Muni Prices End Higher as More Supply Hits

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Prices of top-rated municipal bonds finished higher on Thursday, traders said, with yields on some maturities falling by as much as two basis points.

And a day after Chicago grabbed all the headlines, municipal bond traders saw the rest of the week's new issuance come to market in the primary.

 

Primary Market

In the competitive arena, Orange County, Fla., sold $154.2 million of Series 2015 tourist development tax refunding revenue bonds. JPMorgan won the issue with a true interest cost of 3.03%. The bonds were priced to yield from 0.47% with a 2% coupon in 2016 to 3.32% with a 5% coupon in 2031.

The deal came to market after three recent rating upgrades as analysts cited substantial growth in hotel revenues and a booming local economy. The bonds are rated Aa3 by Moody's Investors Service, AA-minus by Standard & Poor's, and AA by Fitch Ratings. All three ratings represent one-notch upgrades based on growth in pledged revenues and wide debt service coverage, as well as central Florida's strong economic base, rating analysts said.

Present value savings of more than $15 million or 10% of refunded par is estimated on the deal, according to Fred Winterkamp, manager of Orange County's Fiscal and Business Service Division.

The county last sold bonds competitively on Sept. 6, 2012, when Raymond James won $96.2 million of Series 2012C sales tax revenue refunding bonds with a TIC of 1.97%.

Since 1995, the county has sold only about $3 billion of bonds, with the largest issuance coming in 1998 and 2002 when it offered $479 million and $565 million, respectively. The county did not sell bonds in 2001, 2004, 2008, 2011 or 2014.

Two New Jersey cities were also in the market on Thursday: Atlantic City and Trenton.

Atlantic City sold $12 million of Series 2015B GOs under the state of New Jersey's Municipal Qualified Bond Act, which is intended to facilitate distressed municipal issuers' access to the capital markets.

Bank of America Merrill Lynch won the bonds with a TIC of 6.06%. The bonds were priced to yield from 4% with a 6% coupon in 2016 to 5% with a 6% coupon in 2020; a 2030 term was priced as 6 3/8s to yield 6%. The issue is rated A-minus by S&P.

The city last sold comparable bonds competitively on Nov. 26, 2013, when Bank of America Merrill Lynch won $62.88 million of Series 2013 GOs and tax appeal refunding bonds with a TIC of 4.17%

Trenton offered two separate competitive sales totaling $12.39 million, both rated Baa1 by Moody's.

Roosevelt & Cross won the $10.52 million general improvement, water utility, and sewer utility bonds with a net interest cost of 3.76%. The bonds were priced to yield from 0.60% with a 5% coupon in 2016 to 4.05% with a 4% coupon in 2045. The bonds were insured by AGM and rated A2 by Moody's and AA by S&P. Roosevelt & Cross also won the $1.88 million of school bonds with an NIC of 3.13%. Pricing information was not available.

Trenton last sold comparable bonds competitively on Feb. 5, 2014, when UBS Financial Services won $9.88 million of taxable GOs issued under the MQBA with a TIC of 4.53%.

In the negotiated sector, Citi priced the Houston Independent School District, Texas' $463.86 million of variable rate bonds in three separate deals as a remarketing.

The $349.74 million issue consisted of $175 million of Series 2014A-1 variable-rated limited tax school house bonds priced as 3s to yield 0.68% in 2039 and $174.74 million of Series 2014A-2 variable-rated limited tax school house bonds priced as 4s to yield 1.05% in 2039. The $65.07 million Series 2012 variable-rate limited tax refunding bonds were priced at par to yield 1.70% in 2030. The $49.05 million of Series 2013B variable-rated limited tax school house bonds were priced at par to yield 1.70% in 2036. All bonds were backed by the Texas Permanent School Fund guarantee program and rated triple-A by Moody's and S&P.

BAML priced the Montgomery County Industrial Development Authority, Pa.'s $455.64 million of Series 2015A health system revenue bonds for the Albert Einstein Healthcare Network. The bonds were priced to yield from 1.23% with a 5% coupon in 2017 to 4.60% with a 4.50% coupon and 4.42% with a 5.25% coupon in a split 2032 maturity; a 2036 maturity was priced as 5 1/4s to yield 4.56%, a 2045 maturity was priced as 5 1/4s to yield 4.72% and a 2046 maturity was priced as 5 1/4s to yield 4.75%. The issue is rated Baa2 by Moody's and BBB by Fitch.

Morgan Stanley priced the Massachusetts Educational Financing Authority's $184.8 million of Series 2015A Issue I education loan revenue bonds revenue bonds, subject to the alternative minimum tax. The bonds were priced to yield from 1.31% with a 5% coupon in 2017 to 4.40% with a 4.25 coupon in 2032.

Wells Fargo Securities priced Riverside, Calif.'s $200 million of Series 2015A sewer revenue bonds. The issue was priced to yield from 1.27% with a 4% coupon in 2018 to 4.08% with a 4% coupon in 2036; a 2040 term bond was priced as 5s to yield 3.84%. The bonds are rated A1 by Moody's and A by S&P.

Secondary Market

The yield on the 10-year benchmark muni general obligation closed down two basis points to 2.23% from 2.25% on Wednesday, while the yield on the 30-year GO lost one basis point to 3.20% from 3.21%, according to the final read of Municipal Market Data's triple-A scale. Trading was light in the secondary, according to Interactive Data.

Treasury prices were mixed on Thursday as the yield on the two-year Treasury note was down to 0.63% from 0.65% on Wednesday, while the 10-year yield fell to 2.13% from 2.14% and the 30-year yield was flat at 2.89%.

The 10-year muni to Treasury ratio was calculated on Thursday at 104.6% versus 105.4% on Wednesday, while the 30-year muni to Treasury ratio stood at 110.8% compared to 111.6%, according to MMD.

Tax-Exempt Money Market Funds Post Outflow

Tax-exempt money market funds experienced outflows of $179.4 million, bringing total net assets to $245.18 billion in the period ended May 25, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $842.5 million to $245.36 billion in the previous week.

The average, seven-day simple yield for the 395 weekly reporting tax-exempt funds remained at 0.01% for a 108th straight week.

The total net assets of the 995 weekly reporting taxable money funds rose $1.87 billion to $2.395 trillion in the period ended May 26, after experiencing an inflow of $16.58 billion to $2.393 trillion in the prior week.

The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 19th consecutive week.

Overall, the combined total net assets of the 1,388 weekly reporting money funds increased $1.69 billion to $2.640 trillion in the period ended May 26, which followed an inflow of $17.42 billion to $2.638 trillion in the prior period.

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