plus by S&P and Fitch.

The Broward County School District, Florida, is selling $175.845 million of Series 2019 GO school bonds.

Proceeds will be used for the acquisition, construction, renovation and equipping of educational facilities within the School District, including safety enhancements and instructional technology upgrades. The deal is rated AA-minus by Fitch.

In the negotiated sector, the biggest offering is a $345.53 million composite deal from the Orange County Health Facilities Authority in Florida for the Orlando Health Obligated group. The issue consists of hospital revenue bonds, forward delivery hospital revenue refunding bonds and taxable corporate CUSIP hospital revenue bonds.

Goldman Sachs is expected to price the taxable corporate CUSIP bonds on Tuesday and the tax-exempt bonds on Wednesday. The deal is rated A2 by Moody's and A-plus by S&P.

Secondary market

Municipal bonds were mixed on Friday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell less than one basis point in the four- to seven-year, 10-year and 16- to 23-year maturities, rose as much as one basis point in the one- to three-year, eight-year, 11- to 15-year and 25- to 30-year maturities. The three, nine, and 24-year maturities were flat.

High-grade munis were also mixed, with muni yields falling less than one basis point in the four- to six-year and 10- to 25-year maturities, rising less than a basis point in the one- to three-year, eight- and nine-year and 27- to 30-year maturities. The seven, 12 and 26-year maturities were unchanged.

Municipals were steady on Municipal Market Data's AAA benchmark scale, which showed the yield on both the 10-year muni general obligation and the yield on 30-year muni maturity remaining unchanged.

On Friday, the 10-year muni-to-Treasury ratio was calculated at 81.0% while the 30-year muni-to-Treasury ratio stood at 101.2%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.

Lipper: Muni bond funds see inflows

Investors put more money into municipal bond funds in the latest week, according to Lipper data released on Thursday.

The weekly reporters saw $834.371 million of inflows in the week ended Jan. 23 after inflows of $945.911 million in the previous week.

Exchange traded funds reported outflows of $117.588 million, after outflows of $306.220 million in the previous week. Ex-ETFs, muni funds saw inflows of $951.959 million after inflows of $1.252 billion in the previous week.

The four-week moving average remained positive at $683.673 million, after being in the green at $707.936 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

Long-term muni bond funds had inflows of $500.408 million in the latest week after inflows of $401.730 million in the previous week. Intermediate-term funds had inflows of $243.066 million after inflows of $497.610 million in the prior week.

National funds had inflows of $701.121 million after inflows of $774.506 million in the previous week. High-yield muni funds reported inflows of $383.195 million in the latest week, after inflows of $411.038 million the previous week.

Previous session's activity

The Municipal Securities Rulemaking Board reported 43,207 trades on Thursday on volume of $14.26 billion.

California, New York and Texas were the municipalities with the most trades, with the Golden State taking 13.178% of the market, the Empire State taking 12.069% and the Lone Star State taking 10.607%.

Week's actively traded issues

Some of the most actively traded munis by type in the week ended Jan. 25 were from Texas, New York and Illinois issuers, according to Markit.

In the GO bond sector, the Birdville Independent School District, Texas, 3.75s of 2044 traded 24 times. In the revenue bond sector, the New York City Municipal Water Finance Authority 5s of 2024 traded 39 times. In the taxable bond sector, the Chicago Sales Tax Securitization Corp. 4.787s of 2048 traded 38 times.

Week's actively quoted issues

Puerto Rico and California names were among the most actively quoted bonds in the week ended Jan. 25, according to Markit.

On the bid side, the Puerto Rico Sales Tax Financing Corp. revenue 6s of 2042 were quoted by 98 unique dealers. On the ask side, the California taxable 7.55s of 2039 were quoted by 104 dealers. Among two-sided quotes, the California taxable 6s of 2040 were quoted by 22 dealers.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Contact Ziad Saba at 212-803-6079 for more information.

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Muni-Bond Funds See Investors Rushing Back as Rate Fears Subside

Friday, January 11, 2019
By Danielle Moran and Claire Ballentine

(Bloomberg) -- Investors are flooding back into state and local government debt as Federal Reserve officials signaled they'd be cautious about raising interest rate amid signs of slowing global economic growth.

Municipal-bond mutual funds reported the biggest inflow of cash in nearly two years during the week through Wednesday, when they pulled in $1.55 billion, according to Lipper US Fund Flows data. That may signal a shift in sentiment among investors, who had pulled out funds during most of the fourth quarter after concern about rising interest rates weighed on bond prices.

"There are two things driving the flows in our opinion," said Michael Pietronico, chief executive officer of Miller Tabak Asset Management. "That would be the Federal Reserve signaling a more dovish approach to monetary policy and the global economic slowdown, which is clear to see."

The influx of cash may add support to a market that analysts said would likely benefit this month from a flood of debt payments that may outpace the amount of new securities being sold. Bank of America Corp. analysts said they expected "steady inflows" in 2019 and are bullish on state and local-government bonds overall. The municipal market has returned about 0.2 percent since the beginning of the year and prices rose slightly Friday, pushing down the yields on benchmark 10-year debt by about 0.02 percentage point to 2.24 percent.

--With assistance from Mark Tannenbaum.

To contact the reporters on this story:
Danielle Moran in New York City at dmoran21@bloomberg.net
Claire Ballentine in New York at cballentine@bloomberg.net

To contact the editors responsible for this story:
James Crombie at jcrombie8@bloomberg.net, William Selway, Michael B. Marois

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New issues likely to see good demand; munis end stronger ahead of supply

Monday, January 7, 2019
By Chip Barnett and Aaron Weitzman

Municipal bonds finished stronger on Monday ahead of this week's $7.77 billion new issue calendar. The slate consists of $5.81 billion of negotiated deals and $1.96 billion of competitive sales.

"The strong market technicals will drive good demand," said Michael Pietronico, chief executive officer at Miller Tabak Asset Management. "In particular we sense larger institutions will be the predominant buyers, as attractive block offerings have been few and far between in the municipal market these past couple of weeks."

Primary market

On Monday, Bank of America Merrill Lynch held a second day of retail orders on Massachusetts' $918.49 million of tax-exempt general obligation bonds. The deal will be priced for institutions on Tuesday.

The bonds are rated Aa1 by Moody's Investors Service, AA by S&P Global Ratings and AA-plus by Fitch Ratings.

In the competitive arena on Tuesday, New York's Empire State Development is selling about $1.56 billion of Urban Development Corp. state personal income tax revenue bonds in six sales. The bonds are rated Aa1 by Moody's and AA-plus by Fitch.

On Wednesday, Wells Fargo Securities is expected to price the New Jersey Transportation Trust Fund Authority's $500 million of transportation program bonds. The deal is rated A-minus by Fitch and Kroll Bond Rating Agency.

On Thursday, JPMorgan Securities expected to price the San Francisco Airport Commission's $1.78 billion of tax-exempt and taxable revenue and revenue refunding bonds. The deal, which consists of bonds subject to the alternative minimum tax and non-AMT bonds, is rated A1 by Moody's and A-plus by S&P and Fitch.

Bond Buyer 30-day visible supply at $10.53B

The Bond Buyer's 30-day visible supply calendar increased $259.6 million to $10.53 billion for Monday. The total is comprised of $3.99 billion of competitive sales and $6.55 billion of negotiated deals.

Secondary market

Municipal bonds were stronger on Monday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell as much as three basis points in the two- to 30-year maturities while dropping four basis points in the one-year maturity.

High-grade munis were also stronger, with yields calculated on MBIS' AAA scale falling as much as four basis points in the one- to 30-year maturities.

Municipals were mixed on Municipal Market Data's AAA benchmark scale, which showed the yield on the 10-year muni general obligation remaining unchanged while the yield on the 30-year muni maturity rose by two basis points.

Treasury bonds were weaker amid continuing stock market volatility. The Treasury 30-year was yielding 2.972%, the 10-year yield stood at 2.675%, the five-year was at 2.509%, the two-year was at 2.524% while the Treasury three-month bill stood at 2.412%.

On Monday, the 10-year muni-to-Treasury ratio was calculated at 82.4% while the 30-year muni-to-Treasury ratio stood at 99.9%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.

"The broader muni yield curve is lower by one basis point in the shorter end out to eight-years and unchanged on the longer end," ICE Data Services said in a Monday market comment. "The taxable curve had moved this morning. It was 3.1 basis points higher in yield at the two-year mark and tapering down to 1.1 basis point higher in the 10-year with the 30-year being down one basis point in yield."

Previous session's activity

The Municipal Securities Rulemaking Board reported 36,387 trades on Friday on volume of $7.66 billion.

California, New York and Texas were the municipalities with the most trades, with the Golden State taking 14.95% of the market, the Empire State taking 11.183% and the Lone Star State taking 9.685%.

Week's actively traded issues

Revenue bonds comprised 56.69% of total new issuance in the week ended Jan. 4, according to Markit with general obligation bonds making up 37.62% and taxable bonds accounting for 5.69%.

Some of the most actively traded munis by type in the were from New Jersey, Texas and Puerto Rico issuers.

In the GO bond sector, the Jersey City 3.25s of 2020 traded 22 times. In the revenue bond sector, the Texas 4s of 2019 traded 20 times. And in the taxable bond sector, the Puerto Rico Government Development Bank Recovery Authority 7.5s of 2040 traded 27 times.

Treasury auctions discount rate bills

Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were lower, as the $39 billion of three-months incurred a 2.410% high rate, off from 2.465% the prior week, and the $36 billion of six-months incurred a 2.470% high rate, down from 2.505% the week before.

Coupon equivalents were 2.458% and 2.536%, respectively. The price for the 91s was 99.390806and that for the 182s was 98.751278.

The median bid on the 91s was 2.390%. The low bid was 2.350%. Tenders at the high rate were allotted 47.49%. The bid-to-cover ratio was 3.06.

The median bid for the 182s was 2.440%. The low bid was 2.410%. Tenders at the high rate were allotted 81.66%. The bid-to-cover ratio was 2.98.

Gary 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. Contact Ziad Saba at 212-803-6079 for more information.

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Chicago Delays $1.3 Billion Sales-Tax Bond Sale as Yields Rise

Wednesday, October 31, 2018
By Martin Z. Braun and Danielle Moran

(Bloomberg) -- Chicago postponed a planned sale of $1.3 billion of bonds secured by the city's sales-tax revenue as yields rose after the U.S. Treasury Department said it plans to increase the issuance of long-term debt. The third-largest U.S. city was planning to use proceeds of the offering to refinance outstanding general-obligation debt, making the deal more sensitive to interest-rate moves. On Monday Chicago had doubled the size of the sale, but on Wednesday municipal-bond yields edged higher, pushing those on 30-year securities up 0.03 percentage point to 3.39 percent. The "recent market fluctuations" caused the city to "postpone the bond offering until the market normalizes," said Kristen Cabanban, a spokeswoman for Chicago. "We will continue to monitor the market and will bring the offering when conditions are most favorable to achieving the greatest savings for taxpayers."

Some investors speculated that an S&P Global Ratings downgrade early Wednesday of Illinois's sales-tax debt to BBB from AA- may have led potential investors to reevaluate the deal, even though the company didn't lower its grade on Chicago's securities. S&P downgraded the state debt because of a change in how the rating company views municipal bonds backed by dedicated revenue. S&P is taking into account general creditworthiness when it rates so-called "priority-lien tax revenue debt." Michael Pietronico, a founding partner and senior portfolio manager for Miller Tabak Asset Management, doubted that the rise in interest rates triggered the delay to Chicago's sale. He said it is "very rare" for a deal to be shifted to so-called day-to-day status -- which is sometimes used to give bankers more time to drum up demand -- because of market conditions. "If there was interest in the loan from buyers it likely would have priced," he said. "Either the interest was not there or the yield penalty buyers were asking for was too punitive for the issuer."

To contact the reporters on this story:
Martin Z. Braun in New York at mbraun6@bloomberg.net
Danielle Moran in New York City at dmoran21@bloomberg.net

To contact the editors responsible for this story:
James Crombie at jcrombie8@bloomberg.net, William Selway, Michael B. Marois

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Municipal Bond Yields Hit Four-Year High as Cash Leaves Market

Tuesday, September 18, 2018
By Danielle Moran

(Bloomberg) -- A two-week slide in the price of state and local government securities has pushed yields to a more than four-year high as investors pull money from municipal bond funds and the flood of debt payments that boosted demand over the summer recedes.

The yield on 10-year benchmark bonds jumped to more than 2.6 percent Tuesday, the highest since February 2014. The securities have slid along with Treasuries after a slew of strong economic data reinforced speculation that the Federal Reserve will raise interest rates twice more this year.

"I would suggest that the Treasury market is leading the muni market at this point, slowly grinding higher as the Treasury market makes it difficult for the muni market to stabilize," said Michael Pietronico, chief executive officer of Miller Tabak Asset Management, which manages $1.1 billion of municipal debt in New York.

Mikhail Foux, head of municipal strategy at Barclays Plc, said that while the Treasury movement is probably the biggest driver of municipal yields right now, the anticipated uptick in new bond sales through the end of the year is figuring in as well. The supply-demand mismatch that led to positive returns during the summer months is waning as the new debt issues are expected outpace the amount of money investors receive from interest payments and bonds that are being paid off.

"A main reason for muni underperformance is that technicals are not as strong as they were," Foux said.

Buyers of state and local bonds are showing signs of caution, Foux said, with investors pulling money out of municipal mutual funds for the last two weeks. Such outflows typically occur when rising interest rates threaten the value of outstanding bonds, he said.

"It seems like a lot of investors are a little cautious right now and they don't want to put money to work even if they have money," Foux said.

To contact the reporter on this story:
Danielle Moran in New York City at dmoran21@bloomberg.net

To contact the editors responsible for this story:
James Crombie at jcrombie8@bloomberg.net, Michael B. Marois, William Selway

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As demand remains very healthy, municipal bonds finish mixed

Monday, July 30, 2018
By Christine Albano and Chip Barnett

Municipal bonds ended mixed on Monday ahead of this week's $4.4 billion of planned bond issuance.

Even though demand generally remains healthy, there wasn't much to get municipal investors interested in the market as July begins winding down, according to municipal market participants.

"Activity in municipals seems relatively muted although there [are] some bid wanted lists, and that is generating some attention from dealers because of their size," Michael Pietronico, chief executive officer at Miller Tabak Asset Management said on Monday.

In addition, he observed that the short end of the market is seeing excessive demand relative to the value offered. "There remains a host of investors who sense long rates might be due for a spike," Pietronico said.

Consequently, he said that slope of the curve is a challenging place to be. "Once again the short end of the market remains the most difficult area of the curve to find value," he said.

Meanwhile, despite recent softness, the supply-demand imbalance is lifting the market, while credit quality continues to improve, according to Stephen Winterstein, managing director of municipal credit research at Wilmington Trust.

"The municipal bond market was softer last week in sympathy with U.S. Treasuries," he said in a report released Monday. "While this was the first down week in seven, demand appears to be solid and lagging supply continues to serve as a support mechanism."

While Wilmington Trust remains concerned by unfunded pension liabilities and other post-employment benefits [OPEB], it views improving credit quality as a boost for the market.

"We believe credit quality is largely healthy," Winterstein said, noting that Moody's Investors Service upgraded the District of Columbia's general obligation debt to Aaa, from Aa1 earlier this month, while S&P Global Ratings last week upgraded the state of Michigan to AA, from AA-minus and the state of Minnesota to AAA, from AA-plus, both with stable outlooks.

Muni performance over the last 10 years

Bank of America Merrill Lynch looked at total returns of the ICE-BAML U.S. Municipal Securities Index over the past decade.

Over the last 10 years, munis had average monthly total returns of 3.65% compared to Treasury and corporate average returns of 2.58% and 4.21%, respectively.

"Though past performance does not guarantee future performance, we do see munis had decent total returns with tax-exempt income. The worst yearly total return was in 2008, with a negative 3.953%, while the best followed right after in 2009 with 14.454%," Sophie Yan, BAML muni research strategist, wrote in Monday's report. "We also show the rolling 12-month total returns of munis, comparing it to Treasuries and corporates. The volatility and divergence between these asset classes were very high between 2008 and 2010, becoming more stable and consistent in recent years."

For 2018, the muni index has returned negative 0.031% through July 26, outperforming both the Treasury and agency master index and the corporate index, which had total returns of negative 1.633% and negative 2.677%, respectively.

The best performance in munis for the year-to-date has been in the one- and three-year maturities and in the BBB-rated sector, Yan said.

Secondary market

Municipal bonds were mixed on Monday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell less than one basis point in the one-year, three-year and 29- to 30-year maturities, rose less than a basis point in the eight- to 13-year and 15- to 27-year maturities and remained unchanged in the two-year, four-year- to seven-year, 14-year and 28-year maturities.

High-grade munis were also mixed, with yields calculated on MBIS' AAA scale falling less than one basis point in the one- to eight-year and 30-year maturities, rising less than a basis point in the nine- to 27-year maturities and remaining unchanged in the 28- and 29-year maturities.

Municipals were stronger on Municipal Market Data's AAA benchmark scale, which showed both the 10-year muni general obligation yield and the yield on the 30-year muni maturity rising one basis point.

Treasury bonds were stronger as stocks traded lower.

On Monday, the 10-year muni-to-Treasury ratio was calculated at 82.4% while the 30-year muni-to-Treasury ratio stood at 97.0%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.

Previous session's activity

The Municipal Securities Rulemaking Board reported 30,306 trades on Friday on volume of $9.92 billion.

California, New York and Texas were the states with the most trades, with the Golden State taking 16.128% of the market, the Empire State taking 15.764% and the Lone Star State taking 10.942%.

Primary market

The week's slate consists of $3.5 billion of negotiated deals and $932 million of competitive sales.

On Tuesday, JPMorgan Securities is set to price San Antonio's $330 million of Series 2018 general improvement bonds, combination tax and revenue certificates of obligation, tax notes, and taxable combination tax and revenue certificates of obligation. The deal is rated triple-A by Moody's Investors Service, S&P Global Ratings and Fitch Ratings.

Bank of America Merrill Lynch is expected to price the Louisiana Public Facilities Authority's $305 million of Series 2015 A1, A2 A3 and 207 hospital revenue bonds for the Louisiana Children's Medical Center. The deal is rated A-plus by S&P.

Wells Fargo Securities is set to price the West Virginia Parkways Authority's $161 million of Series 2018 senior lien turnpike toll revenue bonds on Tuesday. The deal is rated AA-minus by S&P and Fitch.

Citigroup is expected to price the Forsyth County School District, Ga.'s $147 million of Series 2018 general obligation bonds on Tuesday. The deal is rated triple-A by Moody's and S&P.

In the short-term competitive sector, the Miami-Dade County School District is selling $335 million of Series 2018 tax anticipation notes on Tuesday.

On Wednesday, Citigroup is set to price the Washington State Convention Center Public Facilities District's $974 million of Series 2018 lodging tax bonds and subordinate lodging tax bonds. The bonds will finance part of the construction associated with building an addition.

In the competitive arena, Maryland is selling two deals totaling over $500 million on Wednesday. The deals consist of $275.3 million of Bidding Group 1 state and local facilities loan of 2018 second series tax-exempt bonds and $234.71 million of Bidding Group 2 state and local facilities loan of 2018 second series tax-exempt bonds.

Bond Buyer 30-day visible supply at $10.03B

The Bond Buyer's 30-day visible supply calendar increased $2.15 billion to $10.03 billion for Tuesday. The total is comprised of $3.40 billion of competitive sales and $6.63 billion of negotiated deals.

Prior week's top underwriters

The top municipal bond underwriters of last week included JPMorgan Securities, Bank of America Merrill Lynch, RBC Capital Markets, Wells Fargo Securities and Citigroup, according to Thomson Reuters data.

In the week of July 22 to July 28, JPMorgan underwrote $1.4 billion, BAML $1.1 billion, RBC $873 million, Wells Fargo $608.6 million, and Citi $353.9 million.

Fortuitous forecast

Combining interest-rate stability, low muni yield volatility, and below average year-to-date issuance with a flatter yield curve and benign credit conditions, Morgan Stanley Wealth Management maintains a "blue-sky setting" for municipals, according to executive director Matthew Gastall in a monthly municipal report.

"Though some U.S. Treasury volatility has been apparent, the laggard response that municipals exhibit versus broader fixed income price action has helped volatility in our market to remain subdued," he wrote.

This year's gross primary issuance is running roughly 13% below the primary market's year-to-date historical average, he noted, recognizing that the decline is a result of the limitations placed on advance refundings following the passage of last year's Tax Cuts and Jobs Act. In addition, only 14% of this year's gross supply has been issued solely for refinancings, compared to such deals accounting for approximately 34% of all volume between 2009 and 2017.

Roughly two-thirds of the state and local government asset class is controlled by households, he pointed out, since the vast majority of its investors seek wealth preservation and an income stream that is exempt from federal income taxes.

"As the securities are not as directly exposed to the global flows of the prodigious international base, municipals often outperform Treasury weakness and underperform rallies because of their slower response," he added.

Consequently, volatility metrics have hovered at minimal levels since the first quarter, he noted, with the five-, 10-, and 30-year triple-A Municipal Market Data benchmark yields trading within ranges of 28, 16, and 29 basis points, respectively, Gastall noted.

"Interest-rate stability and lower volatility have granted many investors comfort, helping the municipal asset class to perform well," he said in the report.

With trading activity slowing for the summer, Gastall believes this period is an advantageous one for investors to complete midyear portfolio reviews, including proper yield-curve positioning, coupon structure, credit-quality, sector/state diversification, and tax exposure.

Meanwhile, current trade tensions and the uncertainties of this year's midterm electiosed 55.14% of new issuance in the week ended July 27, up from 54.84% in the previous week, according to Markit. General obligation bonds made up 38.80% of total issuance, down from 38.89%, while taxable bonds accounted for 6.06%, down from 6.27% a week earlier.

Some of the most actively traded munis by type in the week were from New York, California and Illinois issuers.

In the GO bond sector, the New York City zeros of 2038 traded 24 times. In the revenue bond sector, the Los Angeles 4s of 2019 traded 56 times. And in the taxable bond sector, the Illinois 5.1s of 2033 traded 38 times.

Treasury plans to borrow $329B in Q3

The Treasury Department said it plans to borrow $329 billion in the third quarter, compared to an earlier estimate of $273 billion.

The borrowing assumes a $350 billion cash balance at quarter's end, the same as the prior estimate.

Treasury borrowed $72 billion in the second quarter, compared to the estimated $75 billion, ending with a $333 billion cash balance, compared to the expected $360 billion.

In the fourth quarter, Treasury expects to borrow $440 billion, ending the calendar year with a $390 billion cash balance.

Treasury to sell $65B 4-week bills

The Treasury Department said it will sell $65 billion of four-week discount bills Tuesday. There are currently $93.007 billion of four-week bills outstanding.

Treasury sells discount bills

Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were higher, as the three-months incurred a 2.000% high rate, up from 1.970% the prior week, and the six-months incurred a 2.160% high rate, up from 2.140% the week before.

Coupon equivalents were 2.038% and 2.214%, respectively. The price for the 91s was 99.494444 and that for the 182s was 98.908000.

The median bid on the 91s was 1.970%. The low bid was 1.940%. Tenders at the high rate were allotted 71.22%. The bid-to-cover ratio was 2.87.

The median bid for the 182s was 2.140%. The low bid was 2.110%. Tenders at the high rate were allotted 73.19%. The bid-to-cover ratio was 3.14.

Gary 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. Contact Ziad Saba at 212-803-6079 for more information.

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Municipal Bond Funds Draw Flood of Cash as Market Extends Gains

Wednesday, July 25, 2018
By Danielle Moran

(Bloomberg) -- Bondholders are no longer seeing losses from their investments in state and local-government debt -- and they're pouring money back into the market.

Mutual funds that focus on municipal bonds picked up $1.68 billion in the week through July 18, the biggest influx of cash since the end of January, according to the Investment Company Institute. It was and the eleventh straight weekly gain.

Strong demand comes as the market recovers from losses in January that left it in the red for much of the year. Municipal bonds have since swung to a 0.04 percent gain, a relatively strong showing given the 1.47 percent loss for Treasuries and 2.79 percent drop for corporate debt, according to Bloomberg Barclays indexes.

"Solid returns of the muni market over all relative to other fixed income sectors is what's drawing in the interest," said Michael Pietronico, chief executive officer of Miller Tabak Asset Management in New York, which manages $1.2 billion of municipal debt.

He said there's also "a lot of uncertainties in regards to tariffs and trade issues globally that is driving money into defensive sectors, particularly munis."

To contact the reporter on this story:
Danielle Moran in New York City at dmoran21@bloomberg.net

To contact the editors responsible for this story:
James Crombie at jcrombie8@bloomberg.net, William Selway

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Municipal Bonds Gain the Most in a Year With Month's End Surge

Friday, June 1, 2018
By Danielle Moran

(Bloomberg) -- Municipal bonds had a good May.

The Bloomberg Barclays muni-bond index recorded its best month in a year, with the benchmark returning 1.15 percent in May. That was its biggest gain since a 1.59 percent increase a year earlier.

The market for state and local debt saw a month's-end boost from a Treasury rally Tuesday spurred by political unrest in Italy that had global investors fleeing to the safest assets, causing municipal yields to jump as much as eight basis points.

"What drove the performance was the level of interest as rates moved to more attractive absolute levels. Perhaps the market got a bit oversold," said Michael Pietronico, chief executive officer of Miller Tabak Asset Management in New York, which manages $1.2 billion of municipal debt. "Events that are accruing overseas, particularly in Italy assisted in the interest in the asset class."

Investors added cash to municipal-bond mutual funds for the last four weeks, illustrating strong demand for state and local debt, according to Lipper US Fund Flows data.

Summer typically sees demand outpace supply in the municipal market as the amount of money investors receive from debt payments tends to exceed the amount of new bonds being sold. This year, that imbalance could top $80 billion after Congress eliminated the tax break on a key debt refinancing tool and issuers rushed to market in December, said Nisha Patel, portfolio manager at Eaton Vance Management.

"The market has confounded investors since the end of last year," said Jon Thompson, analyst at Securian Asset Management, which has about $1.1 billion in municipals under management.

"While expectations might be setting up for a seasonally and typically strong summer, I wouldn't be willing to say, 'yeah that's going to happen' because the market hasn't performed really as investors have expected and as it has historically."

To contact the reporter on this story:
Danielle Moran in New York City at dmoran21@bloomberg.net

To contact the editors responsible for this story:
James Crombie at jcrombie8@bloomberg.net, Michael B. Marois, William Selway

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Municipal bonds stabilize as San Antonio, N.C. Turnpike deals sell

Friday, April 26, 2018
By Christine Albano, Chip Barnett, and Aaron Weitzman

Municipal bonds steadied on Thursday after sliding the previous day, as the last of the week's new issuance came to market.

Traders said that the future tone of the market may depend on Treasurys.

"Municipals are trying to stabilize at the moment -- although further weakness is possible should Treasurys weaken," said Michael Pietronico, chief executive officer of Miller Tabak Asset Management.

"Absolute yields are attractive, but dealers are looking to lighten inventory further to minimize their losses," he said. "Investors with cash are in complete control of the municipal bond market."

Secondary market

Municipal bonds were mixed on Wednesday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell as much as a basis point in the three- to 13-year maturities and rose as much as a basis point in the one- to two-year and 14- to 30-year maturities.

High-grade munis were mixed as well, as yields calculated on MBIS' AAA scale fell by as much as one basis point in the three- to 13-year and 18- to 25-year maturities and rose as much as a basis point in the one- to two-year, 14- to 17-year and 26- to 30-year maturities.

Munis were stronger according to Municipal Market Data's AAA benchmark scale, which showed yields declining two basis points in the 10-year maturity and dropping two basis points in the 30-year maturity.

Treasury bonds were stronger in late trade, with the 10-year yield slipping below 3% as the Dow Jones Industrial Average, the S&P 500 and Nasdaq index all moved up.

Primary market

JPMorgan Securities priced San Antonio, Texas' $209.11 million of Series 2018A water system junior lien revenue and refunding bonds.

The deal is rated Aa2 by Moody's Investors Service and AA by S&P Global Ratings and AA by Fitch Ratings.

Since 2008, the Alamo City has sold about $12.2 billion of securities, with the largest volume during that period occurring in 2012 when it sold $2.05 billion and the least amount (excluding this year) in 2011 when it sold $411 million.

In the competitive arena, the North Carolina Turnpike Authority sold $150.13 million of Series 2018A appropriation revenue refunding bonds for the Triangle Expressway System.