Prices of top-rated municipal bonds were steady at mid-session, according to traders, as the New York City general obligation bond issue was set for day two of its retail pricing.
Secondary Market
The yield on the 10-year benchmark muni general obligation was unchanged on Monday from 2.19% on Friday, while the yield on the 30-year GO was flat at 3.16%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were lower on Monday as the yield on the two-year Treasury note increased to 0.62% from 0.61% on Friday, while the 10-year yield rose to 2.15% from 2.09% and the 30-year yield increased to 2.92% from 2.84%.
The 10-year muni to Treasury ratio was calculated on Friday at 102.0% versus 104.6% on Thursday, while the 30-year muni to Treasury ratio stood at 109.7% compared to 110.8%, according to MMD.
Primary Market
The market is waiting on about $7.05 billion of new supply this week, consisting of $5.29 billion of negotiated deals and $1.76 billion of competitive sales.
And New York City tops the list of issuers with separate offerings totaling almost $1 billion.
JPMorgan priced the city's $616.79 million of Fiscal 2015 Series F, Subseries F-1 and Fiscal 2015 Series 1 general obligation bonds for retail on Friday; day two of the retail order period will take place later on Monday with the institutional pricing set for Tuesday.
The $300 million of Series F Subseries F-1 tax-exempts were priced as 3s and as 5s to yield 1.21% in a split 2018 maturity and as 5s to yield 1.97% in 2021; as 4s to yield 2.50% in 2024; as 5s to yield 2.63% in 2025; as 5s to yield 2.79% in 2026. The bonds were also priced to yield from 3.65% with a 3.5% coupon in 2033 to 3.85% with a 3.75% coupon in 2037. No retail orders were taken for the 2034 and 2035 maturities while the 2017 maturity was offered as a sealed bid.
The $316.79 Series 1 tax-exempts were priced to yield from 1.27% with a 4% coupon in 2018 to 2.52% with a 5% coupon in 2024. The 2016 and 2017 maturities were offered as sealed bids.
The issue is rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
In the competitive arena on Tuesday, the city will offer two separate sales of $195 million Fiscal 2015 Subseries F-3 taxable GOs and $105 million of Fiscal 2015 Subseries F-2 taxable GOs.
Citi is slated to price the New York State Dormitory Authority's $500 million of bonds for the North Shore Long Island Jewish Health System on Wednesday. The DASNY issue is rated A3 by Moody's, A-minus by S&P and A by Fitch.
Citi is also expected to price the District of Columbia's $534 million of GOs on Thursday. The bonds are rated Aa1 by Moody's and AA by S&P and Fitch.
In the competitive sector on Wednesday, the Maryland Department of Transportation is selling two separate bond issues totaling $488 million. The sales consist of $337.51 million of refunding Series 2015 consolidated transportation bonds and $150 million of Series 2015 second issue consolidated transportation bonds. Both issues are rated Aa1 by Moody's, triple-A by S&P and AA-plus by Fitch.
Citi is expected to price the California Municipal Finance Authority's $357.91 million of Series 2015A revenue bonds on Tuesday for the Community Medical Centers. The bonds are rated Baa1 by Moody's and A-minus by S&P.
William Blair is set to price the Leander Independent School District, Texas' $300 million of Series A and B unlimited tax refunding bonds. The issue, backed by the Permanent School Fund guarantee program, is rated triple-A by S&P and AA-minus by Fitch.
Barclays Capital is slated to price Franklin County, Ohio's $281.59 million of Series 2015 hospital facilities revenue bonds for the Ohio Health Corp. on Wednesday. The bonds are rated Aa2 by Moody's, AA-plus by S&P and AA by Fitch.
Bank of America Merrill Lynch is set to price the Lower Colorado River Authority, Texas' $231 million of Series 2015 transmission contract refunding revenue bonds for the LCRA Transmission Services Corp. on Thursday. The bonds are rated A by Moody's and A-plus by S&P.
Also on the competitive slate for Tuesday is the East Bay Municipal Utility District, Calif.'s $109 million of Series 2015B water system revenue green bonds, rated Aa1 by Moody's triple-A by S&P and AA-plus by Fitch; and Broward County School District, Fla.'s $159 million of Series 2015 general obligation school bonds, rated Aa3 by Moody's, A-plus by S&P and AA-minus by Fitch.
No Technical Difficulties
A better technical landscape is seen for municipal bonds, even with a heavy calendar of refunding issues slated for the peak June and July rollover period, according to a new Bank of America Merrill Lynch Global Research report.
The BAML Muni Master Index has returned a negative 0.501% for May, outperforming the Corporate Master Index, but underperforming the Government Master Index. For the year to date, the muni index returned 0.072% and underperformed both the Treasury index and the corporate index which had total returns of 0.682% and 1.029%, respectively. The best performance in munis for the year-to-date was seen in the one- to three-year maturities and in the high-yield sector, the report said.
Meanwhile, BAML said it remained bullish on municipal to Treasury ratios.
"For the past two weeks, we have witnessed a bullish reversal in the rates market. From a recent high of 2.3629%, the 10-year Treasury has rallied some 25 basis points," the report said. "Munis basically followed with some lag. Muni/Treasury ratios rose a few percentage points to 105% and 110%, respectively, from a recent low of 97% and 105% on May 11. This has happened despite an observable moderation in new issuance, and increased retail activity."
BAML said a big reason for this was that fund flows recently have been very light.
"Going forward, we continue to hold the opinion that Muni/Treasury ratios should get to 95% for the 10-year and 100% for the 30-year during the summer. A continued rates rally and issuance moderation should be key factors for arriving at these targets in June/July."
Prior Week's Most Actively Traded Issues
Among some of the most actively traded bonds in the week ended May 29 were issuers from Wisconsin, Puerto Rico, and Chicago names, according to Markit.
Broken down by market sector, revenue bonds comprised 55.34% of new issuance, up from 54.24% in the prior week. General obligation bonds comprised 37.28% of total issuance, down from 37.85%, while taxable bonds made up 7.38%, down from 7.91%.
In the revenue bond sector, the Wisconsin Public Finance Authority 4 1/4s of 2041 were traded 68 times. In the GO bond sector, the Puerto Rico commonwealth 8s of 2035 were traded 73 times. And in the taxable bond sector, the Chicago Transportation Authority's sales and transfer tax receipt revenue 6.899s of 2040 were traded 23 times, according to Markit.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,080 trades on Friday on volume of $12.275 billion.
The most active bond, based on the number of trades, was the Twin Lakes Regional Sewer District, Ind., sewer works revenue refunding 4s of 2044, which traded 173 times at an average price of 100.436 with an average yield of 3.915%. The bonds were initially priced at 98.477.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $212.9 million to $13.77 billion on Monday. The total is comprised of $5.86 billion competitive sales and $7.91 billion of negotiated deals.
