Muni Prices Weaken; $669M Va. CBA's Priced

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Prices of top-quality municipal bonds made a U-turn and turned weaker on Thursday, traders said, with yields rising by as much as two basis points at mid-session. Yields had remained little changed over the previous three trading sessions.

In the primary market, the Virginia College Building Authority's $669 million of revenue and revenue refunding bonds were priced.

 

Secondary Market

The yield on the 10-year benchmark muni general obligation rose as much as two basis points from 1.93% on Wednesday, while the yield on 30-year GO was up by as much as two basis points from 2.76%, according to a midday read of Municipal Market Data's triple-A scale.

Treasury prices were lower on Thursday. The yield on the two-year Treasury note rose to 0.61% from 0.59% on Wednesday, while the 10-year yield increased to 1.98% from 1.92% and the 30-year yield rose to 2.56% from 2.50%.

On Wednesday, the 10-year muni to Treasury ratio was calculated at 100.5% versus 103.4% on Tuesday, while the 30-year muni to Treasury ratio stood at 110.3% compared to 112.1%.

 

Primary Market

J.P. Morgan Securities priced the Virginia CBA's $668.98 million 21st Century College and Equipment Programs educational facilities revenue and revenue refunding bonds in two series.

The $463.61 million Series 2015A revenue bonds were priced as 5s and 3s to yield 0.52% in 2017 to 3.31% with a 4% coupon in 2035; a 2016 maturity was offered as a sealed bid. The $205.37 million Series 2015B revenue refunding bonds were priced as a 2027 bullet maturity at par to yield 2.17%.

Both series are rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.

Since 1995, the Virginia CBA has issued roughly $9.35 billion of bonds, with the largest amounts coming in 2009 and 2012 when it sold $1.69 billion and $1.05 billion, respectively. The lowest years came in 1995 and 1996 when it sold just $24.7 million and $101 million, respectively.

Also on Thursday, Morgan Stanley priced the Corpus Christi Utility System, Texas' $142.03 million Series 2015 A&B junior lien revenue bonds. The $92.43 million Series 2015A bonds were priced to yield from 0.77 with a 3% coupon in 2017 to 3.33% with a 5% coupon in 2035; a 2040 term bond was priced as 5s to yield 3.41% and a 2045 term was priced as 5s to yield 3.46%; a 2016 maturity was offered as a sealed bid. The $49.61 million Series 2015B bonds were priced as a 2045 bullet maturity as 2s to yield 0.97%. The issue is rated A1 by Moody's and A-plus by S&P and Fitch.

Citigroup Global Markets priced the Northeast Independent School District, Texas' $345.19 million of bonds late on Wednesday. The bonds were priced as 2s to yield 0.35% in 2016 and as 3s to yield 0.70% in 2017 and to yield from 1.64% with a 5% coupon in 2021 to 3.30% with a 4% coupon in 2037. The deal rated triple-A by Moody's and S&P. The bonds are backed by the Permanent School Fund Guarantee program and rated triple-A by Moody's and S&P.

"This is an advanced refunding, not as large as doing a current refunding," Brian Moy, the district's senior director of budgets and financial analysis said in an interview, "But with this current market there is too much savings available to the taxpayer for us to wait around for two more years,"

Moy also said that since 2012, they have been more active and restructuring their debt.

"With this issue and another sale of $57.9 million of refunding bonds in May. After the May issue, the district will have refunded all callable debt issued prior to 2012," he said.

On Wednesday, Citigroup Global Markets received the official award on the California's Golden State Tobacco Securitization Corp.'s $1.692 billion of Series 2015A enhanced tobacco settlement asset-backed bonds for institutions after a one-day retail order period. The bonds are rated A1 by Moody's and A by S&P and Fitch.

The final pricing has the issue yielding from 0.28% with a 2% coupon in 2016 to 1.87% with a 5% coupon in 2022; as 5s to yield 2.43% in 2026; as 4s to yield 3.43% in 2031; as 3 1/4s to yield 3.54% and as 5s to yield 3.12% in a split 2032 maturity; as 5s to yield 3.18% in 2033; as 3 1/4s to yield 3.62% and as 5s to yield 3.22% in a split 2034 maturity; as 4s to yield 3.65% and as 5s to yield 3.25% in a split 2035 maturity; as 5s to yield 3.33% in 2040; and as 5s to yield 3.38% in a 2045 maturity.

 

Tax-Exempt Money Market Funds Post Outflow

Tax-exempt money market funds had an outflow of $521.6 million, bringing total net assets to $259.47 billion, in the period ended March 23, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $443.7 million to $259.99 billion in the previous week.

The average, seven-day simple yield for the 396 weekly reporting tax-exempt funds remained at 0.01% for a 99th straight week.

The total net assets of the 992 weekly reporting taxable money funds rose $32.79 billion to $2.461 trillion in the period ended March 24, after experiencing an outflow of $19.06 billion to $2.428 trillion in the prior week.

The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 10th consecutive week.

Overall, the combined total net assets of the 1,388 weekly reporting money funds increased $32.27 billion to $2.721 trillion in the period ended March 24, which followed an outflow of $19.50 billion to $2.688 trillion in the prior period.

 

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $3.749 billion to $8.377 billion on Thursday. The total is comprised of $2.696 billion competitive sales and $5.681 billion of negotiated deals.

 

MSRB Previous Session's Activity

The Municipal Securities Rulemaking Board reported 38,226 trades on Wednesday on volume of $9.938 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 155 times at an average price of 99.614 with an average yield of 4.013%; (initial offering price of 97.858, an initial offering yield of 4.14%).

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