Prices of top-rated municipal bonds finished weaker on Wednesday, traders said, as the market absorbed a wave of new issue supply for a second straight day.
Muni yields rose by as much as two basis points in cautious trading, even as the minutes from the Federal Open Market Committee's April meeting showed the chances of a June interest rate increase appear to be slim to none.
Secondary Market
The yield on the 10-year benchmark muni general obligation closed up two basis points to 2.32% from 2.30% on Tuesday, while the yield on the 30-year GO rose two basis points to 3.30% from 3.28%, according to the final read of Municipal Market Data's triple-A scale.
Only a few Federal Reserve members expect that upcoming economic data will get better enough to warrant a rate hike increase at the FOMC's June meeting, according to the minutes released Wednesday afternoon.
"Many participants," said it was unlikely that the data through June would "provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied, although they generally did not rule out this possibility."
Treasury prices were mixed on Wednesday as the yield on the two-year Treasury note declined to 0.58% from 0.60% on Tuesday, while the 10-year yield decreased to 2.25% from 2.27% and the 30-year yield increased to 3.05% from 3.04%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 103.1% versus 101.8% on Tuesday, while the 30-year muni to Treasury ratio stood at 108.1% compared to 108.0%, according to MMD.
Primary Market
Topping the calendar was a $1 billion issue from Florida's Citizens Property Insurance Corp. The deal was structured as fixed-rate bonds and floating rate notes.
Bank of America Merrill Lynch priced the $700 million of Series 2015A-1 Coastal Account senior secured bonds. The issue was priced to yield 1.51% with 3% and 5% coupons in a 2018 split maturity; to yield 2.10% with 4% and 5% coupons in a split 2020 maturity; to yield 2.66% with 4% and 5% coupons in a split 2022 maturity; and to yield 3.20% with a 5% coupon in 2025.
JPMorgan priced the $300 million of Series 2015A-2 Coastal Account SIFMA-indexed floating-rate notes. The notes were priced at par to yield 85 basis points over the SIFMA rate in 2018 and priced at par to yield 95 basis points over the SIFMA rate in 2020.
The issues were rated A1 by Moody's Investors Service, A-plus by Standard & Poor's and AA-minus by Fitch Ratings; all three rating agencies assign a stable outlook.
Proceeds from the tax-exempt paper will provide Citizens' Coastal Account with liquidity, or a cash bridge, should funds be needed to pay claims quickly if Florida is hit by a hurricane during the June 1 through Nov. 30 storm season. Otherwise, bond proceeds will be invested.
Since 2004, Citizens has sold about $12 billion of bonds, with the most issuance coming in 2006 and 2007 when the insurer offered $3.05 billion and $2.01 billion, respectively. Citizens didn't sell bonds in 2005, 2013 or 2014.
The state-run, nonprofit Florida Hurricane Catastrophe Fund, which also offers low-cost reinsurance to private companies, will be issuing $1.2 billion of taxable bonds for liquidity needs in the next few weeks.
BAML priced North Carolina's $265.19 of Series 2015 grant anticipation revenue vehicle bonds. The issue was priced as 5s to yield 0.30% in 2016 and to yield from 1.96% with a 5% coupon in 2020 to 3.65% with a 5% coupon in 2030. The GARVEEs were rated A2 by Moody's, AA by S&P and A-plus by Fitch.
Bank of America Merrill Lynch priced Atlantic City's $41.705 million of Series 2015A taxable general obligation refunding bonds issued under the State of New Jersey's Municipal Qualified Bond Act.
The bonds were priced as 7s to yield 7.25% in 2028 and as 7 1/2s to yield 7.75% in 2040. The deal was rated A-minus by S&P, which also assigns a stable outlook.
In the competitive sector, Springfield, Mo., sold $523.77 million of Series 2015 public utility refunding revenue bonds. BAML won the issue with a true interest cost of 3.38%. The bonds were priced to yield from 0.15% with a 5% coupon in 2015 to 3.85% with a 4% coupon in 2036. The bonds were rated AA-plus by S&P and AA by Moody's.
The last time Springfield was in the competitive market was on Sept. 14, 2006, when it sold $615 million of Series 2006 public utility revenue bonds to UBS Securities with a TIC of 4.54%.
Seattle, Wash., sold $229.15 million of Series 2015 water system improvement and refunding revenue bonds. Barclays Capital won the issue with a TIC of 3.19%. The bonds were priced to yield from 0.13% with a 2% coupon in 2015 to 3.91% with a 4% coupon in 2038; a 2045 term was priced as 4s to yield 4.03%. The issue was rated Aa1 by Moody's and AA-plus by S&P.
The last time the city sold bonds competitively was on May 15, 2012, when Citi won $238.77 million of Series 2012 water system refunding revenue bonds with a TIC of 2.62%.
The Santa Clara Finance Authority, Calif., sold $103.37 million of Series 2015P refunding lease revenue bonds for multiple facilities projects. Barclays won the issue with a TIC of 3.14%. The bonds were priced as 5s to yield from 0.82%in 2017 to 3.33% in 2031. The issue was rated AA-plus by S&P and AA by Fitch.
The last time the authority competitively sold bonds was on April 8, 2014, when Morgan Stanley won $11.72 million of Series 2014 O refunding lease revenue bonds for multiples facilities projects with a TIC of 1.92%.
BAML priced Nassau County, N.Y.'s $219.6 million of Series 2015C taxable bond anticipation notes and Series 2015A revenue anticipation notes. The $41.12 million taxable BANs were priced at par to yield 1.125% and are due on Dec. 15. The $178.48 million RANs were priced to yield 0.60% with a 2% coupon and are due on March 15, 2016. Both note issues were rated SP1-plus by S&P and F1 by Fitch.
Nassau County was also active in the competitive arena, where it sold $168.90 million of Series 2015 B general improvement bonds. JPMorgan won the bonds with a TIC of 3.78%. No pricing information was available. The issue is rated A1 by Moody's, A-plus by S&P and A by Fitch. The last time the county sold bonds competitively was on Jan. 21 when FTN Financial Capital Markets won $29.64 million of Series 2015A general improvement bonds with a TIC of 2.99%.
