Muni Prices Rise as More Supply Hits Market

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Prices of top-rated municipal bonds were higher at mid-session, traders said, with yield on some maturities falling by as much as two basis points.

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

Primary Market

In the competitive arena, Orange County, Fla., sold $170 million of Series 2015 tourist development tax refunding revenue bonds. JPMorgan won the issue with a true interest cost of 3.03%. Pricing information was not immediately available.

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 issuers were 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.

Roosevelt & Cross also won the $1.88 million of school bonds with an NIC of 3.13%. Pricing information was not immediately 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, 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.

Also on tap is the St. Paul Housing and Redevelopment Authority's $494 million of health care facilities revenue refunding bonds. Piper Jaffray is slated to price the deal, which is rated A2 by Moody's and A by S&P.

Citi is expected to price the Miami-Dade County School Board's $461 million of certificates of participation. The deal is rated A1 by Moody's and A by S&P.

The Montgomery County Industrial Development Authority, Pa., will be coming to market with $455 million of health system revenue bonds to be priced by Bank of America Merrill Lynch. The issue is rated Baa2 by Moody's and BBB by S&P.

Secondary Market

The yield on the 10-year benchmark muni general obligation was down by as much as two basis points from 2.25% on Wednesday, while the yield on the 30-year GO was down by as much as one basis point from 3.21%, according to a read of Municipal Market Data's triple-A scale.

Treasury prices were little changed 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 was unchanged at 2.14% and the 30-year yield was flat at 2.89%.

The 10-year muni to Treasury ratio was calculated on Wednesday at 105.4% versus 105.3% on Tuesday, while the 30-year muni to Treasury ratio stood at 111.6% 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.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $1.85 billion to $11.49 billion on Wednesday. The total is comprised of $5.77 billion competitive sales and $5.72 billion of negotiated deals.

MSRB Previous Session's Activity

The Municipal Securities Rulemaking Board reported 44,522 trades on Wednesday on volume of $10.707 billion.

The most active bond, based on the number of trades, was the Riverside County Public Financing Authority, Calif.'s Series 2015 capital facilities project lease revenue bonds 4 1/8s of 2040, which traded 227 times at an average price of 100.05 with an average yield of 4.103%. The bonds were initially priced at 97.308 to yield 4.30%.

Shelly Sigo contributed to this report.

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