The $1.4 billion San Francisco Bay Area Toll Authority revenue bonds, the largest deal of the week, set the bar for the rest of the deals that came to market this week.
Investors found the deal's soft-put feature and unique structure appealing, aiding buyers with a place to park their cash for the short-term.
The Oregon Department of Administrative Services brought $215 million of triple-A rated lottery bonds to the market on Wednesday that was repriced with tighter spreads.
The repricing came with no surprise to investors as Oregon is a specialty state that typically trades tighter than other lottery backed bonds.
Though credit spreads have greatly narrowed in this sector, traders found the deal attractive given the high state income tax rate.
Single-A hospitals have been heavily traded in the secondary market this week, because mutual funds are selling the debt to make quick cash for redemption payments following Puerto Rico's sell-off last week.
The North Carolina Medical Care Community Health Care Facility's 5s in 2038 has been trading in block trades as large as $1.82 million, according to data provided by Markit. The South Dakota Health and Education Facilities Authority's 4.125s in 2041 were traded in an odd lot of 825,000.
"We've been trading single-A hospitals in the secondary, it is all that we're focusing on besides Puerto Rico," a trader in New York said.
Traders have said that trading is high on the single A hospital bonds in the secondary because high-yield mutual funds were put under pressure last week when the sell-off on Puerto Rico debt caused fund flows for all municipal bonds funds to sharply decline. High yield funds flows reported outflows of $59.48 million for the week ending July 16, adding to the previous week's outflows of $691.1 million, according to Lipper FMI.
"A lot of high yield funds have been forced to sell their high quality issues to fund redemptions," Fred Bacani, Head of Fixed Income & Trading at Veritable LP in Newtown Square, Pennsylvania. "High yield funds can't really catch a strong bid on Puerto Rico debt, so they're selling higher quality names in their portfolio."
Puerto Rico credits have since strengthened, with yields on the commonwealth's GO 8s in 2035 strengthening for six straight days as of market close Thursday, according to data provided by Bloomberg. The trader in New York said that trading on single-A hospitals has remained high this week because their spreads have widened out since the mutual funds began unloading the debt.
Muni yields were mostly strengthened Friday, with yields on bonds maturing in five-years falling as much as one basis point and yields maturing in six to 29-years slipped as much as two basis points. Yields on bonds maturing in one to four-years were steady, according to the Municipal Market Data's triple-A scale.
Fund flows for all municipal bond funds showed of $157.8 million coming in, after an outflow of $790.3 million last week.
The largest deal next week is for $879.8 million of Maryland general obligation bonds. Of that amount, $759.6 million will be sold in the competitive market and $100 million will be priced by Citigroup in the negotiated market. The deals are rated Aaa by Moody's Investors Service, and AAA by both Standard & Poor's and Fitch Ratings.
In the negotiated market, Mesirow Financial will issue $300 million of Houston public improvement refunding bonds. The deal is rated AA-plus by S&P. Wells Fargo Securities will issue $153.4 million of Utah County hospital revenue bonds. The deal is rated Aa1 by Moody's and AA-plus by S&P.
In the competitive market, Miami-Dade County, FL., will auction $310 million of tax anticipation notes on Tuesday, which will mature in 2015. The deal is rated MIG1 by Moody's.
Harris County, TX will sell $225 million of tax anticipation notes, which will mature in 2015. The deal is rated F1-plus by Fitch.
Treasuries weakened Friday, with 30-year yields, the 10-year benchmark and the two-year notes climbing two basis points each to 3.30%, 2.48% and 0.49%, respectively.
