Muni Prices Rise; Calif. Issues Lead the Pack

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Prices of top-quality municipal bonds were mostly higher at mid-session, traders said, with yields on some maturities down as much as three basis points.

Meanwhile in the primary market, traders were awaiting two large deals from California issuers.

Secondary Market

The yield on the 10-year benchmark muni general obligation was as much as three basis points lower from 1.96% from Monday, while the yield on 30-year GO was down by as much as one basis point from 2.80%, according to a read of Municipal Market Data's triple-A scale.

Treasury prices were higher on Wednesday. The yield on the two-year Treasury note declined to 0.53% from 0.56% on Tuesday, while the 10-year yield decreased to 1.86% from 1.94% and the 30-year yield dropped to 2.47% from 2.54%.

On Tuesday, the 10-year muni to Treasury ratio was calculated at 101.6% versus 98.5% on Monday, while the 30-year muni to Treasury ratio stood at 110.2% compared to 109.0%.

Primary Market

The California Department of Water Resources' $765 million of power supply revenue bonds are set to be priced for institutions by JPMorgan on Wednesday.

The bonds were priced for retail to yield 1.56% with 2%, 3%, 4% and 5% coupons in a 2021 maturity split four ways and also to yield 1.77% with 2%, 3%, 4% and 5% coupons in a 2022 maturity split four ways.

The bonds are rated Aa2 by Moody's, AA by S&P and AA-plus by Fitch.

Since 1995, the Department has sold approximately $29 billion of bonds, including water and power issues. The largest issuances came in 2002 and 2010 when it sold $12 billion and $5 billion, respectively. In 1999, 2000, 2003, 2006 and 2007 no bonds were sold.

Also on Wednesday, Barclays Capital is set to price the Regents of the University of California's $500 million of Series 2015 AQ taxable general revenue bonds. This deal is rated Aa2 by Moody's and AA by S&P and Fitch.

Philadelphia came to market this week with two separate issues totaling $417.56 million. JPMorgan received the official award on Wednesday for the city's $275.82 million of Series 2015A water and wastewater revenue bonds. The bonds were priced as 5s to yield 3.45% in 2040 and 3.50% in 2045. Bank of America Merrill Lynch received the written award for the city's $141.74 million of Series 2015B water and wastewater revenue refunding bonds. The bonds were priced to yield from 1.32% with a 5% coupon in 2019 to 2.02% with a 5% coupon in 2022 and from 2.94% with a 5% coupon in 2028 to 3.67% with a 4% coupon in 2035. Both issues are rated A1 by Moody's, A by S&P and A-plus by Fitch.

On Thursday, the Board of Regents for Texas A&M University will be selling two separate issues totaling $289 million in the competitive arena. The issues consist of $144 million Series 2015A permanent university fund bonds and $145 million Series 2015B taxable permanent university fund bonds. Both issues are rated triple-A by Moody's, S&P and Fitch.

The University last sold bonds competitively on Nov. 13, 2013, when Morgan Stanley won $209 million Series 2013 permanent university fund bonds with a true interest cost of 2.7867%

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $2.354 billion to $9.249 billion on Wednesday. The total is comprised of $2.998 billion competitive sales and $6.251 billion of negotiated deals.

MSRB Previous Session's Activity

The Municipal Securities Rulemaking Board reported 39,378 trades on Tuesday on volume of $9.606 billion. Most active, based on the number of trades, was the Kentucky Municipal Power Agency's Series 2015A Prairie State project power system revenue refunding 4s of 2039, which traded 132 times at an average price of 99.78 with an average yield of 4.002%; (initial offering price of 97.858, an initial offering yield of 4.14%).

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