Prices of top-quality municipal bonds finished steady on Friday, according to traders, after about $2.29 billion of new deals came to market during the shortened holiday trading week.
Revised data from Thomson Reuters show that about $1.69 billion of negotiated deals and $812.1 million of competitive sales were sold during the week.
Secondary Trading
The yield on the 10-year benchmark muni general obligation on Friday closed steady from 2.23% on Thursday, while the yield on the 30-year GO was unchanged from 3.20%, according to the final read of Municipal Market Data's triple-A scale.
On Friday, Sept. 4, the yield on the 10-year muni stood at 2.18% while the 30-year muni yield was at 3.11%.
Treasury prices were higher on Friday, with the yield on the two-year Treasury note falling to 0.71% from 0.74% on Thursday, while the 10-year yield fell to 2.18% from 2.22% and the 30-year yield decreased to 2.95% from 2.99%.
The 10-year muni to Treasury ratio was calculated on Friday at 102.2% versus 101.1% on Thursday, while the 30-year muni to Treasury ratio stood at 108.8% compared to 107.0%, according to MMD.
Primary Market
Barclays Capital priced the biggest deal of the week – the North Texas Tollway Authority’s $764 million of Series 2015B first-tier revenue refunding bonds.
The authority recently saw two rating upgrades, as Moody's Investors Service raised its rating to A1 from A2 on Aug. 27 and Standard & Poor’s increased its rating to A from A-minus on Aug. 28.
The deal met with heavy demand, said Horatio Porter, NTTA’s chief financial officer.
"Some of the later maturities were two- to three-times oversubscribed, while some of the early maturities were oversubscribed eight to 10 times," Porter told The Bond Buyer.
Ratings upgrades and the fact that the issue was the largest in a holiday shortened week helped draw attention to the deal, Porter added.
Porter said the NTTA enlarged the deal from the $744 million listed on the preliminary official statement based on responses to investor calls.
Net present value savings of 8.6% amounted to $65 million, Porter said, who added that the deal reduces NTTA's maximum annual debt service to $609 million from $633 million. The interest rate falls to 4.9% from 5.7%.
"We have worked over the past year to bring down annual debt service through our refundings," Porter said. "I'm pretty pleased with how this deal went."
In the short-term market, JPMorgan Securities priced the Detroit School District’s $121 million of Series 2015E junior subordinate lien obligations. The state aid revenue notes were issued through the Michigan Finance Authority.
The final pricing offered the notes, due Aug. 22, 2016, at par to yield 5.75%. The yield was about 550 basis points over the MMD triple-A scale read for one-year maturities. The preliminary pricing had the notes offered at par to yield 5.50%.
The district needed to issue the one-year notes to cover its operating cash flow through next August. S&P gave the notes an SP-3 rating, its lowest short-term designation.
RBC Capital Markets priced the University of Oklahoma's $207 million of tax-exempt general revenue bonds. Proceeds of the sale will go toward redesign of the university’s football stadium in Norman, Okla. The bonds, issued through the Oklahoma Capitol Improvement Authority, were rated A-plus by S&P and AA-minus by Fitch Ratings.
In the competitive arena, the University of Washington sold two separate issues totaling almost $196 million.
Bank of America Merrill Lynch won the $159 million of Series 2015C general revenue and refunding bonds with a true interest cost of 3.54%. Fifth Third Securities won the $37 million of Series 2015D taxable general revenue and refunding bonds with a TIC of 2.56%. Both issues were rated triple-A by Moody's and AA-plus by S&P.
In the competitive short-term market, the New York MTA sold $500 million of Series 2015A dedicated tax fund bond anticipation notes. The BANs were won by eight underwriting groups, including Morgan Stanley, JPMorgan Securities, Bank of America Merrill Lynch, Wells Fargo Securities, RBC Capital Markets, Citigroup, Goldman Sachs, and FTN Financial Capital.
Jefferies priced Austin, Texas' $294 million of public improvement bonds, public property finance contractual obligations, and certificates of obligation. The issue was rated triple-A by Moody's, S&P and Fitch.
Puerto Rico Bond Trading Mixed
On Wednesday, the Puerto Rico “Working Group for the Fiscal and Economic Recovery of Puerto Rico” released its fiscal and economic growth plan. The plan seeks to achieve long-term fiscal stability and economic growth but was met with mixed reactions.
In secondary trading, prices of Puerto Rico general obligation bonds were lower on the week, according to the Municipal Securities Rulemaking Board’s EMMA website.
The commonwealth Series 2014A GO 8s of 2035 traded on Friday at a low price of 72.875 cents on the dollar, a high yield of 11.499%, in two trades totaling $6 million. On Tuesday, the 8s were trading at a low price of 74.30 cents on the dollar, a high yield of 11.265%, in 10 trades totaling $13.4 million.
Other Puerto Rico bonds were trading lower.
The Puerto Rico Electric Power Authority 2007 Series TT power revenue 5s of 2032 traded at a low price of 60.375 cents on the dollar on Friday, a high yield of 9.88%, in 15 trades totaling $400,000. On Tuesday, the 5s were trading at a low price of 62.00, a high yield of 9.597%, in two trades totaling $20,000, according to EMMA.
The Puerto Rico Aqueduct and Sewer Authority’s Series 2012A senior lien revenue 5s of 2033 traded on Friday at a low price of 65.60 cents on the dollar, a high yield of 8.881%, in 12 trades totaling $270,000. On Tuesday, the 5s were trading at a low price of 66.576, a high yield of 8.732%, in seven trades totaling $90,000, according to EMMA.
The Week's Most Actively Quoted Issues
Puerto Rico and Connecticut were some of the most actively quoted names in the week ended Sept. 11, according to data released by Markit.
On the bid side, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 12 unique dealers. On the ask side, the Connecticut Health and Educational Facilities Authority revenue 4 1/8s of 2041 were quoted by 19 dealers. And among two-sided quotes, the Puerto Rico commonwealth GO 8s of 2035 were quoted by 13 dealers, Markit said.
The Week's Most Actively Traded Issues
Some of the most actively traded issues in the week ended Sept. 11 were in New Jersey, Puerto Rico and California, according to Markit.
In the revenue bond sector, the New Jersey Economic Development Authority 4 1/4s of 2026 were traded 22 times. In the GO bond sector, the Puerto Rico commonwealth 8s of 2035 were traded 23 times. And in the taxable bond sector, the California 7.55s of 2039 were traded 14 times, Markit said.
Muni Bond Funds See Outflows
Municipal bond funds again saw outflows in the latest week, according to Lipper data released on Thursday.
Weekly reporting funds experienced $95.986 million of outflows in the week ended Sept. 9, after seeing outflows of $586.481 million in the previous week, Lipper reported.
The latest outflow brings to 19 out of 37 weeks this year that the funds have seen redemptions. Inflows for the year to date are still in the green, totaling nearly $2 billion.
The four-week moving average remained negative at $245.843 million after being in the red at $219.075 million in the previous week. The moving average has now been negative for 16 weeks in a row. 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 $12.690 million in the latest week, after seeing outflows of $323.912 million in the previous week. Intermediate-term funds saw outflows of $9.352 million after seeing outflows of $82.230 million in the prior week.
Exchange traded funds saw inflows of $28.812 million, after experiencing outflows of $41.635 million in the previous week.
High-yield muni funds saw outflows of $6.069 million in the latest reporting week, after seeing an outflow of $123.945 million the previous week. In the past 20 weeks, high-yield funds have seen outflows 14 times totaling $1.945 billion and inflows six times totaling $322.011 million.
Richard Williamson and Caitlin Devitt contributed to this column
