Muni Market Reflects on Week, Set for New Slate

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Municipal bond traders were taking stock of the week's new issuance, reflecting on the impact of the Federal Reserve's inaction on interest rates and preparing to see next week's new issue slate.

Secondary Market

Treasuries were narrowly mixed on Friday. The yield on the two-year Treasury rose to 0.78% from 0.77% on Thursday, the 10-year Treasury yield fell to 1.62% from 1.63% and the yield on the 30-year Treasury bond decreased to 2.34% from 2.36%.

Top-quality municipal bonds finished stronger on Thursday. The yield on the 10-year benchmark muni general obligation fell two basis points to 1.55% from 1.57% on Wednesday, while the yield on the 30-year decreased two basis points to 2.31% from 2.33%, according to the final read of Municipal Market Data's triple-A scale.

On Thursday, the 10-year muni to Treasury ratio was calculated at 95.2% compared to 94.2% on Wednesday, while the 30-year muni to Treasury ratio stood at 98.3% versus 93.5%, according to MMD.

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 35,494 trades on Thursday on volume of $12.83 billion.

Week's Most Actively Traded Issues

Some of the most actively traded issues by type in the week ended Sept. 22 were from California and New York issuers, according to Markit.

In the GO bond sector, the Centinela Valley Union High School District, Calif., 3s of 2044 were traded 33 times. In the revenue bond sector, the New York City Transitional Finance Authority 4s of 2041 were traded 48 times. And in the taxable bond sector, the University of California Medical Center pooled revenue 6.548s of 2048 were traded 12 times.

Week's Most Actively Quoted Issues

Puerto Rico, New York and Illinois issues were among the most actively quoted bonds in the week ended Sept. 22, according to Markit.

On the bid side, the Puerto Rico Commonwealth GO 5s of 2041 were quoted by 47 unique dealers. On the ask side, the NYC TFA revenue 3s of 2042 were quoted by 256 unique dealers. And among two-sided quotes, the Illinois taxable 5.1s of 2033 were quoted by 26 unique dealers.

Week's Primary Market

The week was fairly busy – with issuance divided into the two days before and the day after the Federal Open Market Committee meeting.

The Fed did not move on interest rates, but speculation runs rife that it will do so at its last meeting of the year in December.

Barclays Capital priced the Michigan State Housing Development Authority's $376.96 million of single-family mortgage revenue bond issue, one of the largest affordable housing finance deals of the year. The offering was a combination of financing for new mortgages and refunding of existing bonds for savings.

"We were pleased with the execution and ability to refund a large amount of bonds for savings," said Jeff Sykes, the HDA's chief financial officer.

The $53.74 million of Series 2016C bonds subject to the alternative minimum tax were priced at par to yield from 1.10% in 2017 to 2.15% in 2023.

The $323.22 million of Series 2016B non-AMT bonds were priced to yield from 1.90% and 2% at par in a split 2023 maturity to 2.55% and 2.60% at par in a split 2027 maturity; a 2031 maturity was priced at par to yield 3.10%, a 2034 maturity was priced at par to yield 3.35%, a 2041 maturity was priced as 3 1/2s to yield 3.65%, a 2045 maturity was priced at par to yield 3.70%.

The $145.51 million 2047 maturity was a planned amortization class bond and was priced at about 106.317 as 3 1/2s to yield 2.05%. The maturity was one of the largest PACs ever executed in the municipal market.

The issue was rated Aa2 by Moody's Investors Service and AA-plus by S&P Global Ratings.

Bank of America Merrill Lynch priced the Texas Water Development Board's $600.07 million Series 2016 State Water Implementation Revenue for Texas master trust revenue bonds. The SWIRFT bonds are rated triple-A by S&P and Fitch Ratings.

BAML also priced the Central Florida Expressway's $525.08 million of Series 2016B senior lien refunding revenue bonds. The issue is rated A2 by Moody's and A by S&P and Fitch except for split halves of the 2036 and 2037 maturities which are insured by Assured Guaranty Municipal and rated A2 by Moody's and AA by S&P.

Goldman Sachs priced the Pennsylvania Turnpike Commission's $411.23 million deal, consisting of $255.37 million of Third Series of 2016 Subseries A turnpike subordinate revenue refunding bonds and 79.84 million of First Series of 2016 motor license fund-enhanced turnpike subordinate special revenue refunding bonds, rated A3 by Moody's and A-minus by Fitch, and the $79.84 million of First Series of 2016 motor license fund-enhanced turnpike subordinate special revenue refunding bonds, rated A2 by Moody's and AA-minus by Fitch, and the $76.02 million of taxable Third Series of 2016 Subseries B turnpike subordinate revenue refunding bonds, rated A3 by Moody's and A-minus by Fitch.

Barclays Capital priced the Georgia Private Colleges and Universities Authority's $351.74 million of Series 2016 A&B revenue bonds for Emory University. The deal is rated Aa2 by Moody's, AA by S&P and AA-plus by Fitch.

RBC Capital Markets priced the Pennsylvania Economic Development Financing Authority's $239.39 million of Series 2016 revenue bonds for the University of Pittsburgh Medical Center. The UPMC bonds are rated Aa3 by Moody's, A-plus by S&P and AA-minus by Fitch.

Goldman Sachs priced the New Jersey Healthcare Facility Authority's $225.23 million of Series 2016 refunding bonds for the Atlantic Health Corp. The deal is rated A1 by Moody's and AA-minus by S&P.

RBC priced the American Municipal Power Inc.'s $209.53 million of combined hydroelectric projects revenue green bonds. The deal is rated A2 by Moody's, A by S&P and A-minus by Fitch.

BAML priced the Wisconsin Health and Educational Facilities Authority's $204.41 million of Series 2016A&B revenue bonds for the Marshfield Clinic Health System. The deal is rated A-minus by S&P and Fitch.

Citi priced the Turlock Irrigation District, Calif.'s $159.03 million of Series 2016 first priority subordinated revenue refunding bonds. The deal is rated A-plus by S&P and Fitch.

JPMorgan priced the Wisconsin Housing and Economic Development Authority's $141.44 million of homeownership revenue bonds. The deal is rated Aa2 by Moody's and AA by S&P.

Cabrera Capital Markets priced the Centinela Valley Union High School District in Los Angeles County, Calif.'s $139.5 million of general obligation refunding bonds. Assured Guaranty Municipal insured $136.89 million of the deal. The Series B bonds were insured by AGM and rated AA by S&P; the Series C 2017-2021 were uninsured and rated AA-minus by S&P while the 2022-2024 and 2036 maturities were insured by AGM and rated AA by S&P.

BAML priced the Rhode Island Health and Educational Building Corp.'s $138.71 million of Series 2016B hospital financing revenue refunding bonds for Care New England. The deal is rated BB by S&P and BBB-minus by Fitch.

Citigroup priced the Erie County Industrial Development Agency, N.Y.'s $133.69 million of Series 2016A school facility refunding revenue bonds for the Buffalo City School District. The deal is rated Aa2 by Moody's and AA by S&P.

Goldman priced the Missouri Health and Educational Facilities Authority's $129.87 million of health facilities revenue bonds for the Children's Mercy Hospital. The deal is rated A-plus by S&P.

In the competitive arena, the Dormitory Authority of the State of New York sold $1.09 billion of bonds in three separate offerings.

JPMorgan Securities won the $400.04 million Series 2016A Group A state sales tax revenue bonds with a true interest cost of 1.39%. Bank of America Merrill Lynch won the $387.14 million of Series 2016A Group C state sales tax revenue bonds with a TIC of 3.18%. BAML also won the $303.33 million of Series 2016A Group B state sales tax revenue bonds with a TIC of 2.43%. The DASNY bonds are rated triple-A by S&P Global Ratings and AA-plus by Fitch Ratings.

The New York City Municipal Water Finance Authority sold $201 million of fiscal 2017 Series AA water and sewer system second general resolution revenue bonds on Tuesday. JPMorgan won the deal with a true interest cost of 3.25%. The deal is rated Aa1 by Moody's AA-plus by S&P and Fitch.

Alabama competitively sold $100.09 million of Series 2016C general obligation refunding bonds. Citigroup won the bonds with a TIC of 2.16%. The deal is rated Aa1 by Moody's Investors Service, AA by S&P and AA-plus by Fitch.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar increased $252.4 million to $13.69 billion on Friday. The total is comprised of $3.20 billion of competitive sales and $10.49 billion of negotiated deals.

Lipper Reports More Inflows

For the 51st straight week, municipal bond funds reported inflows, according to Lipper data released on Thursday. The weekly reporters saw $517.593 million of inflows in the week ended Sept. 14, after inflows of $485.522 million in the previous week, Lipper said.

The four-week moving average remained positive at $604.298 million after being in the green at $675.129 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

Long-term muni bond funds experienced inflows, gaining $327.449 million in the latest week after inflows of $419.949 million in the previous week. Intermediate-term funds had inflows of $89.747 million after inflows of $176.075 million in the prior week.

National funds had inflows of $429.444 million on top of inflows of $360.119 million in the previous week. High-yield muni funds reported inflows of $69.736 million in the latest reporting week, after inflows of $175.483 million the previous week.

Exchange traded funds saw inflows of $111.876 million, after outflows of $14.231 million in the previous week.

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