Prices of top-rated municipal bonds finished little changed on Wednesday, traders said, with yields on some maturities slipping by a basis point after remaining flat in the previous two trading sessions.
The $1.7 billion California tobacco bond deal was priced for institutions after a one-day retail order period.
Secondary Market
The yield on the 10-year benchmark muni general obligation dropped one basis point to 1.93% from 1.94% on Tuesday, while the yield on 30-year GO remained at 2.76%, according to the final read of Municipal Market Data's triple-A scale. Yields remained unchanged during Monday's and Tuesday's trading sessions.
Treasury prices were lower on Wednesday. The yield on the two-year Treasury note rose to 0.59% from 0.56% on Tuesday, while the 10-year yield increased to 1.92% from 1.87% and the 30-year yield rose to 2.50% from 2.46%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 100.5% versus 103.4% on Tuesday, while the 30-year muni to Treasury ratio stood at 110.3% compared with 112.1%.
Primary Market
Citigroup Global Markets priced the California's Golden State Tobacco Securitization Corp.'s $1.697 billion of Series 2015A enhanced tobacco settlement asset-backed bonds for institutions.
The deal was priced to yield from 0.67% with a 3% coupon in 2017 to 1.92% with a 5% coupon in 2022; as 5s to yield 2.48% in 2026; as 4s to yield 3.45% in 2031; as 3 1/4s to yield 3.56% and as 5s to yield 3.16% in a split 2032 maturity; as 5s to yield 3.20% in 2033; as 3 1/4s to yield 3.64% and as 5s to yield 3.27% in a split 2035 maturity; as 5s to yield 3.35% in 2040; and as 5s to yield 3.40% and as 4s to yield 3.80% in a split 2045 maturity. The 2016 maturity was offered as a sealed bid.
"The Golden State deal is kind of a reflection of the yields - it got re-priced up front and it is really hard to find any yield on the front end of the curve," said a Midwest trader. "I am seeing a lot of interest up front, and that is what we have seen in yields so far in 2015. As far as the rest of the transaction, I think it went well. It got good results and the market was a little softer today."
On Tuesday, Citi priced the issue was for retail to yield from 0.72% with a 3% coupon in 2017 to 2.02% with a 5% coupon in 2022; as 5s to yield 2.55% in 2026; as 4s to yield 4.38% in 2031; as 3 1/2s to yield 3.60 and as 5s to yield 3.16% in a split 2032 maturity; as 4s to yield 3.67 and as 5s to yield 3.27% in a split 2035 maturity; and as 5s to yield 3.40 and as 4s to yield 3.80% in a split 2045 maturity. No retail orders were taken in the 2033, 2034 or 2040 maturities. The 2016 maturity was offered as a sealed bid.
The asset-backed securities are rated A1 by Moody's Investors Service and A by Standard & Poor's and Fitch Ratings.
"You don't see too much in California where you can get behind plus 100 out long," the trader added. "There is definitely value there. The borrower is getting a good deal and the issuers are getting triple-digit spreads."
Also on Wednesday, Anne Arundel County, Md., sold two separate competitive deals totaling $383.70 million.
The larger sale, $269 million of general obligation bonds, was won by Bank of America Merrill Lynch with a true interest cost of 2.8327%. This sale was broken down into two parts The $191.40 million of GO consolidated general improvement bonds were priced as 5s to yield 0.20% in 2016 to 2.70% in 2035. The $77.60 million of GO consolidated water and sewer bonds were priced as 5s to yield 0.20% in 2016 to 2.70% in 2035; a 2040 term bond was priced as 5s to yield 2.78% and a 2045 term was priced as 5s to yield 2.81%.
The smaller sale, $114.70 million of GOs, was also won by BAML, with a TIC of 2.3044%. This sale came in three parts. The $62.80 million of GO consolidated general improvement bonds were priced as 5s to yield 0.24% in 2016 to 2.25% in 2027. The $35.76 million of GO consolidated water and sewer refunding bonds were priced as 5s to yield 0.29% in 2016 to 2.73% in 2036. The $16.14 million of GO consolidated golf course project refunding bonds were priced as 5s to yield 0.29% in 2016 to 2.37% in 2028.
Both sales are rated Aa1 by Moody's, triple-A by S&P and AA-plus by Fitch.
"The Anne Arundel deal was another big transaction; there was decent follow through there, as I have not seen a lot of balances. It definitely got the market's attention," said the Midwest trader. "The market absorbed the volume this week, as there was a good variety of deals to choose from,but the Golden State tobacco and Anne Arundel were the two headliners."
In the negotiated sector, Wells Fargo Securities priced Mecklenburg Co., N.C.'s $120.37 million of limited obligation refunding bonds Series A and B. The $74.96 million Series A bonds were priced as a split maturity in 2019 as 5s and 3s to yield 1.31% and to as 5s to yield from 1.51% in 2020 to 2.43% in 2026. The $45.41 million Series B bonds were priced as 5s to yield 1.31% in 2019 to 2.61% in 2028. The deal is rated Aa1 by Moody's and AA-plus by both S&P and Fitch.
JPMorgan Securities priced the Denton Independent School District, Texas' $122.14 million of unlimited tax refunding bonds. The bonds were priced to yield from 1.03% with a 5% coupon in 2018 to 3.19% with a 4% coupon in 2033. A 2015 term bond was priced as 3s to yield 0.16%. The deal was backed by the Permanent School Fund Guarantee program and rated triple-A by S&P and Fitch.
Goldman, Sachs priced the Dormitory of the State of New York's $92.90 million of Series 2015A revenue bonds for Columbia University in two maturities. The 2025 maturity was priced as 5s to yield 1.95% while the 2045 maturity was prices as 5s to yield 3%. The 2025 bonds are non-callable while the 2045 bonds are callable on any date. The DASNY issue is rated triple-A by Moody's and S&P.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $710.6 million to $12.125 billion on Wednesday. The total is comprised of $3.238 billion competitive sales and $8.887 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,018 trades on Tuesday on volume of $8.447 billion. Most active on Monday, based on the number of trades, was the Kentucky Municipal Power Agency's Series 2015A Prairie State project power system revenue refunding 4s of 2029, which traded 164 times at an average price of 99.898 with an average yield of 3.989%; (initial offering price of 97.858, an initial offering yield of 4.14%).
