The municipal bond market opened the week with attention on primary deals, as Hawaii and Massachusetts priced more than $1.4 billion for retail investors. The secondary market took a back seat with benchmark scales ending mostly unchanged from Friday.
Three of the week’s largest deals priced for retail investors with over $800 million from Hawaii and over $600 million from Massachusetts in two pricings.
“People are focused on the primary and I don’t see secondary trades going on,” a New Jersey trader said. “I’d say it’s slightly weaker today. It feels overbought. But it’s just quiet.”
This trader said there were not a lot of balances left over from last week’s deals and so new issues should be well received.
Hawaii held a second retail order period for $806.8 million of general obligation bonds, priced by Bank of America Merrill Lynch. The bonds are rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings. Institutional pricing is expected Tuesday.
Yields on the first series of $635 million ranged from 1.16% with a 5% coupon in 2018 to 4.16% with a 4% coupon in 2033. Portions of bonds maturing between 2025 and 2033 were not offered for retail. The bonds are callable at par in 2023. Yields were raised one and two basis points on bonds maturing beyond 2021 from the first retail order period.
The second series of $35.6 million was offered via sealed bid.
The third series of $58.6 million yielded 0.37% with 3% and 5% coupons in a split 2015 maturity.
The fourth series of $27 million yielded 0.57% with 3% and 5% coupons in a split 2016 maturity.
Yields on the fifth series of $50.6 million ranged from 0.84% with a 3% coupon in 2017 to 2.68% with a 3% coupon in 2023. Yields were raised one and two basis points on bonds maturing between 2021 and 2023 from the first retail pricing.
In other retail pricings, B of A Merrill also priced $366 million of triple-A rated Massachusetts transportation fund revenue bonds for the accelerated bridge program. Yields ranged from 2.40% with a 5% coupon in 2023 to 4.35% with a 4.25% coupon in 2040. Portions of bonds maturing between 2029 and 2043 were not offered for retail. The bonds are callable at par in 2021. Institutional pricing is expected Tuesday.
Citi priced for retail $288.2 million of Massachusetts federal highway grant anticipation notes also for the accelerated bridge program. The bonds are rated Aa1 by Moody’s, AAA by Standard & Poor’s, and AA-plus by Fitch.
Yields ranged from 0.52% with 3% and 4% coupons in a split 2016 maturity to 3.47% with a 4% coupon and 3.27% with 5% coupon in a split 2027 maturity. The bonds are callable at par in 2022. A second retail pricing is expected Tuesday followed by institutional pricing Wednesday.
The retail pricings Monday come amid an overall increase in issuance this week to $5.77 billion, up from last week’s revised $5.06 billion. The negotiated market should see $4.48 billion, up from last week’s revised $4.17 billion. On the competitive calendar, $1.29 billion is expected to be auctioned, up from last week’s revised $885.3 million.
In the secondary market, trading volume of Puerto Rico Sales Tax Financing Corp. rose Monday morning following last week’s investor call by the commonwealth discussing COFINA’s legal opinions.
In morning trading, COFINA volume was 22% higher than the average of the last five Monday sessions, and most trades were dealer-to-customer sells. “The most active COFINA CUSIP is trading cheaper relative to trades on Friday,” a Chicago trader said. “COFINA is being sold off of dealer books and not to other dealers.”
Trades compiled by data provider Markit showed firming.
Yields on Oldham County, Ky., School District 2.5s of 2022 and Honolulu Wastewater System 5s of 2036 fell three basis points each to 2.56% and 3.64%, respectively.
Yields on Orange County, Fla., Health Facilities Authority 5.125s of 2039 and Little Elm, Texas, Independent School District 5s of 2037 fell two basis points each to 5.28% and 4.03%, respectively.
Yields on Pennsylvania 5s of 2024 fell two basis points to 2.88% and California 5s of 2022 slid one basis point to 2.79%.
On Monday, the triple-A Municipal Market Data scale ended steady after weakening on Friday. The 10-year and 30-year yields were flat at 2.46% and 4.06%, respectively. The two-year was steady for the fifth session at 0.34%.
Yields on the Municipal Market Advisors benchmark scale ended as much as one basis point weaker. The 10-year and 30-year yields were steady at 2.62% and 4.25%, respectively. The two-year was flat for the fourth session at 0.48%.
Treasuries were steady to slightly firmer. The benchmark 10-year yield slid two basis points to 2.61%. The two-year and 30-year yields were flat at 0.32% and 3.70%, respectively.
Throughout October, yields and credit spreads for muni bonds declined for the second straight month after rising between June and August, according to a monthly report by BondDesk Group which tracks retail trades of under 100 bonds. “Amid the decline in yields and credit spreads, daily trade volume and buy-to-sell ratios also declined,” the report said. Trade volume in October was 13% lower than the 12-month high set in August.
The average yield of a triple-A GO maturing in five years was 1.3% and the average yield of a 10-year bond was 2.3% in October. The average yield of a single-A GO maturing in five years was 1.7% and the average bond maturing in 10 years was 3.0%.
The average five-year triple-A revenue bond yielded 1.5% while the 10-year bond yielded 2.4% throughout October. The average five-year single-A revenue bond yielded 2.1% and the 10-year yielded 3.2%.
