Top-rated municipal bonds finished steady to weaker on Wednesday, according to traders, as the week's second wave of new issuance swept over the market.
The yield on 10-year benchmark muni general obligation rose one basis point to 1.50% from 1.49% on Tuesday, while the 30-year muni yield was steady from 2.19%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were little changed. The yield on the two-year Treasury was steady from 0.75% on Tuesday, while the 10-year Treasury yield slipped to 0.69% from 1.70% and the yield on the 30-year Treasury bond was flat from 2.50%.
The 10-year muni to Treasury ratio was calculated at 89.1% on Wednesday compared to 87.8% on Tuesday, while the 30-year muni to Treasury ratio stood at 87.7% versus 87.7%, according to MMD.
Primary Market
Traders said the market held in well against the threat of market fallout from Thursday's vote on Britain's future in the European Union.
"Deals are getting done one way or the other, but not getting blown up in any way," said a New York trader. "The market is actually not bad today, maybe a little weaker, but finding buyer is kind of hard, but the pricing is fair. I would categorize it as surprisingly resilient, given the potential volatility that we could get tomorrow."
In the biggest deal of the day, Morgan Stanley priced the New York Metropolitan Transportation Authority's $595.86 million of Series 2016B transportation revenue refunding bonds for institutions on Wednesday after a one-day retail order period. The issue was upsized from the retail order period's original amount of $543.66 million.
The bonds were priced for institutions to yield from 0.95% with 3.5% and 5% coupons in a split 2019 maturity to 2.45% with a 5% coupon in 2037. The 2018 maturity was offered as a sealed bid. On Tuesday, the issue was priced for retail to yield from 0.96% with 3.5% and 5% coupons in a split 2019 maturity to 2.46% with a 5% coupon in 2037.
The deal is rated A1 by Moody's Investors Service, AA-minus by S&P Global Ratings, A by Fitch Ratings and AA-plus by Kroll Bond Rating Agency.
"The MTA deal was coming off the long end at around 38 basis points off the MMD scale.Now that doesn't show a lot of weakness, but I think this deal was indicative of the market today," the New York trader said. "Although you got some guys who have taken their chips off the table with the impending vote tomorrow, there is still an overwhelming amount of money that is out there."
Wells Fargo Securities priced the University of California Regents' $533.91 million of taxable and tax-exempt limited project revenue bonds.
The $435.94 million of Series 2016 K tax-exempt bonds were priced to yield from 0.58% with a 3% coupon in 2018 to 2.57% and 3.32% with 4% coupons in a split 2037 maturity. A 2046 term bond was priced as 4s to yield 2.66% and 2051 term was priced as 5s to yield 2.44%.
The $97.97 million of Series 2016 L taxables were priced at par to yield from 0.65% in 2017 to 3.339% in 2032 and 2.702% in 2039. The issue is rated Aa3 by Moody's and AA-minus by S&P and Fitch
"The market for Cal paper has been very strong and Cal U. continues to be traded really rich," said one market source. "The deal was to finance some capital projects on some of the campuses. They have a strong portfolio and great liquidity and reputation. The deal was eaten up, and that does not surprise me one bit."
Bank of America Merrill Lynch priced the Metropolitan Water District of Southern California's $239.06 million of Series 2016A water revenue refunding bonds. The issue was priced to yield from 1.74% with a 5% coupon in 2028 to 2.125% at par in 2037. The deal is rated Aa1 by Moody's, triple-A by S&P and AA-plus by Fitch.
Citigroup priced the Imperial Irrigation District, Calif.'s $188.95 million of taxable and tax-exempt electric system refunding revenue bonds.
The $48.37 million of Series 2016B-1 bonds were priced as 5s to yield 2.26% in 2034 and as 5s to yield 2.46% in 2046. The $108.91 million of Series 2016B-2 bonds were priced to yield from 1.05% with a 5% coupon in 2021 to 2.34% with a 5% in 2036. A term bond in 2041 was priced as 5s to yield 2.42%. The $31.68 million of Series 2016A taxables were priced to yield from 0.945% with a 0.945% coupon in 2016 to 2.032% with a 2.032% coupon in 2029. The deal is rated AA-minus by S&P.
BAML priced the Colorado Health Facilities Authority's $376 million of hospital revenue bonds for the Adventist Health System/Sunbelt Obligated Group.
The $150 million of Series 2016A bonds were priced as 4s to yield 2.94% and as 5s to yield 2.59% in a split 2041 maturity and as 4s to yield 2.99% in 2046. The $52.75 million of Series 2016B bonds were priced as 5s to yield from 1.22% in 2021 to 2.10% in 2030. The $173.25 million of Series 2016C bonds were priced as 5s to yield 1.66% and 2.04% in a split 2036 maturity. The deal is rated Aa2 by Moody's and AA by S&P and Fitch.
RBC Capital Markets priced the Pennsylvania Housing Finance Agency's $214.27 million of Series 2016-120 single-family non-AMT mortgage revenue bonds.
The issue was priced at par to yield from 1.30% in 2020 to 2.35% and 2.40% in a split 2027 maturity; the 2031 maturity was priced at par to yield 2.80%, the 2036 maturity was priced at par to yield 3.10%, the 2040 maturity was priced at par to yield 3.20% and the 2046 PAC maturity was priced as 3 1/2s to yield approximately 1.82%. The deal is rated Aa2 by Moody's and AA-plus by S&P.
BAML priced the state of Michigan's $189.07 million of Series 2016A taxable GO school loan refunding bonds and Series 2016B tax-exempt GO environmental program refunding bonds. The $129.12 million of Series 2016A taxables were priced to yield from 40 basis points over the comparable Treasury security in 2018 to 50 basis points over the comparable Treasury security in 2022; the 2016 and 2017 maturities were offered as sealed bids.
The $59.95 million of Series 2016B tax-exempts were priced to yield from 1.17% with a 5% coupon in 2021 to 1.68% with a 4% coupon in 2025. Both series are rated Aa1 by Moody's, AA-minus by S&P and AA by Fitch.
Jefferies priced the Ohio Water Development Authority's $150 million of water development revenue bonds Fresh Water Series 2016B. The issue was priced to yield from 1.35% with a 5% coupon in 2023 to 2.17% with a 5% coupon in 2037. The deal is rated triple-A by Moody's and S&P.
Citigroup priced the Orlando Utilities Commission's $142.84 million of Series 2016A utility system revenue refunding bonds subject to the alternative minimum tax. The issue was priced to yield from 0.66% with a 4% coupon in 2017 to 1.38% with a 5% coupon in 2023; and to yield from 1.85% with a 5% coupon in 2028 to 2.36% with a 4% coupon in 2033. The deal is rated Aa2 by Moody's and AA by S&P and Fitch.
BAML priced the Board of Governors of Wayne State University, Mich.'s $101.03 million of general revenue refunding bonds. The $90.9 million of Series 2016A bonds were priced to yield from 1.14% with a 3% coupon in 2019 to 3.16% with a 3.125% coupon. The $11.13 million of Series 2016B bonds were priced to yield from 1.55% with a 1.5% coupon in 2018 to 3.00% with a 2.95% coupon in 2025; a 2031 maturity was priced as 3.70S to yield 3.80% and a 2037 maturity was prices as 4s to yield about 4.178%. The deal is rated Aa3 by Moody's and A-plus by S&P.
In the competitive arena, the state of Alaska sold $128.3 million of Series 2016B unlimited tax general obligation bonds.
JPMorgan Securities won the deal with a true interest cost of 2.76%. The bonds were priced to yield from 0.72% with a 4% coupon in 2017 to 2.35% with a 5% coupon in 2035. The deal is rated Aa1 by Moody's and AA-plus by S&P and Fitch.
Since 2006, Alaska has issued about $1.9 billion of debt, with the largest issuance occurring in 2006 when it sold $412.7 million of securities. In 2016, the Last Frontier State has already issued more than $400 million of bonds including this sale, making this year the state's biggest issuance year since 2006.
In the short-term sector, Houston, Texas, sold $230 million of Series 2016 tax and revenue anticipation notes to nine groups.
BAML won $50 million with a bid of 5% plus a premium of $2,114,544, an effective rate of 0.660340%; JPMorgan won $50 million with a bid of 2% plus a premium of $654,500, an effective rate of 0.656850%; Wells Fargo won $30 million with a bid of 3% plus a premium of $684,000, an effective rate of 0.660400%; Raymond James won $25 million with a bid of 3% plus a premium of $570,000, an effective rate of 0.660400%; Citi won $25 million with a bid of 3% plus a premium of $570,005, an effective rate of 0.660380%; Barclays won $20 million with a bid of 2% plus a premium of $261,000, an effective rate of 0.660900%; FTN Financial Capital won $10 million with a bid of 3% plus a premium of $35,000, an effective rate of 0.649050%; Hutchinson Shockey won $10 million with a bid of 2% plus a premium of $130,600, an effective rate of 0.659890%; and Mesirow Financial won $10 million with a bid of 3% plus a premium of $228,500, an effective rate of 0.655390%.
