Prices of top-rated municipal bonds finished lower on Wednesday, traders said, as yields rose for the third straight trading session, with some maturities rising by as much as six basis points.
In the primary, the city of Chicago, the Dormitory Authority of the State of New York and the Maryland Department of Transportation were all in the market, providing a variety of names, yields and credit quality for investors.
Primary Market
Chicago made its return to the market on Wednesday after converting floating-rates to fixed-rates in last week's sale of $670 million of general obligation bonds.
In this sale, the city was converting floating-rate sales tax-backed bonds sold in 2002 to fixed-rates. RBC Capital Markets was the senior manager on the remarketing with another 12 firms in the syndicate; Sycamore Advisors was advising the city.
RBC priced the $111.72 million of Series 2002 sales tax revenue refunding bonds to yield from 1.68% with a 2% coupon in 2017 to 4.67% with a 5% coupon in 2034; a 2016 maturity was offered as a sealed bid. The longest maturity, which comes due in 2034, was priced at about 170 basis points over the comparable MMD triple-A benchmark.
"I like this deal better than the deal last week," said a Midwest trader, referring to the spread over the triple-A scale. "I hope this proves to be one of the cheaper deals you can buy in Chicago."
Chicago recently posted an investor presentation with its offering statement and held calls highlighting the strong coverage and bondholder protections on this sales tax credit. Still, the ratings on the credit diverged, with the issue being rated triple-A by Standard & Poor's, BBB-plus by Fitch Ratings and AA-plus by Kroll Bond Rating Agency.
Citi priced and repriced DASNY's $503.98 million of Series 2015A bonds for the North Shore Long Island Jewish Health System.
The bonds were repriced to yield from 0.91% with 3% and 5% coupons in a split 2017 maturity to 3.96% with a 5% coupon in 2037; a 2042 term bond was priced as 4 1/8s to yield 4.28% and a 2043 term was priced as 5s to yield 4.06%; a 2016 maturity was offered as a sealed bid. The issue is rated A3 by Moody's Investors Service, A-minus by S&P and A by Fitch.
DASNY said proceeds from the sale will be used to finance the construction, renovation and modernization of the Emergency Departments at both the Huntington and Southside Hospitals and to refund all or part of the North Shore Long Island Jewish Obligated Group's revenue bonds, Series 2003, 2005 A&B, 2007A, and 2009A.
In the competitive sector, the Maryland DOT sold two separate bond issues totaling $408.45 million. Both issues are rated Aa1 by Moody's, triple-A by S&P and AA-plus by Fitch.
Bank of America Merrill Lynch won the $272.45 million of refunding Series 2015 consolidated transportation bonds with a true interest cost of 1.84%. The issue was priced as 5s to yield from 0.32% in 2016 to 2.14% in 2023.
Morgan Stanley won the $136 million of Series 2015 second issue consolidated transportation bonds with a TIC of 2.75%. The issue was priced to yield from 1.14% with a 5% coupon in 2018 to 3.252% with a 3.125% coupon in 2030.
Maryland DOT last sold bonds competitively on Feb. 11 when Citi won $265.54 million of Series 2015 consolidated transportation bonds with a TIC of 2.56%.
In the short-term sector, Bank of America Merrill Lynch received the official award on Los Angeles County's $900 million of 2015-16 tax and revenue anticipation notes. The RANs were priced as 5s to yield 0.29% in 2016. The issue is rated MIG1 by Moody's, SP1-plus by S&P and F1-plus by Fitch.
On Thursday, the District of Columbia will be offering $534.44 million of GOs, which are being priced by Citi. The deal consists of $500 million of Series 2015A new money bonds and $34.44 million Series 2015B refunding bonds. The issue is rated Aa1 by Moody's and AA by S&P and Fitch.
Since 1996, Washington, D.C., has issued about $9 billion of GOs, with the most issuance occurring in 2007 and 2008 when it offered $1.3 billion and $1 billion, respectively; D.C. sold no bonds in 2006 or 2009.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose by four basis points to 2.31% from 2.27% on Tuesday, while the yield on the 30-year GO increased by six basis points to 3.30% from 3.24%, according to the final read of Municipal Market Data's triple-A scale.
In the past three trading sessions, the yield on the 10-year muni has moved 12 basis points higher while the 30-year has risen by 14 basis points.
Treasury prices were lower on Wednesday as the yield on the two-year Treasury note increased to 0.67% from 0.65% on Tuesday, while the 10-year yield rose to 2.36% from 2.27% and the 30-year yield gained to 3.11% from 3.03%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 97.7% versus 100.3% on Tuesday, while the 30-year muni to Treasury ratio stood at 106.3% compared to 107.3%, according to MMD.
