Municipal bond traders were awaiting big offerings from California, Phoenix and the Chicago Schools, all set for sale Tuesday.
Secondary Market
Treasury prices were higher Tuesday as the yield on the two-year Treasury note dropped to 0.52% from 0.53% on Monday, while the 10-year yield decreased to 1.88% from 1.90% and the 30-year yield declined to 2.55% from 2.57%.
The yield on the 10-year benchmark muni general obligation on Monday was unchanged from 1.94% on Friday, while the yield on the 30-year GO rose one basis point to 2.84% from 2.83%, according to the final read of Municipal Market Data's triple-A scale. On Monday, April 13, the yield on the 10-year muni stood at 1.97% while the yield on the 30-year was at 2.84%.
The 10-year muni to Treasury ratio was calculated on Monday at 102.6% versus 105.0% on Friday, while the 30-year muni to Treasury ratio stood at 110.9% compared to 113.1%.
Primary Market
Leading off the new supply slate are three separate competitive offerings from California totaling $1.1 billion. The sales consist of $578.6 million of tax-exempt various purpose general obligation refunding bonds, Bid Group C; $408.6 million of tax-exempt various purpose GO refunding bonds, Bid Group B; and $105.36 million of taxable various purpose GO, Bid Group A. The bonds are rated Aa3 by Moody's Investors Service and A-plus by Standard & Poor's and Fitch Ratings.
The Golden State last sold tax-exempt bonds competitively on Nov. 13, 2014, when Bank of America Merrill Lynch won $630 million of tax-exempt various purpose GOs with a true interest cost of 2.9499%. The state last sold taxable bonds competitively on Nov. 13, 2014, when Citi won $270 million of taxable various purpose GOs with a TIC of 0.9560%.
Also slated for Tuesday is the Chicago Board of Education's $300 million of unlimited tax GOs. PNC Capital Markets is the senior manager on the deal, which is expected to include $275 million of Series 2015C project bonds and $20 million of Series 2015E green bonds, backed by dedicated alternative revenues. The issue is rated A-minus by S&P, BBB-minus by Fitch and BBB-plus by Kroll Bond Rating Agency.
The sale is coming on the heels of a spate of negative headlines surrounding the district, which is under federal investigation for the awarding of a no-bid contract.
Steep yield penalties are expected as the district's long term yields have jumped 140 basis points due to recent negative news with trading between 200 and 300 basis points above the Municipal Market Data and Municipal Market Analytics triple-A benchmarks depending on maturities.
In preliminary pricing indications on the $275 million series, the 2035 maturity for $194 million was initially offering yields of 5.53% with a 5.25% coupon and 5.38% with a 6% coupon, 281 and 266 basis points, respectively, over the MMA benchmark. The 2039 maturity for $81.5 million was offering yields of 5.62% with a 5.25% coupon and 5.32% with a 6.25% coupon, 279 and 249 basis points over MMA.
And Phoenix, Ariz., is scheduled to come to market with $391 million of tax-exempt and taxable Series 2 civic improvement subordinated excise tax revenue refunding bonds. Wells Fargo Securities is slated to price the issue. The bonds are rated Aa3 by Moody's and AA-plus by S&P.
Also this week is Washington's Energy Northwest's $888 million offering. JPMorgan is slated to price the tax-exempt and taxable bonds on Thursday in six series. The issue is rated Aa1 by Moody's, AA-minus by S&P and AA by Fitch.
And Connecticut plans to issue $250 million of green bonds to finance wastewater and drinking water infrastructure projects statewide. In what will be the Nutmeg State's first all-green bond sale, the bonds are being offered to retail investors on Monday and Tuesday ahead of the institutional pricing on Wednesday. The sale follows Connecticut's first issuance of $60 million green bonds in the Fall of 2014, which was just a small part of an overall $300 million GO sale.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $120.7 million to $11.750 billion on Tuesday. The total is comprised of $4.003 billion competitive sales and $7.747 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,824 trades on Monday on volume of $8.273 billion.
The most active bond, based on the number of trades, was the Chicago Series 2012B taxable GO project and refunding 5.432s of 2042, which traded 167 times at an average price of 88.131 with an average yield of 6.361%. The bonds were initially priced at par to yield 5.432%.
—Yvette Shields and Paul Burton contributed to this report
