Municipal Bonds Finish Out Week Slightly Weaker

Prices of top-shelf municipal bonds finished stronger on Friday, traders said, with yields on some maturities falling by as much as four basis points.

The yield on the 10-year benchmark muni general obligation was off four basis points to 2.19% from 2.23% on Thursday, while the yield on the 30-year GO fell two basis points to 3.12% from 3.14%, according to the final read of Municipal Market Data's triple-A scale.

For the week, muni yields were slightly weaker. On the previous Friday, the 10-year muni yield stood at 2.20% while the 30-year muni was yielding 3.15%, according to MMD.

Treasury prices were also higher on Friday, with the yield on the two-year Treasury note falling to 0.67% from 0.73% on Thursday, while the 10-year yield dropped to 2.20% from 2.27% and the 30-year yield decreased to 2.92% from 2.96%.

The 10-year muni to Treasury ratio was calculated on Friday at 99.5% versus 98.4% on Thursday, while the 30-year muni to Treasury ratio stood at 106.8% compared to 106.4%, according to MMD.

Primary Market

Traders feasted on a hefty plate of new issues that were placed before them during the week.

Topping the calendar was the Michigan State Building Authority's $989.34 million of Series 2015 I revenue and revenue refunding bonds. JPMorgan priced the issue, which was rated Aa2 by Moody's Investors Service, A-plus by Standard & Poor's and AA-minus by Fitch Ratings.

Siebert Brandford Shank priced New York City's $750.48 million of Fiscal 2016 Series A&B GOs for institutions after holding a two-day retail order period. The Big Apple's bonds were rated Aa2 by Moody's and AA by S&P and Fitch.

New York City said it received about $147 million of retail orders for the bonds during the two-day retail order period.

"The Michigan Building Authority wrapped up its $990 million loan with downward yield adjustments compared to the morning pricing," Janney wrote in a research note. "And New York City ended up adjusting the yield of the multi-coupon (2.5%, 4%, 5%) 10-year maturity by 16 basis points (over a three-day marketing period) to 2.70%."

Citigroup priced San Antonio, Texas' $275.65 million tax-exempt offering, which consisted of Series 2015 general improvement and refunding bonds, Series 2015 combination tax and revenue certificates of obligation and Series 2015 tax notes. Citi also priced the city's $43.82 million of taxable Series 2015 combination tax and revenue certificates of obligation. All the securities were rated triple-A by Moody's, S&P and Fitch.

"The deal went very well. We had widespread institutional interest," Jorge Rodriguez, head of public finance at Coastal Securities, financial advisor on the sale, told The Bond Buyer. "I think it's probably the most widespread interest we've seen on a San Antonio deal in a very, very long time."

The refunding produced $12.9 million, or 13.4%, in present value savings, according to Rodriguez. The city also considered refunding a 2008 issue, but ran into negative arbitrage factors; it will consider refunding those bonds later this year.

"For what we refunded, we got very good results," Rodriguez said. "We were very pleased with where the market was, given the international situation." The overall deal oversubscribed two to three times, he added.

In the competitive arena, the Virginia College Building Authority sold $290 million of Series 2015D educational facilities revenue bonds under the 21st Century College and Equipment Program. Wells Fargo Securities won the issue with a true interest cost of 2.94%. The issue was rated Aa1 by Moody's and AA-plus by Fitch.

"We are very thrilled with the results, as we got a low TIC from Wells Fargo and the cover was less than a half basis point differential," Michael Walsh, public finance manager for the VCBA, told The Bond Buyer.

Columbus, Ohio, sold $333.49 million of securities in four separate offerings. Bank of America Merrill Lynch won the $230.66 million of Series 2015A unlimited tax various purpose bonds with a true interest cost of 2.79%. Robert W. Baird won the $74.69 million of Series 2015B limited tax various purpose bonds with a TIC of 2.97%. PNC Capital Markets won the $13.64 million of Series 2015C taxable limited tax various purpose bonds with a TIC of 2.54%. PNC also won the $14.5 million of Series 2015 limited tax various purpose notes with an effective rate of 0.180568%. All three bond issues were rated triple-A by Moody's, S&P and Fitch; the notes were rated MIG1 by Moody's.

Fort Worth, Texas, sold $256 million of bonds in two separate competitive sales. Citigroup won the $127.82 million of Series 2015A general purpose refunding and improvement bonds with a TIC of 2.45%. Barclays Capital won the $126.64 million of Series 2015A water and sewer system revenue refunding and improvement bonds with a TIC of 2.69%. The general purpose bonds were rated Aa1 by Moody's and AA-plus by S&P and Fitch and the water bonds were rated Aa1 by Moody's and AA by S&P and Fitch.

The Florida Department of Transportation sold $213.89 million of Series 2015A full faith and credit right-of-way acquisition and bridge construction refunding bonds. JPMorgan won the bonds with a TIC of 1.90%. The issue was rated Aa1 by Moody's and triple-A by S&P and Fitch.

The Week's Most Actively Quoted Issues

California, Pennsylvania and Puerto Rico were some of the most actively quoted names in the week ended July 31, according to data released by Markit.

On the bid side, the Bay Area Toll Authority, Calif., toll bridge revenue 7.043s of 2050 were quoted by 14 unique dealers. On the ask side, the Lehigh County General Purpose Authority, Pa., hospital revenue 4 1/8s of 2040 were quoted by 18 dealers. And among two-sided quotes, the Puerto Rico Electric Power Authority power revenue 5s of 2042 were quoted by 17 dealers, Markit said.

The Week's Most Actively Traded Issues

Some of the most actively traded issues in the week ended July 31 were in New York, Puerto Rico and California, according to Markit.

In the revenue bond sector, the New York Metropolitan Transportation Authority 5s of 2035 were traded 76 times. In the GO bond sector, the Puerto Rico commonwealth 8s of 2035 were traded 58 times. And in the taxable bond sector, the California Earthquake Authority revenue 2.805s of 2019 were traded 13 times, Markit said.

 

 

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