Last Issuance of Week Comes In as Yields Move Lower

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Municipal market participants saw the last issuance of the week flow into the market as muni yields slipped on Thursday, according to traders.

Primary Market

"It was a good day for the issuers to come to market with the lowering yields," said one New York trader. "The deals got done and did so pretty easily."

Another east coast trader said that "most of the primary market supply was soaked up aggressively."

Citi priced the Alabama State Port Authority's $142.405 million of dock facilities revenue refunding bonds. The $124.140 million of Series 2017A alternative minimum tax bonds were priced to yield 1.12% with a 5% coupon in 2017 and from 2.72% with a 5% coupon in 2023 to 3.89% with a 5% coupon in 2035. Assured Guaranty insured these bonds, except for a 2017 maturity of $1.785 million.

The $12.110 million of Series 2017B non-AMT bonds were priced to yield from 1.41% with a 5% coupon in 2018 to 1.85% with a 5% coupon in 2020.

The $6.155 million of Series 2017C non-AMT bonds were priced to yield 3.68% with a 5% coupon in a bullet 2036 maturity, which is insured by Assured.

No pricing information was available for a scheduled $133 million taxable portion. The deal is rated A-minus by S&P Global Ratings and Fitch Ratings, with the exception of the insured maturities, which are rated AA by S&P.

Citi also priced California Educational Facilities Authority's $179.055 million of revenue bonds for Loma Linda University on Thursday. The $135.445 million of Series 2017A tax exempt portion was priced to yield from 1.00% with a 5% coupon in 2017 to 3.74% with a 5% coupon in 2036. A term bond in 2042 was priced to yield 3.78% with a 5% coupon and a term bond in 2047 was priced to yield 3.83% with a 5% coupon.

Citi received the verbal award on the $43.61 million of Series 2017B taxable portion late on Wednesday night. The bonds were priced at par to yield from 1.966% in 2018 to 4.213% in 2027. A term bond in 2033 was priced at par to yield 4.75%. The 2018 maturity was about 75 basis points above the comparable Treasury security, the 2027 maturity was about 180 basis points above the comparable Treasury security. The deal is rated Baa1 by Moody's Investors Service and A by S&P.

RBC Capital Markets priced the Tennessee Housing Development Agency's $100 million of Issue 2017-1 residential finance program bonds not subject to the alternative minimum tax.

The issue was priced at par to yield from 0.95% and 1.05% in a split 2018 maturity to 3.15% in both parts of a split 2028 maturity; a 2032 maturity was priced at par to yield 3.625%, a 2039 maturity was priced at par to yield 4% and a 2042 PAC bond was priced as 4s to yield 2.33% with an average life of 5 years. The deal is rated Aa1 by Moody's and AA-plus by S&P.

In the competitive arena, Delaware sold $225 million of Series 2017 general obligation bonds. Morgan Stanley won the GOs with a true interest cost of 2.80%.

The issue was priced to yield from 0.80% with a 5% coupon in 2018 to 3.389% with a 3.25% coupon in 2037. The deal is rated triple-A by Moody's, S&P and Fitch.

Since 2007, Delaware has sold about $3.29 billion of bonds, with the most issuance coming in 2009 when it offered $729 million. The First State did not come to market in 2012 or 2015.

The Port of Seattle sold $129.94 million of Series 2017 limited tax GOs. JPMorgan Securities won the bonds with a TIC of 3.55%. The issue was priced as 5s to yield from 0.80% in 2018 to 3.13% in 2039; a 2042 maturity was priced as 5s to yield 3.16%. The deal is rated triple-A by Moody's and S&P and AA-minus by Fitch.

The Lancaster County School District, S.C., competitively sold $125 million of Series 2017 GOs. Bank of America Merrill Lynch won the bid with a TIC of 3.29%. The bonds were priced to yield from 0.85% with a 5% coupon in 2018 to 3.53% with a 4% coupon in 2036. The deal is rated Aa1 by Moody's and AA by S&P.

PNC Capital Markets won the Miami-Dade County $176.93 million of transit system sales surtax revenue refunding bonds with a TIC of 3.66%. No other pricing information was immediately available. The deal is rated AA by S&P and Fitch.

Secondary Market

Top-rated municipal bonds finished stronger on Thursday. The 10-year benchmark muni general obligation yield was three basis points lower to 2.34% from 2.37% on Wednesday, while the yield on the 30-year GO was down two basis points to 3.09% from 3.11%, according to a final read of Municipal Market Data's triple-A scale.

Treasuries were stronger, as the yield on the two-year Treasury declined to 1.19% from 1.22% on Wednesday, while the 10-year Treasury fell to 2.38% from 2.41%, and the yield on the 30-year Treasury bond decreased to 3.02% from 3.03%.

On Thursday, the 10-year muni to Treasury ratio was calculated at 98.1% compared to 98.1% on Wednesday, while the 30-year muni to Treasury ratio stood at 102.3%, versus 102.5%, according to MMD.

Tax-Exempt Money Market Fund Inflows

Tax-exempt money market funds experienced inflows of $356.8 million, bringing total net assets to $131.63 billion in the week ended Feb. 20, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $539.1 million to $131.27 billion in the previous week.

The average, seven-day simple yield for the 232 weekly reporting tax-exempt funds was unchanged from 0.22% in the previous week.

The total net assets of the 863 weekly reporting taxable money funds decreased $6.23 billion to $2.507 trillion in the week ended Feb. 21, after an inflow of $970.3 billion to $2.513 trillion the week before.

The average, seven-day simple yield for the taxable money funds was steady from 0.27% in the prior week.

Overall, the combined total net assets of the 1,095 weekly reporting money funds fell $5.87 billion to $2.639 trillion in the week ended Feb. 21, after inflows of $431.2 billion to $2.645 trillion in the prior week.

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