Market Participants Waiting for First of Large Deals to Price

Municipal market participants are eagerly anticipating the pricing of the first few large deals of the week, scheduled for later Tuesday, following a dull day in the market Monday.

"Yields will be relatively attractive for buyers and that will help get the deals done," said a New York trader.

Secondary Market

Treasury prices were mostly lower on Tuesday morning, as the yield on the two-year Treasury note is flat from Monday's 0.66%, while the 10-year yield increased to 2.10% from 2.08% and the 30-year yield rose to 2.71% from 2.68%.

The yield on the 10-year benchmark muni general obligation on Monday was three basis points higher at 2.05% from Friday's 2.02%, while the yield on the 30-year GO rose three basis points to 2.90% from 2.87%, according to the final read of Municipal Market Data's triple-A scale.

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%.

Primary Market

Among the large issues expected to hit the market Tuesday is Cypress-Fairbanks Independent School District's $297.92 million of unlimited tax refunding bonds. Raymond James will price the bonds, which are scheduled to mature serially from 2028 to 2035. The issue has underlying ratings of Aa1 from Moody's Investors Service and AA-minus from Standard & Poor's.

Also pricing Tuesday is Medford School District No. 549C, Ore.'s $136.28 million of general obligation refunding bonds, led by Piper Jaffray.

Bank of America Merrill Lynch and Morgan Stanley are scheduled to price the biggest deal of the week - California's $1.9 billion of general obligation bonds for retail investors Tuesday followed by institutional pricing on Wednesday. The deal is rated Aa3 by Moody's and A-plus by both S&P and Fitch Ratings.

Bank of America Merrill Lynch is also expected to price Thursday the Los Angeles Department of Water and Power, Calif.'s $495 million power system revenue bonds.

On the competitive side, Maryland is scheduled to auction two issues totaling $922 million on Wednesday. The deals consist of $518 million tax-exempt First Series A State and Local Facilities Loan of 2015 GOs and $404 million First Series B State and Local Facilities Loan of 2015 refunding GOs. The issues are rated triple-A by Moody's, S&P and Fitch.

Maryland comes to market fairly often, having sold five deals since 2012, the latest being July 23 of last year, when JP Morgan won $449.61 million of GOs with a true interest cost of 2.6535%.

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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