Municipal bond traders saw the last of this month's issuance come to market on Tuesday with the biggest deal of the week pricing - the $265 million Illinois State Toll Highway Authority bonds.
No muni deals are scheduled for Wednesday or during the abbreviated trading session on Friday, the last trading day of November.
"It's pretty quiet in the market, and you can feel that," said a New York trader "There's just not too much to report. Some primary sales came in and did well, but that was about it."
Municipal bond prices were slightly stronger on the day as secondary market activity also wound down ahead of the Thanksgiving holiday.
"The primary is going to get really quiet. And as far as the secondary - Wednesday, Friday - you'll be lucky to get a trade," the trader said.
Primary Market
Closing out the month was the biggest deal of the week - the $264.5 million issue of Illinois State Toll Highway Authority toll highway senior revenue refunding bonds.
Siebert Brandford Shank & Co. priced the bonds with 5% coupons to yield from 0.84% in 2018 to 2.63% in 2025.
The Illinois Tollway said the issue, which had at an average yield of 2.3%, refunded $291.7 million of the Series 2006A bonds. The sale will cut the Tollway's principal and interest payments by $33 million in fiscal years 2015-2024 on a net present value basis.
"We are extremely pleased that we were able to leverage favorable conditions in the municipal market to achieve savings that exceeded our expectations," Tollway Executive Director Kristi Lafleur said in a press release.
This was the Tollway's third refunding bond issuance since 2013.
"These three issues refunded most of the Tollway's outstanding Series 2005A and 2006A bonds. In total, the three issues refunded $956.4 million of Series 2005A and 2006A bonds, producing net present value savings of $90.3 million, or 9.4% of the amount of bonds refunded," according to agency.
In Its last sale in October, the agency came to market with a $400 million new money deal. That issue priced with 5% coupons ranging in yield from 2.82% in 2027 to 3.53% in 2039. The generic, triple-A general obligation bond in 2039 yielded 2.89% at the time of the pricing, according to Municipal Market Data.
The new issue is secured by toll revenues and by the authority's bond covenant pledges to charge rates sufficient to repay the debt, fund reserves and maintain a targeted debt-service coverage ratio.
Ahead of the sale, Moody's Investors Service affirmed the authority's senior-lien Aa3 rating and stable outlook. Fitch Ratings and Standard & Poor's have also affirmed the authority's AA-minus rating with a stable outlook.
"The favorable reaction among investors to Tollway bonds underscores [its] fundamental strength," said Board Chair Paula Wolff.
Also on Tuesday, BMO Capital Markets Inc. priced $100 million of McHenry County, Ill., Conservation District general obligation refunding bonds.
The bonds were priced as serials to yield from 1.24% with a 3% coupon in 2015 to 2.93% with a 5% coupon in 2027. The issue is rated Aa1 by Moody's and AA-plus by S&P.
Secondary Market
Municipal bond yields were unchanged to a tad lower on Tuesday, with the benchmark 10-year general obligation yield down two basis points to 2.13% from Monday and 30-year GO one basis point tighter to 3.07%, according to the final read of MMD's triple-A scale.
Treasury prices were mostly higher, with the two-year note yield up two basis points to 0.52% from Monday's market close. The 10-year yield was down four basis points to 2.27% while the 30-year fell four basis points to 2.98%.
On Tuesday, the muni-to-Treasury ratio was higher. The 10-year muni-to-Treasury ratio closed at 94.2%, up from 93.2% on Monday. The 30-year muni to Treasury ratio closed at 103.5%, compared with 102.1% on Monday.
"Things are a little richer," a New York trader said, "but they're not trading at that level. It seems like they just get marked up to get marked down again."
He said that the only real action he saw "were some money fund manager types putting out some lists." He added that "some of our guys were buying some 10-year paper, but nothing major."
The bond markets have a regular trading day on Wednesday and a 2 p.m., EST, recommended close on Friday but little if any in the way of secondary activity is expected on either day.
Yields on the Golden State Tobacco Securitization Corp., Calif.'s tobacco settlement revenues widened on Tuesday, according to an evaluation by Markit. The tobacco settlement asset-backed senior current interest 2007A 5.75s of 2047 tightened, with yields falling to 7.06% from 7.13, according to Markit.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,933 trades on Monday for volume of $6.434 billion.
Most active based on the number of trades were the Missouri State Health and Educational Facilities Authority 4s of 2045 which traded 357 times at an average price of 98.718 and an average yield of 4.073%. This same issue was the second most active on Tuesday, trading 135 times at a high/low price of 100/97.065 and a high/low yield of 4.169%/4.0%.
