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Municipal bonds were unable to continue yesterday's fast pace, but the high-grade sector did post mild gains in what amounted to a quiet close to a volatile week.
New issues were minimal today, save for one large retail order period from a New York issuer. Next week's supply grows again, creating anxiety for some participants.
In terms of day-to-day total returns:
-- The high-grade, short end of the curve showed a total return of positive 0.06%, according to Municipal Market Advisors (MMA) data.
-- The high-grade, intermediate part of the curve showed a total return of positive 0.05%.
-- The high-grade, long end of the curve showed a total return of positive 0.07%.
The high-grade marketplace of bonds rated double-A or better was quiet today. After the large advances made yesterday, traders were content to call it a week. There was some activity in the 10-year range that made for some modest increases again today in that range.
In the non-investment grade sector of non-rated bonds or single-A and lower, there was even less trading. The only notable theme was several accounts clearing out old California inventory with the expectation to purchase the state's new deal coming next week.
The new-issue market today had the New York State Environmental Facilities Corp. offering revenue bonds to retail customers. It will do the same on Monday.
Major deals priced today:
-- $361 million state clean water and drinking water revolving funds revenue bonds for the New York State Environmental Facilities Corp.; Aa1/AA/AA+; retail only.
Next week supply grows again. A California offering will be the largest single deal in over a year. With the rally of high-grades this week, credit spreads have widened considerably. Most expect this large single-A offering to only exacerbate that process.
Largest deals expected to price next week:
-- $4 billion California general obligation bonds; A2/A/A+ (retail March 23, 24/institutional March 25)
-- $481 million Houston, Texas, utility system first lien revenue bonds; A1/AA/NR (March 24)
-- $455 million Illinois Finance Authority Northwestern Memorial Hospital revenue bonds in 2 series; Aa2/AA+/NR (March 24)
-- $444 million Oregon Dept. of Administration Services lottery revenue bonds; Aa3/AAA/NR (retail March 24/institutional March 24)
A look at the 30-day returns of the
Dow Jones Industrial Average
and the 30-day returns of a 2- to 10-year muni ladder may surprise some investors.
Matthew Posner is a director with Municipal Market Advisors. Posner writes intraday research, data and commentary on the municipal market and heads up the firm's efforts in Washington, D.C., as an educator of policymakers on the tax-exempt securities market. Founded in 1995, MMA is the leading independent strategy, research and advisory firm in municipal bond industry.