Prices of top-shelf municipal bonds were lower at mid-session, as several big deals came to market in the negotiated and competitive sectors led by the $937 million general obligation bond sale from the state of Massachusetts.
Secondary Market
The yield on the 10-year benchmark muni general obligation was up from one to three basis points from 2.29% from 2.27% on Monday, while the yield on the 30-year GO was one to three basis points higher from 3.28%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were lower on Tuesday with the yield on the two-year Treasury note rising to 0.67% from 0.65% on Monday, while the 10-year yield rose to 2.37% from 2.35% and the 30-year yield increased to 3.16% from 3.15%.
The 10-year muni to Treasury ratio was calculated on Monday at 97.0% versus 101.3% on Friday, while the 30-year muni to Treasury ratio stood at 104.1% compared to 106.2%, according to MMD.
Primary Market
Bank of America Merrill Lynch priced Massachusetts' $936.755 million of GO consolidated loan of 2015, Series C refunding bonds and Series 2015A bonds for retail on Tuesday. The institutional pricing will take place on Wednesday.
The $686.75 million Series 2015A GO refunding bonds were priced for retail to yield from 2.07% with a 3% coupon in 2022 to 2.22% with a 5% coupon in 2023. The bonds were also priced to yield from 2.54% with a 5% coupon in 2025 to 3.85% with a 3.75% coupon in 2037. No retail orders were taken in the 2028-2031 and 2034-2046 maturities. The 2016 and 2017 maturities were offered as sealed bids. The $250 million Series C consolidated loan of 2015 GOs were priced as 5s to yield 1.07% in 2018, 2.07% in 2022 and 2.40% in 2024; a 2045 term bond was priced at par to yield 4.00%. No retail orders were taken in the 2031, 2031 or 2040 maturities.
The MMD spread for Massachusetts GOs is 10 basis points over the benchmark for five-years, 17 basis points over the benchmark for 10-years, and 19 basis points over the benchmark for 15-years and out, Daniel Berger, MMD Senior Market Strategist, wrote in a Tuesday comment.
The deal is rated Aa1 by Moody's Investors Service and AA-plus by both Standard and Poor's and Fitch Ratings.
A report published recently by Fitch states that Massachusetts has a broad and diverse economy with the second-highest per capita personal income in the nation. This was one of many reasons why Fitch rated it this high.
"Employment growth is solid, education levels are high, and population growth has approximated that of the U.S. this decade, a marked improvement from historical experience and the performance of other states in the region," stated the report. "The commonwealth has benefited from conservative budgeting and sound financial practices over time. A limitation on the use of capital gains-related tax revenue has reduced the volatility of economically sensitive revenues in the budget, and the commonwealth has shown a commitment to reserve funding."
Since 1995, Massachusetts has issued roughly $49.26 billion of general obligation debt. The years of 2002 and 2004 saw the largest amount of issuance with $4.63 billion and $3.36 billion, respectively. The Bay State issued the lowest amount in the years of 1999 and 2008, when it sold $995 million and $1.20 billion, respectively.
In the competitive arena, Seattle, Wash., sold $164.28 million of Series 2015A municipal light and power revenue bonds. Bank of America Merrill Lynch won the bonds with a true interest cost of 3.58%. The bonds were priced to yield from 0.35% with a 5% coupon in 2016 to 3.93% with a 4% coupon in 2040; a 2045 term bond was priced at par to yield 4%. The issue is rated Aa2 by Moody's and AA by S&P.
The last time the city competitively sold comparable bonds was on Oct. 22, 2014 when Wells Fargo Securities won $265.21 million of Series 2014 municipal light and power improvement and refunding revenue bonds with a TIC of 3.096%.
Bank in the negotiated sector, Siebert Brandford Shank priced for institutions the New York State Environmental Facilities Corp.'s $216.87 million of Series 2015A state clean water and drinking water revolving funds revenue bonds for the New York City Municipal Water Finance Authority Projects/Second Resolution subordinated SRF bonds. The bonds were offered to retail investors on Monday.
The bonds were priced to yield from 1.02% with a 3% coupon in 2018 to 3.39% with a 5% coupon in 2040; a 2045 term was priced as 5s to yield 3.45%. The 2016 and 2017 maturities were offered as sealed bids. The bonds are rated triple-A by Moody's and S&P and AA-plus by Fitch.
Siebert also held a retail order period on Miami-Dade County, Fla.'s $222.89 million of Series 2015A public facilities revenue and refunding bonds for the Jackson Health System.
The bonds were priced for retail to yield from 1.03% with a 4% coupon in 2017 to 2.85% with a 5% in 2024 and to yield from 3.15% with a 5% coupon in 2026 to 4.07% with a 4% coupon in 2034. There were no retail orders taken in the 2027, 2029, 2032 or 2033 or 2035 to 2037 maturities; a 2016 maturity was offered as a sealed bid. The issue was rated Aa2 by Moody's, A-plus by S&P and AA-minus by Fitch.
Wayne County, Mich., Readies Note Sale
Wayne County, Mich., Deputy Treasurer Christa McLellan on Tuesday said the target date for the county's sale of $186.9 million of delinquent tax anticipation notes was Thursday.
The deal was postponed from last week after County Executive Warren Evans asked for state fiscal intervention to help it fix its financial problems.
The DTANs are set to be priced by Bank of America Merrill Lynch. Public Financial Management is municipal advisor and Axe & Ecklund is note counsel. The county also obtained the services of Orrick, Herrington & Sutcliffe as special bankruptcy counsel.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 33,654 trades on Monday on volume of $6.554 billion. The most active bond, based on the number of trades, was the Missouri State Environmental Improvement and Energy Resources Authority's Series 2015 water facilities revenue bonds for the Tri-County Water Authority project 4s of 2036, which traded 91 times at an average price of 100.651 with an average yield of 3.914%. The bonds were initially priced at 98.759 to yield 4.09%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $284.0 million to $12.14 billion on Tuesday. The total is comprised of $2.68 billion competitive sales and $9.47 billion of negotiated deals.
