Municipal bond traders are set for the week's biggest deal to hit the market on Thursday as over $1 billion of Chicago bonds are on tap.
Secondary Market
U.S. Treasuries were weaker on Thursday. The yield on the two-year Treasury rose to 1.24% from 1.19% on Wednesday, while the 10-year Treasury yield gained to 2.47% from 2.39%, and the yield on the 30-year Treasury bond increased to 3.03% from 2.99%.
Top-shelf municipal bonds ended weaker on Wednesday. The 10-year benchmark muni general obligation yield rose three basis to 2.17% from 2.14% on Tuesday, while the yield on the 30-year GO increased four basis points to 2.92% from 2.88%, according to the final read of Municipal Market Data's triple-A scale.
On Wednesday, the 10-year muni to Treasury ratio was calculated at 90.8% compared to 92.0% on Tuesday, while the 30-year muni to Treasury ratio stood at 97.8%, versus 98.3%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 44,096 trades on Wednesday on volume of $12.89 billion.
Primary Market
Goldman Sachs is pricing the week's biggest deal -- the city of Chicago's taxable and tax-exempt general obligation bonds.
The taxable portion opened for indications of interest on Wednesday. The $274.24 million of Series 2017B taxables were offered to yield about 475 basis points above the comparable Treasury security in 2029, according to a market source who saw the indications of interest wire.
Another source said the premarketing scale on the $888.76 million of Series 2017A tax-exempt GO project and refunding bonds was released on Wednesday ahead of Thursday's pricing.
According to the source, the bonds were pre-marketed to yield from 5.80% with a 5.75% coupon in 2029 to 5.96% with a 5.75% coupon in 2031. The bonds were also pre-marketed to yield from 6.08% with a 6% coupon in 2033 to 6.19% with a 6% coupon in 2035. A term bond in 2038 was pre-marketed to yield 6.25% with 6% coupon.
The deal is rated BBB-plus by S&P Global Ratings and Kroll Bond Rating Agency and BBB-minus by Fitch Ratings.
Since 2007, Chicago has issued about $26.68 billion of debt, with the largest issuance occurring in 2015 when it sold roughly $4.24 billion of debt. The windy city saw its lowest issuance total in the past 10 years back in 2009 when it issued roughly $778 million. The city has issued more than $2 billion every year since 2013 and a total of eight times since 2007.
Barclays Capital is set to price the Texas Transportation Commission's $800 million of Series 2017 A and B general obligation mobility fund refunding bonds on Thursday. The deal is rated triple-A by Moody's Investors Service, S&P and Fitch.
Since 2007, the TTC has issued about $20.59 billion of debt, with the largest issuance occurring in 2014 when it sold roughly $5.52 billion of debt. The commission did not come to market at all in 2011 or 2013. The TTC has issued more than $2 billion four times and more than $1 billion eight times since 2007.
RBC Capital Markets is set to price the Los Angeles Department of Water and Power's $500 million of Series 2017A power system revenue bonds for institutions after holding a one-day retail order period.
The issue was priced for retail as 5s to yield from 1.67% in 2022 to 2.98% in 2037, 3.05% in 2042 and 3.10% in 2047.
The deal is rated Aa2 by Moody's and AA-minus by S&P and Fitch.
Citigroup is expected to price the University of Massachusetts Building Authority's $352 million of Series 2017 tax-exempt and taxable project revenue bonds. The deal is rated Aa2 by Moody's and AA-minus by S&P and Fitch.
Loop Capital is set to price the Pennsylvania Turnpike Commission's $286.92 million of Series 2017A turnpike subordinate revenue bonds. The deal is rated A3 by Moody's and A-minus by Fitch.
JPMorgan Securities is expected to price the Maryland Health and Higher Educational Facilities Authority's $272.57 million of Series 2017B tax-exempt and Series 2017C taxable revenue bonds for the University of Maryland Medical System. The deal is rated A2 by Moody's, A-minus by S&P and A by Fitch.
In the competitive arena, the University of Houston System Board of Regents will sell two separate deals totaling $404.5 million.
The offerings consist of $392.85 million of Series 2017A consolidated revenue and refunding bonds and $11.64 million of Series 2017B taxable consolidated revenue and refunding bonds. Both sales are rated Aa2 by Moody's and AA by S&P.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $1.94 billion to $11.88 billion on Thursday. The total is comprised of $2.79 billion of competitive sales and $9.09 billion of negotiated deals.
Tax-Exempt Money Market Fund Outflows
Tax-exempt money market funds experienced outflows of $829.3 million, bringing total net assets to $130.81 billion in the week ended Jan. 16, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $1.37 million to $131.64 billion in the previous week.
The average, seven-day simple yield for the 236 weekly reporting tax-exempt funds decreased to 0.23% from 0.24% in the previous week.
The total net assets of the 863 weekly reporting taxable money funds decreased $26.25 billion to $2.506 trillion in the week ended Jan. 17, after an outflow of $14.38 billion to $2.532 trillion the week before.
The average, seven-day simple yield for the taxable money funds increased to 0.26% from 0.25% in the previous week.
Overall, the combined total net assets of the 1,099 weekly reporting money funds fell $27.08 billion to $2.637 trillion in the week ended Jan. 17 after outflows of $13.01 billion to $2.664 trillion in the prior week.