Top-rated municipal bonds finished stronger on Thursday, traders said, as yields on some maturities fell by as much as five basis points. Treasuries surged as stocks slumped after global equities caught a bad case of the Bear Market Blues.
The yield on the 10-year benchmark muni general obligation fell five basis points to 1.56% from 1.61% on Wednesday, while the 30-year muni yield dropped five basis points to 2.63% from 2.68%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were higher on Thursday. The yield on the two-year Treasury dropped to 0.63% from 0.70% on Wednesday, while the 10-year Treasury yield decreased to 1.61% from 1.71% and the 30-year Treasury bond yield declined to 2.46% from 2.53%.
The 10-year muni to Treasury ratio was calculated on Thursday at 95.0% compared to 94.5% on Wednesday, while the 30-year muni to Treasury ratio stood at 105.2% versus 106.0%, according to MMD.
In late trade, the Dow Jones Industrial Average was down almost 1.9%, the Nasdaq Composite Index decreased by around 0.7% and the S&P 500 Index was off by nearly 1.5%. The price of oil fell about 50 cents to nearly $27.
"For the past week, the markets focused on an assortment of problems. Now the problems point to one major concern -- the central banks seemed powerless to buoy inflation and halt an economic slide," MMD Senior Analyst Randy Smolik wrote in a market comment. "Treasury trading resembled a panic as gains reached 14-17 basis points at one point."
Primary Market
Municipal bond traders wrapped up the busiest new issue week of the year as the last few deals of size hit the market on Thursday.
Bank of America Merrill Lynch priced Columbus, Ohio's $206 million of Series 2016-1 and Series 2016-2 various purpose general obligation refunding bonds. The bonds were priced for retail investors on Wednesday.
The $184.57 million of Series 2016-1 unlimited tax bonds were priced for institutions to yield from 0.48% with a 3% coupon in 2017 to 2.44% with a 4% coupon in 2031. The $21.43 million of Series 2016-2 bonds limited tax bonds were priced to yield from 1.14% with a 3% in 2022 to 1.86% with a 5% coupon in 2027.
For retail, the Series 2016-1 bonds were priced to yield from 0.50% with a 3% coupon in 2017 to 2.48% with a 4% coupon in 2031 while the Series 2016-2 bonds were priced to yield from 1.16% with a 3% in 2022 to 1.88% with a 5% coupon in 2027.
The issue was rated triple-A by Moody's Investors Service, Standard & Poor's and Fitch Ratings.
Citigroup priced the Indiana Municipal Power Agency's $149.03 million of Series 2016C power supply system refunding revenue bonds.
The issue was priced as 5s to yield from 0.57% in 2018 to 2.34% in 2029 and from 3.15% in 2035 to 3.04% in 2039. The deal was rated A1 by Moody's and A-plus by S&P and Fitch.
RBC Capital Markets priced the Regents of the University of New Mexico's $168.51 million issue consisting of Series 2016A tax-exempt subordinate lien system refunding and improvement bonds and Series 2016B taxable subordinate lien system refunding revenue bonds.
The $160.29 million of Series 2016A bonds were priced to yield from 0.15% with a 2% coupon in 2016 to 3.07% with a 4.50% coupon in 2038; a 2046 term bond was priced as 4s to yield 3.33%. The $8.22 million of Series 2016B taxables were priced at par to yield from 0.72% in 2016 to 2.48% in 2024.
The issue was rated Aa2 by Moody's and AA by S&P.
Looking ahead, New York City said it plans to offer $800 million of tax-exempt fixed-rate general obligation refunding bonds late next week.
Jefferies will hold a two-day retail order period for the NYC issue starting on Friday, Feb. 19, and will price the bonds for institutions on Tuesday, Feb. 23.
BAML, Citigroup, J.P. Morgan, Morgan Stanley, and Siebert Brandford Shank & Co. will serve as co-senior managers.
Also next week, he New York Metropolitan Transportation Authority will be selling $500 million of green bonds. The MTA plans to offer its inaugural green bonds in a two-day order period starting Feb. 17. Ramirez & Co. will be pricing the bonds with Drexel Hamilton and Stern Brothers as special co-senior managers.
Meanwhile, the New York Transitional Finance Authority deal that was priced by BAML this week was reported to be getting a good market reception.
"The $750 million New York City TFA deal that priced earlier this week said to be trading well through initial pricing levels in the secondary," Interactive Data wrote in a market commentary.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,966 trades on Wednesday on volume of $11.45 billion.
Tax-Exempt Money Market Funds Post Outflows
Tax-exempt money market funds experienced outflows of $1.13 billion, bringing total net assets to $246.24 billion in the week ended Feb. 8, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $1.57 billion to $247.37 billion in the previous week.
The average, seven-day simple yield for the 354 weekly reporting tax-exempt funds remained at 0.01% for the 145th straight week.
The total net assets of the 946 weekly reporting taxable money funds decreased $5.35 billion to $2.518 trillion in the week ended Feb. 9, after an inflow of $8.55 billion to $2.523 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds increased to 0.10% from 0.09% in the previous week.
Overall, the combined total net assets of the 1,300 weekly reporting money funds fell $6.48 billion to $2.764 trillion in the period ended Feb. 9, which followed an inflow of $6.98 billion to $2.770 trillion in the prior week.
