Municipal bond traders on Tuesday will see the busiest day of the busiest week so far this year. The bulk of the week's more than $9 billion of new supply is set to come to market, led off by deals in New York and Texas.
Secondary Market
Treasuries were higher on Tuesday. The yield on the two-year Treasury declined to 0.64% from 0.66% on Monday, while the 10-year Treasury yield dropped to 1.70% from 1.73%, and the 30-year Treasury bond yield decreased to 2.54% from 2.56%.
Top-quality municipal bonds finished stronger on Monday. The yield on the 10-year benchmark muni general obligation fell four basis points to 1.62% from 1.66% on Friday, while the 30-year muni yield dropped three basis points to 2.69% from 2.72%, according to the final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated on Monday at 93.5% compared to 89.2% on Friday, while the 30-year muni to Treasury ratio stood at 105.1% versus 100.9%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 29,130 trades on Monday on volume of $4.63 billion.
Primary Market
The calendar this week consists of $6.2 billion of negotiated deals and $2.9 billion of competitive sales.
The New York City Transitional Finance Authority leads the pack on Tuesday with several sales totaling $1 billion.
Bank of America Merrill Lynch will price the TFA's $750 million of Fiscal 2016 Series E-1 future tax secured subordinate bonds for institutions Tuesday after completing a two-day retail order period for the debt.
BAML priced the bonds for retail on Monday to yield from 0.71% with a 3% coupon in 2019 to 2.93% with a 5% coupon in 2042; a 2018 maturity was offered as a sealed bid.
The deal is rated Aa1 by Moody's Investors Service and triple-A by Standard & Poor's and Fitch Ratings.
The TFA will also competitively sell $250 million of taxable fixed-rate new money bonds in two sales on Tuesday consisting of $195.42 million of Fiscal 2016 Series E-2 future tax secured subordinate bonds and $54.58 million of Fiscal 2016 Series E-3 future tax secured subordinate bonds. Both taxable sales are rated triple-A by S&P and Fitch.
Also on Tuesday, Wells Fargo Securities is set to price Houston's $800 million of Series 2016B combined utility system first lien revenue and refunding bonds. The offering from the Houston Combined Utility System, is backed by customer revenues and is rated Aa3 by Moody's and AA by S&P and Fitch.
Officials said the size of the deal could go as high as $960 million depending upon market conditions.
Since 2006, the city of Houston has issued bonds an average of 5.4 times a year. The city has sold about $13 billion of debt, with the largest issuances coming in 2011 and 2014 when it offered $2.1 billion and $2.5 billion, respectively, and hitting the lows in 2006 and 2015, when it issued $319 million and $485 million, respectively.
In the competitive arena on Tuesday, Washington state will sell two deals totaling $522.11 million. The offerings consist of $321.58 million of Series 2016C various purpose GOs and $200.53 million of Series 2016D motor vehicle tax GOs. Both sales are rated Aa1 by Moody's and AA-plus by S&P and Fitch.
Minnesota will competitively sell on Tuesday two deals totaling $350.75 million. The offering is made up of $247.43 million of Series 2016A state revolving fund revenue bonds and $103.35 million of Series 2016B state revolving fund revenue refunding bonds.
The new money bonds will finance drinking water and clean water loans for projects across the state while the second series will refund outstanding bonds. The state has about $800 million in SRF bonds. Bond proceeds and recycled funds are combined with federal grants and a state matching requirement to provide low-cost loans. Both deals are rated triple-A by Moody's, S&P and Fitch.
The Dallas Independent School District will competitively sell $304.98 million of Series 2016A unlimited tax school building bonds. The deal, which is backed by the Permanent School Funding guarantee program, is rated triple-A by Moody's, S&P and Fitch.
Clark County, Nev., on Tuesday will competitively sell $283.73 million of Series 2016A limited tax GO bond bank refunding bonds, additionally secured by pledged revenues. The issue is rated Aa1 by Moody's and AA by S&P.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $472.7 million to $12.20 billion on Tuesday. The total is comprised of $3.98 billion of competitive sales and $8.21 billion of negotiated deals.
