Municipals Strengthen as Texas Waters Flow In

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Top quality municipal bonds were stronger at mid-session, according to traders as the last few big deals of the week came to market.

 

Secondary Market

The yield on the 10-year benchmark muni general obligation fell as much as two basis points from 2.30% on Wednesday, while the 30-year GO yield dropped one to three basis points from 3.10%, according to a read of Municipal Market Data's triple-A scale.

U.S. Treasuries were weaker on Thursday. The yield on the two-year rose to 1.26% from 1.25% on Wednesday, while the 10-year Treasury yield gained to 2.43% from 2.39%, and the yield on the 30-year Treasury bond increased to 3.04% from 3.01%.

On Wednesday, the 10-year muni to Treasury ratio was calculated at 96.1% compared with 95.8% on Tuesday, while the 30-year muni to Treasury ratio stood at 103.0%, versus 102.6%, according to MMD.

 

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 43,803 trades on Wednesday on volume of $16.06 billion.

 

Primary Market

On Thursday, the North Texas Municipal Water District competitively sold $112.26 of bonds in two separate offerings.

Bank of America Merrill Lynch won the $74.94 million of Series 2017 regional wastewater system revenue bonds with a true interest cost of 3.66%. The bonds are rated Aa2 by Moody's Investors Service and AAA by S&P Global Ratings.

Wells Fargo Securities won the $37.32 million of Series 2017 contract revenue bonds for the Upper East Fork wastewater interceptor system with a TIC of 3.12%. The bonds are rated Aa1 by Moody's and AAA by S&P.

Since 2007, the district has sold about $2.5 billion of bonds, with the most issuance occurring in 2016 when it offered $514.7 million of debt. It did not come to market in 2011 and only issued $27.9 million of securities in 2013.

In the negotiated sector, BAML received the official award on Thursday for the North Carolina Turnpike Authority's $200.52 million of Series 2017 senior lien turnpike revenue refunding bonds for the Triangle Expressway System.

The issue was priced to yield from 1.18% with a 5% coupon in 2018 to 3.47% with a 5% coupon in 2032. A term bond in 2039 was priced to yield 3.58% with a 5% coupon.

The deal is rated BBB by S&P and BBB-minus by Fitch Ratings with the exception of the 2024, 2026 through 2029, 2031 and 2039 maturities, which are insured by Assured Guaranty Municipal and are rated A2 by Moody's and AA by S&P.

The deal was repriced in several maturities, Eric Kazatsky, Janney's director of municipal credit research, said in a market comment on Thursday.

"This could indicate excess customer interest or that the bonds were not at the appropriate market level for the initial pricing scale," he wrote.

Kazatsky added, however that AGM wrapped several of the deal's maturities and that it "can be seen as a somewhat positive sign that Assured Guaranty provided insurance capacity for the bonds and felt comfortable enough with the credit from a risk standpoint."

Piper Jaffray received the award on the Palomar Community College District, Calif.'s $139 million of Series 2017D general obligation bonds.

The issue was priced as 4s to yield 0.91% in 2018 and 1.09% in 2019 and as 5s to yield from 1.72% in 2022 to 2.99% in 2032; a 2045 maturity was priced as 5 1/4s to yield 3.25% and a 2046 maturity was priced as 4s to yield 3.82%. The deal is rated Aa1 by Moody's and AA by S&P.

Several deals of interest are already on the calendar for the upcoming week, including the Golden State Tobacco Securitization Corp.'s $619 million of asset backed bonds to be priced by Jefferies and the New Jersey Turnpike Authority's $525 million of revenue bonds to be priced by Goldman Sachs.

 

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $2.21 billion to $7.45 billion on Thursday. The total is comprised of $3.30 billion of competitive sales and $4.15 billion of negotiated deals.

 

Tax-Exempt Money Market Fund Inflows

Tax-exempt money market funds experienced inflows of $18.1 million, bringing total net assets to $131.10 billion in the week ended March 20, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $90.9 billion to $131.08 billion in the previous week.

The average, seven-day simple yield for the 232 weekly reporting tax-exempt funds was jumped to 0.25% from 0.20% in the previous week.

The total net assets of the 861 weekly reporting taxable money funds decreased $25.78 billion to $2.495 trillion in the week ended March 21, after an outflow of $4.95 billion to $2.521 trillion the week before.

The average, seven-day simple yield for the taxable money funds spiked to 0.36% from0.29% in the prior week.

Overall, the combined total net assets of the 1,091 weekly reporting money funds fell $25.75 billion to $2.626 trillion in the week ended March 21, after outflows of $4.86 billion to $2.652 trillion in the prior week.

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