Muni Yields Higher as Market Awaits Tuesday's Slate

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Prices of top-quality municipal bonds were weaker at Monday's close, according to traders, with yields on some maturities strengthening as much as three basis points.

Market participants got action from larger deals during the first day of the week for a change, as issuers from Florida and Texas came to market. Tuesday is expected to be an even busier day.

Secondary Trading

The yield on the 10-year benchmark muni general obligation on Monday was three basis points higher to 2.01%, from 1.98% on Friday, while the yield on the 30-year GO was also up three basis points to 3.05%, from 3.02%, according to a final read of the Municipal Market Data's triple-A scale.

The 10-year muni to Treasury ratio was calculated on Monday at 97.6% versus 99.9% on Friday, while the 30-year muni to Treasury ratio stood at 105.1% compared to 107.1%, according to MMD.

Treasury prices were lower on Monday at close, with the yield on the two-year Treasury note rising to 0.61% from 0.58% on Friday, while the 10-year yield climbed to 2.06% from 2.00% and the 30-year yield increased to 2.90% from 2.83%.

Primary Market

The action got started right away on Monday, as Wells Fargo Securities priced and then re-priced the Spring Branch Independent School District, Tx.'s $217.68 million of limited tax refunding bonds, Series 2015A and unlimited tax refunding bonds, Series 2015B.

The Series A bonds for $65.94 million were priced to yield 0.18% with a 2% coupon in 2016. The bonds were also priced to yield from 0.77% with a 5% coupon in 2018 to 2.17% with a 5% coupon in 2025.

The Series B bonds for $151.74 million were priced to yield from 0.08% with a 2% coupon in 2016 to 3.44% with a 4% coupon in 2036. A 2038 term bond was priced to yield 3.52% with a 4% coupon. The deal is backed by the Texas Permanent School Fund guarantee program and has insured ratings of Aaa by Moody's and AAA by S&P.

In the competitive arena, the Florida Department of Transportation sold $195.87 million of turnpike revenue refunding bonds, Series 2015B. Bank of America Merrill Lynch won the bidding war with a true interest cost of 3.15%.

The bonds were priced to yield from 0.58% with a 5% coupon in 2017 to 3.56% with a 4% coupon in 2036. The deal, which has previously on the day-to-day calendar, is rated Aa3 by Moody's Investors Service and AA-minus by Fitch Ratings.

The Florida DOT last sold $227.56 million of turnpike revenue bonds, Series 2015A on June 30, when JP Morgan won the bidding war with a true interest cost of 3.58%.

Tuesday will be an even busier day as four of the larger deals this week are expected to price.

Citi is expected to price the Texas Water Development Board's $790 million of state water implementation revenue bonds, Series 2015 A and B.

Bank of America Merrill Lynch will price the District of Columbia Water and Sewer Authority's $350 million of public utility subordinate lien revenue bonds after a retail order period which was held on Monday. The deal is rated Aa3 by Moody's, AA by Standard and Poor's and AA-minus by Fitch.

There are a few larger noteworthy competitive deals that are expected to take place on Tuesday, from issuers from California, Kentucky and Washington state.

San Francisco will be auctioning $226 million of GO bonds and Louisville and Jefferson County Metropolitan Sewer District will sell $257.1 million of revenue bonds.

Louisville and Jefferson County Metropolitan Sewer District, will be auctioning roughly $262.48 million in two separate series. Series A will be $175 million of sewer and drainage system revenue bonds, and Series B will be $87.48 million of sewer and drainage system revenue refunding bonds.

The last time the district competitively sold bonds was Nov. 4, 2014, when they sold $80 million to Citi with a TIC of 3.81%.

Washington State is expected to sell $161.61 million of certificates of participation, Series 2015C, for state and local agency real and personal property.

The last time the Evergreen State sold COPs, was back on Sept. 24, when they sold $58.9 million to Barclays Capital with a TIC of 2.86%.

Previous Week's Most Actively Traded Issues

Revenue bonds comprised 56.13% of new issuance in the week ended Sept. 25, down from 56.88% in the previous week, according to Markit. General obligation bonds comprised 36.05% of total issuance, up from 33.98%, while taxable bonds made up 7.82%, down from 9.14%

Some of the most actively traded issues in the week were in Florida and Pennsylvania.

In the revenue sector, the Miami-Dade County, Fla., Educational Facilities Authority 4s of 2045 were traded 86 times. In the GO sector, the Reading School District, Pa., 4 1/8s of 2036 were traded 57 times. And in the taxable sector, the Miami-Dade County, Fla., Educational Facilities Authority 5.073s of 2050 were traded 30 times, Markit said.

MSRB Previous Session's Activity

The Municipal Securities Rulemaking Board reported 33,354 trades on Friday on volume of $8.977 billion.

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