Municipal Bonds Weaken As Brexit Balloting Begins

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Top-rated municipal bonds were weaker at mid-session, traders said, as the last deals of the week came to market while Britain voted on a referendum on whether to keep or renounce its membership in the European Union.

The yield on 10-year benchmark muni general obligation was as much as two basis points stronger from 1.50% on Wednesday, while the 30-year muni yield was from two to four basis points stronger from 2.19%, according to a read of Municipal Market Data's triple-A scale.

Muni traders won't know the results of the vote until Friday, but they were winding down business ahead of the potential volatility in financial markets worldwide.

U.S. Treasuries were weaker on Thursday. The yield on the two-year Treasury rose to 0.78% from 0.75% on Wednesday, while the 10-year Treasury yield gained to 1.73% from 1.69% and the yield on the 30-year Treasury bond increased to 2.54% from 2.50%.

On Wednesday, the 10-year muni to Treasury ratio was calculated at 89.1% compared to 87.8% on Tuesday, while the 30-year muni to Treasury ratio stood at 87.7% versus 87.7%, according to MMD.

 

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 40,329 trades on Wednesday on volume of $13.71 billion.

 

Primary Market

In the competitive arena on Thursday, the New Mexico Finance Authority sold $116.51 million of Series 2016D senior lien public project revolving fund revenue bonds.

Morgan Stanley won the issue with a true interest cost of 2.41%. Pricing information was not immediately available. The deal is rated Aa1 by Moody's Investors Service and triple-A by S&P Global Ratings.

Previous to the sale, the authority last competitively sold comparable bonds on Jan. 28 when JPMorgan Securities won $52 million of Series 2016A tax-exempt senior lien public project revolving fund revenue bonds with a TIC of 1.94%.

Since 2006, the NMFA has issued about $3.87 billion of debt, with the largest issuance occurring in 2010 when it sold $726 million of securities. The authority has issued no more than $300 million in a year, seven times since 2006, including the past six years.

Hennepin County, Minn. Sold $104.29 million of Series 2016A general obligation bonds. Bank of America Merrill Lynch won the bonds with a TIC of 2.93%. The issue was priced as 5s to yield from 0.73% in 2018 to 2.24% in 2041. The deal is rated triple-A by S&P and Fitch Ratings.

Goldman Sachs priced Dallas, Texas's $540.35 million of waterworks and sewer system revenue refunding bonds in two series.

The $370.1 million of Series 2016A tax-exempts were priced to yield from 0.67% with a 3% coupon in 2017 to 2.54% with a 4% coupon and 2.29% with a 5% coupon in a split 2036 maturity; a split 2041 maturity was priced as 4s to yield 2.64% and as 5s to yield 2.39%; a 2045 maturity was priced as 4s to yield 2.68%.

The $170.25 million of Series 2016B taxable were priced at par to yield from 0.60% in 2016 to 2.689% in 2028.

The deal is rated triple-A by S&P and AA-plus by Fitch.

RBC Capital Markets received the official award on Frisco, Texas' $158.18 million deal, consisting of Series 2016 GO refunding and improvement bonds, Series 2016A combination tax and limited surplus revenue certificates of obligation, and Series 2016B taxable combination tax and limited surplus revenue certificates of obligation.

The $120.62 million of Series 2016 bonds were priced to yield from 0.60% with a 3% coupon in 2017 to 2.36% with a 5% coupon in 2036. The $17.07 million of certificates were priced to yield from 0.60% with a 2% coupon in 2017 to 2.63% with a 4% coupon in 2036. The $20.5 million of Series 2016B taxables were priced at par to yield from 1.255% in 2019 to 3.185% in 2031, at par to yield 3.60% in 2036, and as 3 1/2s to yield 3.80% in 2041.

The deal was rated Aa1 by Moody's and AA-plus by S&P.

 

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $2.13 billion to $9.37 billion on Thursday. The total is comprised of $3.21 billion of competitive sales and $6.16 billion of negotiated deals.

 

Tax-Exempt Money Market Funds See Outflows

Tax-exempt money market funds experienced outflows of $2.62 billion, bringing total net assets to $202.47 billion in the week ended June 20, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $3.31 million to $205.09 billion in the previous week.

The average, seven-day simple yield for the 290 weekly reporting tax-exempt funds increased to 0.07% from 0.06% last week.

The total net assets of the 897 weekly reporting taxable money funds decreased $16.34 billion to $2.487 trillion in the week ended June 21, after an outflow of $4.98 billion to $2.504 trillion the week before.

The average, seven-day simple yield for the taxable money funds remained at 0.11%.

Overall, the combined total net assets of the 1,187 weekly reporting money funds decreased $18.96 billion to $2.690 trillion in the period ended June 21, which followed an outflow of $8.29 billion to $2.709 trillion.

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