Top-shelf municipal bonds finished Thursday stronger, as yields lowered by as many as three basis points in some maturities, according to traders who saw the last issuance of the week come to market.
Secondary Market
The 10-year benchmark muni general obligation yield was three basis points lower to 2.42% from 2.45% on Wednesday, while the yield on the 30-year GO was one basis point lower to 3.20% from 3.21%, according to a final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were weaker at Thursday's market close. The yield on the two-year Treasury was up to 1.33% from 1.31% on Wednesday, while the 10-year Treasury yield rose to 2.53% from 2.50%, and the yield on the 30-year Treasury bond increased to 3.14% from 3.11%.
On Thursday, the 10-year muni to Treasury ratio was calculated at 95.8%, compared with 97.9% on Wednesday, while the 30-year muni to Treasury ratio stood at 101.9%, versus 103.5%, according to MMD.
Puerto Rico Prices Continue to Drop
The Puerto Rico Oversight Board's approval of a 10-year fiscal plan allowing the payment of only 26% of debt due has made holders of the commonwealth government's bonds more pessimistic about recoveries. Since Monday Puerto Rico's GO and Senior COFINA sales tax bonds have weakened in the secondary market.
The Puerto Rico sales tax financing corporation tax revenue senior bonds 5s of 2040 had an initial offering price of 103.823. Since the beginning of February, the price of this bond had been steady around 70.5 but last week it dropped to 69.5 and as of March 15, it was down to 68.7, according to Markit's evaluated price.
The Puerto Rico GO 8s of 2035 had an initial offering price of 93 cents on the dollar. Since the beginning of February, it had been consistently been between 72 and 73.625. It dropped to 67 on March 14 and on March 15 it dropped even lower to 66.75.
Markit also said that there was a $1 million plus sale today of the GO at 66.25, which is lower than their imputed price for the GO.
Primary Market
The last issuance of the week came to market on Thursday, with the bulk of it coming via competitive deals from a well-known New York issuer.
The Empire State Development Corp. competitively priced five separate deals that totaled roughly $1.84 billion of New York State Urban Development Corporation State personal income tax revenue general purpose bonds, with three tranches of tax-exempt bonds and two of taxable bonds.
The $514.38 million of series 2017B, Group B taxable bonds were won by JPMorgan with a true interest cost of 2.19%. No other pricing information was immediately available.
The $512.89 million of Series 2017B, Group A taxable bonds were won by Morgan Stanley with a TIC of 3.09%. No other pricing information was immediately available.
On the tax-exempt side, the $327.245 million of Series 2017A, Group A bonds were won by JPM with a TIC of 2.37%. The bonds were priced to yield from 1.13% with a 5% coupon in 2019 to 2.70% with a 5% coupon in 2027.
The $243.2 million of Series 2017A, Group B bonds were won by Jefferies with a TIC of 3.41%. The bonds were priced to yield from 2.79% with a 5% coupon in 2028 to 3.19% with a 5% coupon in 2033.
The $242.355 million of Series 2017A, Group C bonds were won by Morgan Stanley with a TIC of 3.95%. No other pricing information was immediately available.
All five deals are rated AAA by S&P Global Ratings and AA-plus by Fitch Ratings.
Since 2007, the ESDC has sold about $17.69 billion of bonds, with the most issuance coming in 2013 when it offered $3.28 billion. The corporation did not come to market at all in 2012 and has sold more than $1 billion of bonds all but three years in that time. After Thursday's auctions, the ESDC has now sold more this year than in any of the past three years.
Boulder Valley School District No. RE-2, Colo. sold roughly $285 million of general obligation and GO refunding bonds in two separate deals. The $190 million of GO bonds were won by Morgan Stanley with a TIC of 3.96%. No other pricing information was immediately available.
The $94.88 million of GO refunding bonds were also won by Morgan Stanley, with a TIC of 2.44%. No other pricing information was immediately available. Both deals are rated Aa1 by Moody's Investors Service and AA-plus by S&P and Fitch.
In the negotiated arena, JPMorgan priced Monroe County Industrial Development Corp., N.Y.'s $238.19 million of revenue bonds for the University of Rochester Project. The $145.5 million of Series 2017A were priced to yield from 1.00% with a 5% coupon in 2018 to 3.46% with a 5% coupon in 2037. A term bond in 2042 was priced to yield 3.95% with a 3.875% coupon and a term bond in 2047 was priced to yield 3.97% with a 3.875% coupon.
The $92.685 million of Series 2017B bonds were priced to yield from 1.00% with a 5% coupon in 2018 to 3.86% with a 3.75% coupon in 2037. A term bond in 2039 was priced to yield 3.88% with a 3.75% coupon. The deal is rated Aa3 by Moody's and AA-minus by S&P and Fitch.
JPMorgan also priced the Washington Health Care Facilities Authority's $114.81 million of revenue bonds for the Seattle Children's Hospital. The bonds were priced to yield from 1.09% with a 3% coupon in 2018 to 3.31% with a 5% coupon in 2030. A term bond in 2042 was priced to yield 3.75% with a 5% coupon and a term bond in 2047 was priced to yield 3.77% with a 5% coupon. The deal is rated Aa2 by Moody's and AA by Fitch.
Muni Bond CUSIP Surge in February
Demand for new municipal bond CUSIP identifiers rose for the first time in three months, increasing 13% and declining 8% in January, CUSIP Global Services said in a report released Thursday. The report tracks requests by issuers for bond identifiers as an early indicator of new volume.
A total of 933 new municipal bond identifier requests were made last month, up from 826 in January, which was the slowest month for new orders since 819 were requested in February 2013.
"After three straight months of declining volume in requests for new corporate and municipal debt identifiers, we've noted a distinct tide change in February," said Gerard Faulkner, director of operations for CUSIP Global Services. "Whether that shift is indicative of market sentiment in the debt markets or simply the laws of supply and demand is not yet clear; it will be important to keep watching this metric closely as market participants continue to digest a fair amount of uncertainty."
On a year-over-year basis, municipal bond request volume was down 14% through the end of February.
"The CUSIP indicator has been suggesting a slowdown in new debt issuance throughout the period of uncertainty surrounding the transfer of power in Washington," said Richard Peterson, senior director, S&P Global Market Intelligence. "While we cannot yet tell whether this month's reversal of that trend is a signal that sentiment is changing or an anomaly, we can say we expect to see a healthy level of new security issuance in the near term."
Tax-Exempt Money Market Fund Inflows
Tax-exempt money market funds experienced inflows of $90.9 million, bringing total net assets to $131.08 billion in the week ended March 13, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $560.5 billion to $130.99 billion in the previous week.
The average, seven-day simple yield for the 232 weekly reporting tax-exempt funds was unchanged from 0.20% in the previous week.
The total net assets of the 860 weekly reporting taxable money funds decreased $4.95 billion to $2.521 trillion in the week ended March 14, after an inflow of $5.37 billion to $2.526 trillion the week before.
The average, seven-day simple yield for the taxable money funds increased to 0.29% from 0.27% in the prior week.
Overall, the combined total net assets of the 1,092 weekly reporting money funds fell $4.86 billion to $2.652 trillion in the week ended March 14, after inflows of $5.93 billion to $2.657 trillion in the prior week.
