Top-quality municipal bonds were unchanged at mid-session, according to traders, as the biggest deal of the week priced for institutions on Tuesday.
JPMorgan Securities priced the state of California's $2.7 billion of various purpose general obligation and GO refunding bonds for institutions after a one-day retail order period.
The $615 million of GOs were priced to yield from 0.63% with 3% and 5% coupons in a split 2018 maturity to 0.84% with 3% and 5% coupons in a split 2020 maturity; and from 1.19% with a 3% coupon in 2022 to 1.63% with a 5% coupon in 2026; as 2s to yield 2.03% in 2028, as 5s to yield 1.94% in 2029 and as 5s to yield 1.99% in 2030. A triple split 2046 maturity was priced as 3s to yield 3.05%, as 4s to yield 2.59% and as 5s to yield 2.29%. A 2017 maturity was offered as a sealed bid.
The $2.09 billion of GO refunding bonds were priced to yield from 0.63% with 4% and 5% coupons in a split 2018 maturity to 2.55% with 4% and 5% coupons in a split 2037 maturity. A split 2017 maturity was offered as sealed bids.
The issue is rated Aa3 by Moody's Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.
The deal marks the second time this year the Golden State has issued a multi-billion dollar bond deal. In March, the state sold $2.95 billion of GOs, in the largest bond deal of 2016. Buyer demand drove the state to increase the size of that sale by about $600 million.
Since 2006, the state has sold about $97.68 billion of debt, with the largest issuance occurring in 2009 when it sold about $23.18 billion of bonds. In the same amount of time, the lowest amount it has issued in a year was 2006, when it came to market with $4.58 billion.
Also on Tuesday, Bank of America Merrill Lynch priced the Illinois Finance Authority's $500 million of Series 2016 state clean water initiative revolving fund revenue bonds.
The issue was priced to yield from 0.66% and 0.70% with 4% coupons in a split 2018 maturity to 2.63% with a 4% coupon in 2036. A 2017 maturity was offered as a sealed bid.
The IFA's state revolving fund bonds will pave the way more low-cost loans for local clean water and drinking water projects. The deal is rated triple-A by S&P and Fitch.
In the competitive arena, the state of Louisiana sold $169 million of Series 2016D GOs on Tuesday.
BAML won the deal with a true interest cost of 2.66%. The issue was priced to yield from 0.64% with a 5% coupon in 2017 to 2.75% with a 4% coupon in 2036.
The deal is rated Aa3 by Moody's, AA by S&P and AA-minus by Fitch.
Siebert Cisneros Shank is expected to price the New York State Environmental Facilities Corp.'s $130 million of state revolving funds revenue green bonds for the 2010 Master Financing Program. The issue consists of tax-exempts and taxables.
Jefferies is set to price the Pennsylvania Housing Finance Agency's $255 million of Series 2016-121 single-family mortgage revenue bonds for retail investors ahead of the institutional pricing on Wednesday. The deal is rated Aa2 by Moody's and AA-plus by S&P.
On Wednesday, Barclays Capital Markets is scheduled to price the Minneapolis-St. Paul Metropolitan Airports Commission's $542.13 million of senior airport revenue refunding non-alternative minimum tax and subordinate airport revenue refunding non-AMT bonds.
The senior bonds are rated AA-minus by both S&P and Fitch, while the subordinate bonds are rated A-plus by S&P and Fitch.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $356 million to $12.70 billion on Tuesday. The total is comprised of $3.44 billion of competitive sales and $9.26 billion of negotiated deals.
Citi Sees 'Lumpy' Issuance Ahead
Municipal bond issuance fell 27% in July compared to the same month last year, but has since picked up, with supply for the week ending Aug. 26 being 57% higher than the trailing three-year average for same period, according to a report from Citi Research.
"We expect the forward issuance calendar to stay robust in terms of both refundings and new money issuance and expect $8.2 billion gross in issuance over the next week," Citi analysts Vikram Rai and Jack Muller wrote in Tuesday's market report. "Our estimate for gross issuance for 2016 remains unchanged at $413 billion split almost evenly between new money and refundings."
Federal Reserve Chair Janet Yellen's message last week from the Fed's meeting in Jackson Hole was economic developments may point to a stronger case for resuming normalization, the report said, adding that while Yellen gave no hints about the timing of an interest rate kike, some Fed participants suggested that a September rise was a real possibility.
"While a hike in 2016 is back on the table, in our experience, issuers typically want to avoid issuance around Fed meetings as they would rather avoid rate volatility," they wrote. "Thus, if anything, the probability of a live Fed meeting would cause issuance to become a little lumpier, if you will. Our net issuance expectation for September $5.2 billion which is markedly higher vs. trailing three-year averages."
Secondary Market
The yield on the 10-year benchmark muni general obligation was unchanged from 1.42% on Monday, while the yield on the 30-year was steady at 2.12%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries were narrowly mixed on Tuesday. The yield on the two-year Treasury fell to 0.80% from 0.81% on Monday, the 10-year Treasury yield rose to 1.57% from 1.56% and the yield on the 30-year Treasury bond increased to 2.23% from 2.22%.
On Monday, the 10-year muni to Treasury ratio was calculated at 90.7% compared to 87.0% on Friday, while the 30-year muni to Treasury ratio stood at 95.7% versus 92.4%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 32,509 trades on Monday on volume of $7.98 billion.
