Prices of top-rated municipal bonds closed higher on Wednesday, traders said, with yields on some maturities off by as much as three basis points. Meanwhile, more supply hit the market as the state of Nevada sold three separate issues totaling about $291 million in the competitive sector.
Federal Reserve Chair Janet Yellen wrapped up the second day of her semi-annual monetary policy report to Congress, testifying before the House Financial Services Committee.
She reiterated the Fed's patient stance on interest rates, which the market has interpreted as meaning that there will be no rate hikes at the next two Federal Open Market Committee meetings. The FOMC meets on March 17-18 and then again on April 28-29, so it looks like the Fed meeting on June 16-17 will be the one to watch.
Secondary Market
Prices of top-quality municipal bonds finished stronger.
The yield on the 10-year benchmark muni general obligation was off three basis points to 2.04% from 2.07% on Tuesday, while the yield on 30-year GO was down one basis point to 2.86% from 2.87%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were mixed. The yield on the two-year Treasury note rose to 0.61% from 0.56% on Tuesday while the 10-year yield increased to 1.99% from 1.98% and the 30-year yield was unchanged at 2.60%.
The 10-year muni to Treasury ratio was calculated at 103.5% versus 104.3% on Tuesday, while the 30-year muni to Treasury ratio stood at 111.3% compared to 110.6%.
Primary Market
All three of the Nevada issues sold on Wednesday carry ratings of Aa2 by Moody's Investors Service, AA by Standard & Poor's and AA-plus by Fitch Ratings.
Morgan Stanley won Nevada's $196.95 million 2015 Series B limited tax general obligation capital improvement and cultural affairs refunding bonds with a true interest cost of 2.3685%. The bonds were priced to yield from 1.04% with a 5% coupon in 2018 to 2.45% with a 5% coupon in 2026.
Bank of America Merrill Lynch won the $74.4 million Series A limited tax GO university system revenue supported projects bonds with a TIC of 2.7017%. The bonds were priced to yield from 0.62% with a 5% coupon in 2017 to 3.27% with a 3% coupon in 2032.
Morgan Stanley won the $20.805 million Series C limited tax GO natural resources refunding bonds with a TIC of 2.6798%. The bonds were priced to yield from 0.14% with a 5% coupon in 2015 to 3.385% with a 3.25% coupon in 2035
Wells Fargo Securities priced the New York City Transitional Finance Authority's $700.495 million of tax-exempt fixed-rate refunding bonds on the second day of its retail order period on Wednesday. The deal was pushed back a day and will be priced for institutions on Thursday. The bonds are rated Aa1 by Moody's and triple-A by S&P and Fitch.
The TFA $654.23 million future tax secured tax-exempt subordinate bonds, Fiscal 2015 Series C, were priced for retail to yield from 0.70% with a 4% coupon in 2017 to 3.25% with a 3.25% coupon in 2031; a 2016 maturity was offered as a sealed bid. The $46.265 million future tax secured tax-exempt subordinate bonds, Fiscal 2015 Series D, were priced for retail to yield from 0.70% in 2017 with a 4% coupon to 2.71% with a 4% coupon in 2027; the 2015 and 2016 maturities were offered as sealed bids.
On Tuesday, Loop Capital Markets priced the largest deal of the week -- Atlanta, Ga.'s $1.245 billion of water and wastewater revenue refunding bonds.
"The city recently completed an investor roadshow for the transaction and we were pleased with the level of interest in this offering," said James Beard, Atlanta's finance director.
The bonds were priced to yield from 0.48% with a 2% coupon in 2016 to 3.32% with a 5% coupon in 2035; a 2040 term bond was priced as 5s to yield 3.38% and a 2043 term was priced as 5s to yield 3.41%.
S&P assigned an AA-minus rating to the refunding, with a stable outlook. S&P cited the city's strong financial performance, high liquidity, and a large pay-as-you-go capital program as reasons for the rating. Fitch gave an A-plus to the issue while Moody's rated it Aa3.
Proceeds from the deal will be used to refund about $231 million of 2001A bonds, $479 million of 2004 bonds, and $596 million of 2009A bonds.
Beard said savings from the transaction will be invested in completing projects necessary for the operation and maintenance of the system.
Additionally, Citigroup Global Markets priced the University of Massachusetts' $490.62 million project revenue and revenue refunding bonds. The UMass $298.795 million Senior Series 2015-1 project revenue bonds were priced to yield from 2.45% with a 5% coupon in 2025 out to a 2036 split maturity priced as 5s to yield 3.10% and as 4s to yield 3.54%; a 2040 term bond was priced as 5s to yield 3.17% and a 2045 term was priced as 4s to yield 3.67%. The $191.825 million Senior Series 2015-2 refunding revenue bonds were priced to yield from 0.75% with a 3% coupon in 2017 to 3.54% with a 4% coupon in 2036. The issue is rated Aa2 by Moody's, AA-minus by S&P and AA by Fitch.
Also, Morgan Stanley priced Fairfax County, Va.'s $196.95 million of public improvement refunding bonds. The $57.22 million Series 2015B bonds were priced as 5s to yield 1.92% in 2023, as 4s to yield 2.25% in 2025, as 5s to yield 2.16% in 2025, and as 3s to yield 2.30% and as 5s to yield 2.29% in a split 2026 maturity. The $139.73 million Series 2015C bonds were priced to yield from 0.65% with a 3% coupon in 2016 to 2.35% with a 5% coupon in 2025. The issue is rated triple-A by Moody's, S&P and Fitch.
And Raymond James & Associates priced the Port Arthur School District, Texas' $124.055 million deal. The $89.93 million of unlimited tax school building bonds, Series 2015A were priced to yield from 0.91% with a 2% coupon in 2018 to 3.38% with a 4% coupon in 2035; a 2040 term bond was priced as 5s to yield 3.11% and a 2045 term was priced as 5s to yield 3.16%. The bonds are backed by the Permanent School Fund Guarantee program and carry ratings of triple-A from Moody's and Fitch. The $34.125 million of unlimited tax refunding bonds, non-PSF guaranteed Series 2015B, were priced to yield from 0.30% with a 2% coupon in 2016 to 3.69% with a 3.5% coupon in 2034. The bonds are rated Aa3 by Moody's and AA-minus by Fitch.
