Munis End Weaker as Hawaii, Mass. Issues Sell

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Top-rated municipal bonds ended weaker on Thursday, traders said, as more supply hit the screens, topped by Hawaii and Massachusetts issues.

Citigroup priced Hawaii's $758.68 million of 2016 general obligation bonds for institutions on Thursday after a one-day retail order period.

The $375 million of Series FG GOs were priced to yield from 1% with 3% and 5% coupons in a spilt 2019 maturity to 2.63% with a 4% coupon in 2036. The $380.96 million of Series FH refunding GOs, which were not offered to retail, were priced to yield from 1.19% with 3% and 5% coupons in a split 2021 maturity to 2.39% in 2031. The $2.72 million of Series FI refunding GOs were priced to yield from 1.19% with a 2% coupon in 2021 to 2.25% with a 5% coupon in 2033.

The deal is rated Aa1 by Moody's Investors Service, AA-plus by S&P Global Ratings and AA by Fitch Ratings.

Since 2006, Hawaii has issued over $11 billion of bonds with the most issuance occurring in 2001 when it sold $1.7 billion of debt. The Aloha State sold the least amount of debt, in that period, in 2007 when it issued $401.6 million of bonds.

Morgan Stanley priced and restructured Massachusetts' $241.04 million of Series 2016A commonwealth transportation fund revenue bonds for rail enhancement and accelerated bridge programs and Series 2016A commonwealth transportation fund revenue refunding bonds for institutions after a one-day retail order period.

The issue was originally sized at $435.72 million, but a 2046 maturity was eliminated during the restructuring.

"As with all of our deals, we are careful to lock into long term rates only at levels with which we are completely comfortable," said Chandra Allard, the Massachusetts Treasury's Communications Director. "We determined that the 2046 term bond was not pricing at a level at which we were willing to commit. Because we have the flexibility to do so, we decided to downsize that part of the transaction and re-enter the market with that piece at a later date."

The resized $136.59 million of Series 2016A CTF revenue bonds were priced to yield from 0.80% with a 4% coupon in 2018 to 2.31% with a 5% coupon in 2038; a split 2041 maturity was priced at par to yield 3% and as 5s to yield 2.40%

The $104.45 million of Series 2016A CTF revenue refunding bonds were priced to yield from 1.22% with a 5% coupon in 2023 to 1.88% with a 5% coupon in 2029. The deal is rated Aa1 by Moody's and triple-A by S&P.

Morgan Stanley also priced Massachusetts' $126.51 million of Series 2016A federal highway grant anticipation notes for the accelerated bridge program.

The notes were priced as 5s to yield from 0.85% in 2019 to 1.62% in 2027. The deal is rated Aa2 by Moody's and triple-A by S&P.

Jefferies priced the state of California's $200 million of GO index floating rates consisting of Series 2016B new issue bonds and a Series 2013C bond remarketing after it replaced Wells Fargo Securities as senior manager on the deal when the California state Treasurer sanctioned Wells.

The $100 million of Series 2016B bonds were priced to yield about 76 basis points over the one-month LIBOR with a maturity data of 2031 and a mandatory tender date of 2021. The $100 million of Series 2016C bonds were remarketed at about 70 basis points over the one-month LIBOR with a maturity data of 2028 and a mandatory tender date of 2020. The deal is rated Aa3 by Moody's and AA-minus by S&P and Fitch.

The California State Public Works Board's $527.54 million of lease revenue refunding bonds, which had been slated to be priced this week by Wells, will now be coming to market next week. Loop Capital Markets and Raymond James & Associates were newly named joint senior managers for the sale.

Barclays Capital priced the Board of Regents of the University of Texas System's $234.03 million of Series 2016H revenue financing system refunding bonds.

The issue was priced to yield from 0.795% with a 2% coupon in 2017 to 3.03% with a 3% coupon in 2038. The deal is rated triple-A by Moody's, S&P and Fitch.

Bank of America Merrill Lynch priced the Greater Orlando Aviation Authority, Fla.'s $182.02 million of Series 2016A and Series 2016B airport facilities revenue bonds.

The $80.195 million of Series 2016A bonds, subject to the alternative minimum tax, were priced as 5s to yield from 1.12% in 2019 to 2.23% in 2027 and from 2.41% in 2029 to 2.90% in 2041 and 2.95% in 2046.

The $101.82 million of Series 2016B non-AMT bonds were priced to yield from 0.85% with a 3% coupon in 2017 to 2.55% with a 5% coupon in 2037; a split 2039 maturity was priced as 4s to yield 2.90% and as 5s to yield 2.60%, a 2042 maturity was priced as 5s to yield 2.63% and a 2046 maturity was priced as 5s to yield 2.7%. The deal is rated Aa3 by Moody's and AA-minus by S&P and Fitch.

Wells Fargo priced the Oklahoma Capital Improvement Authority's $170 million of Series 2016 state highway capital improvement revenue bonds, which are subject to annual appropriation.

The issue was priced to yield from 1.04% with 3% and 5% coupons I a split 2019 maturity to 3.03% with a 3% and 2.77% with a 4% coupon in a split 2034 maturity. The deal is rated AA by S&P and Fitch.

In the competitive arena, Mecklenburg County, N.C., sold $200 million of Series 2016B GO public improvement bonds. Citi won the bonds with a true interest cost of 2.28%. The deal was priced to yield from 0.75% with a 5% coupon in 2017 to 2.66% with a 3% coupon in 2035. The deal is rated triple-A by Moody's, S&P and Fitch.

 

Secondary Market

The yield on the 10-year benchmark muni general obligation rose two basis points to 1.50% from 1.48% on Wednesday, while the yield on the 30-year climbed two basis points to 2.29% from 2.27%, according to the final read of Municipal Market Data's triple-A scale.

Treasuries were narrowly mixed on Thursday. The yield on the two-year Treasury was unchanged from 0.75% on Wednesday, the 10-year Treasury yield was flat at 1.56% and the yield on the 30-year Treasury bond decreased to 2.28% from 2.29%.

The 10-year muni to Treasury ratio was calculated at 96.6% on Thursday compared to 94.6% on Wednesday, while the 30-year muni to Treasury ratio stood at 100.7% versus 99.3%, according to MMD.

 

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 36,788 trades on Wednesday on volume of $17.999 billion.

 

Tax-Exempt Money Market Fund Outflows

Tax-exempt money market funds experienced outflows of $5.13 billion, bringing total net assets to $134.40 billion in the week ended Sept. 26, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $5.53 billion to $139.53 billion in the previous week.

The average, seven-day simple yield for the 247 weekly reporting tax-exempt funds rose to 0.27% from 0.21% in the previous week.

The total net assets of the 886 weekly reporting taxable money funds increased $19.63 billion to $2.524 trillion in the week ended Sept. 27, after an outflow of $23.27 billion to $2.504 trillion the prior before.

The average, seven-day simple yield for the 881 taxable money funds remained at 0.12% from the week before.

Overall, the combined total net assets of the 1,128 weekly reporting money funds rose $14.50 billion to $2.658 trillion in the period ended Sept. 27, which followed an outflow of $28.80 billion to $2.644 trillion.

 

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