Municipal Bonds End Stronger Ahead of Supply

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Traders said of top-quality municipal bonds finished stronger on Monday, with yields on some maturities falling by as much as one basis point ahead of this week's heavy new issue supply.

The yield on the 10-year benchmark muni general obligation ended one basis point lower at 2.16% from 2.17% on Friday, while the 30-year yield was off one basis point to 3.14% from 3.15%, according to the final read of Municipal Market Data's triple-A scale.

Treasury prices were narrowly mixed on Monday. The two-year Treasury yield slipped to 0.84% from 0.85% on Friday while the 10-year Treasury yield was unchanged from 2.27% and the 30-year yield increased to 3.07% from 3.06%.

The 10-year muni to Treasury ratio was calculated on Monday at 94.9% from 95.3% on Friday, while the 30-year muni to Treasury ratio stood at 102.1% compared to 103.1%, according to MMD.

 

Primary Market

Volume for the week is estimated at $9.42 billion, consisting of $7.02 billion of negotiated deals and $2.40 billion of competitive sales. Volume is heavy ahead of the Thanksgiving holiday next week.

On Monday, Bank of America Merrill Lynch priced the Massachusetts School Building Authority's $730.78 million of Series 2015C senior dedicated sales tax refunding bonds for retail investors ahead of the institutional pricing on Tuesday.

The deal was priced for retail to yield from 0.92% with a 2% coupon in 2018 to 3.75% at par and 3.21% with a 5% coupon in two parts of a triple split 2037 maturity; a 2016 maturity was offered as a sealed bid. No retail orders were taken in the 2027-2028 or 2030-2036 maturities or in the $88.5 million section of the 2037 triple-split maturity.

The deal is rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings. It carries a stable outlook from all three rating agencies.

Ramirez & Co. priced the New York City Municipal Water Finance Authority's $338.08 million of Fiscal 2016 Series BB water and sewer system second general resolution revenue bonds for retail investors ahead of the institutional pricing on Tuesday.

The $316.31 million of Subseries BB-1 bonds were priced as 5s to yield 3.50% in 2046 and as 4s to yield 4.85% in 2046. The $21.77 million of Subseries BB-2 bonds were priced as 5s to yield 1.25% in 2021.

The issue is rated Aa1 by Moody's and AA-plus by S&P and Fitch.

JPMorgan priced the Long Island Power Authority's $117.23 million of Series 2015B electric system general revenue bonds for retail investors.

The bonds were priced to yield from 1.36% with a 4% coupon in 2019 to 3.56% with a 5% coupon in 2035. A term bond in 2040 was priced to yield 4.064% with a 4% coupon. No retail orders were taken for the 2026-2030 and 2031-2034 maturities. Term bonds in 2039 and 2045 were also not available for retail orders. The deal is rated Baa1 by Moody's and A-minus by both S&P and Fitch.

Barclays Capital Markets is scheduled to price the state of Connecticut's $650 million of Series F and G general obligation bonds on Tuesday. The issue consists of $585 million of Series F bonds and $65 million of Series G green bonds.

The deal is rated Aa3 by Moody's and AA by S&P, Fitch and Kroll Bond Rating Agency.

The green bonds will fund wastewater infrastructure projects across the state and is only the Nutmeg State's third green bond offering. Connecticut sold $60 million of green bonds as part of a larger sale last November and had a $250 million green bond-only sale in April.

RBC Capital Markets is expected to price the New Jersey Transportation Trust Fund Authority's $626.8 million of Series 2015 AA transportation program bonds on Tuesday. The deal is rated A3 by Moody's and A-minus by S&P and Fitch.

In the competitive arena on Tuesday, Wisconsin will sell $225 million of Series 2016A transportation revenue bonds. The deal is rated AA-plus by Fitch.

The Maryland Water Quality Finance Administration will offer $180 million of Series 2015 Bay Restoration Fund revenue bonds. The issue is rated Aa2 by Moody's and AA by S&P.

And the Omaha Metropolitan Utilities District, Neb., will sell $179.4 million of Series 2015 water system improvement and refunding revenue bonds. The deal is rated A1 by Moody's and A-plus by S&P.

 

The Previous Week's Actively Traded Sectors

Revenue bonds comprised 55.54% of new issuance in the week ended Nov. 13, up from 55.25% in the previous week, according to Markit. General obligation bonds comprised 37.11% of total issuance, up from 37.05%, while taxable bonds made up 7.35%, down from 7.70%.

Some of the most actively traded issues in the week were in Texas and California.

In the revenue bond sector, the Central Texas Regional Mobility Authority 5s of 2045 were traded 54 times. In the GO sector, the California 5s of 2045 were traded 26 times. And in the taxable bond sector, the California 7.55s of 2039 were traded 16 times, Markit said.

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