Market Gets Cy-Fair ISD, First Look at Calif.

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Prices of top-rated municipal bonds were slightly weaker at mid-session, with yields on some maturities one to three basis points higher, according to traders.

The market has been busy so far Tuesday, as Cypress-Fairbanks Independent School District priced, and California's $1.9 billion of GO bonds priced for retail. In the competitive market, Florida State Board of Education sold $230.335 million of refunding bonds.

Primary Market

Cypress-Fairbanks ISD, Texas's $313.45 million of unlimited tax refunding bonds were priced by Raymond James as 5s to yield from 0.97% in 2018 to 2.75% in 2030 and as 4s to yield from 3.17% in 2031 to 3.39% in 2035. The issue has underlying ratings of Aa1 from Moody's Investors Service and AA-minus from Standard & Poor's.

Bank of America Merrill Lynch and Morgan Stanley priced the retail portion of the biggest deal of the week - California's $1.9 billion of general obligation bonds. The general obligation new money part of the deal for $790 million is priced as 4s to yield 0.17% in 2016 and from 1.84% in 2022 to 2.35% in 2025 and as 5s in 2026 to yield 2.51%. The deal also features a 3% coupon in 2029 to yield 3.17% and a 3.25% coupon in 2032 to yield 3.37%. There is a split maturity in 2045, with $50 million priced as 4s to yield 3.60%, $50 million as 5s to yield 3.20% and $150 million not offered for retail. Additionally, no retail orders were taken for the 2027-2028, 2030-2031 and 2033 maturities.

The $1.11 billion refunding part of the deal is priced to yield from 0.17% in a split maturity in 2016, with $50 million as 2s, $50 million as 3s and $59 million as 5s, to 2.35% in a split maturity in 2025 that has $20 million as 4s and $23 million as 5s. No retail orders were taken for the 2026 through 2030 maturities.

The deal is rated Aa3 by Moody's and A-plus by both S&P and Fitch Rating and institutional pricing is expected to take place on Wednesday.

On the competitive side, JP Morgan won the bid for the $230.335 million Florida State Board of Education public education capital outlay refunding bonds, 2015 Series B with a true interest cost of 2.1872%. The deal is priced as 5s to yield from 0.30% in 2016 to 3.10% in 2029, except the 2025 and 2029 maturities, which have a 3% coupon. It is rated Aa1 by Moody's and triple-A by both S&P and Fitch.

Also Piper Jaffray is expected later Tuesday to price Medford School District No. 549C, Ore.'s $136.28 million of general obligation refunding bonds.

Secondary Market

The yield on the 10-year benchmark muni general obligation on Tuesday was as much as two basis points higher from Monday's 2.05%, while the yield on the 30-year GO is from one to three basis points higher from 2.90%, according to the latest read of Municipal Market Data's triple-A scale.

Treasury prices were mostly steady at midday Tuesday, as the yield on the two-year Treasury note is flat from Monday's 0.66%, while the 10-year yield increased to 2.09% from 2.08% and the 30-year yield was also flat at 2.68% from Monday.

The 10-year muni to Treasury ratio was calculated at 98.5% on Monday versus 101.0% on Friday, while the 30-year muni to Treasury ratio stood at 108.1% compared to 110.5%.

MSRB Previous Session's Activity

The Municipal Securities Rulemaking Board reported 37,218 trades on Monday on volume of $7.960 billion.

Most active on Monday, based on the number of trades, was the New York City Transitional Finance Authority future tax secured tax-exempt subordinate bonds fiscal 2015 Series C 3s of 2028, which traded 421 times at an average price of 99.877, with an average yield of 3.01%.

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