Top rated municipal bonds ended stronger on Wednesday, according to traders, as a California issuer came to market with almost $1 billion of bonds just one day after the massive Ascension Health Alliance deal was priced.
Secondary Market
The yield on the 10-year benchmark muni general obligation fell one basis point to 1.65% from 1.66% on Tuesday while the 30-year muni yield dropped two basis points to 2.61% from 2.63%, according to the final read of Municipal Market Data's triple-A scale.
The Federal Open Market Committee left the fed funds rate target at 0.25% to 0.50%, but didn't give clear clues about the timing of the next increase in its post-meeting statement. Markets don't expect any increases until September.
U.S. Treasuries were narrowly mixed on Wednesday. The yield on the two-year Treasury was unchanged from 0.86% on Tuesday, while the 10-year Treasury yield dropped to 1.87% from 1.93% and the yield on the 30-year Treasury bond declined to 2.72% from 2.75%.
The 10-year muni to Treasury ratio was calculated at 88.5% on Wednesday compared with 86.0% on Tuesday, while the 30-year muni to Treasury ratio stood at 96.5% versus 95.4%, according to MMD.
Primary Market
Bank of America Merrill Lynch priced the California Statewide Communities Development Authority's $947.62 million of Series 2016A revenue bonds for the Loma Linda University Medical Center on Wednesday.
The issue was priced as 5s to yield from 3.34% in 2025 to 3.93% in 2031; a 2036 maturity was priced as 5s to yield 4.27%; a 2041 maturity was priced as 5s to yield 4.45%, a 2046 term bond was priced as 5s to yield 4.48%; and a 2056 term was priced as 5 1/4s to yield 4.70%.
The deal is rated BB by Standard & Poor's and BB-plus by Fitch Ratings.
Since 2006, the SCDA has sold more than $22 billion of debt, with over $4 billion of bonds sold in 2007, 2008 and 2009. The smallest issuance year was 2013, when the authority sold $516 million.
On Tuesday, Morgan Stanley priced Ascension Health Alliance's $1.2 billion healthcare deal through four conduit issuers for the Ascension Senior Credit Group.
"As expected, current market conditions resulted in broad demand for the credit. The transaction was expected to have a nice reception and considering absolute yield levels and historical spread comparisons it did," said Adam Buchanan, a senior vice president in Ziegler's institutional sales and trading group.
The deal was rated Aa2 by Moody's, and AA-plus by S&P and Fitch.
"We were extremely pleased with the result of pricing, with a 3.945% long term taxable rate and an all-in TIC of 3.62%for the tax-exempt fixed rate piece," said Steve Gilmore, Ascension's debt manager. "The favorable taxable market enabled us to upsize that portion to $700 million and the bonds received over $2 billion in indications of interest, enabling the spread to treasuries to be reduced by three bps after the launch. The tax-exempt bonds received over $3.4 billion in orders, enabling yields to be reduced by up to five basis points per maturity."
On Wednesday, Citigroup priced the Texas Private Activity Bond Surface Transportation Corp.'s $271.3 million of tax-exempt senior lien revenue bonds for the Blueridge Transportation Group's SH 288 Toll Lanes Project.
The issue was priced as 5s to yield 3.64% in 2040, 3.72% in 2045, 3.83% in 2050 and 3.93% in 2055.
The deal, which is subject to the alternative minimum tax, is rated Baa3 by Moody's Investors Service and BBB-minus by S&P.
Wells Fargo Securities priced the Colorado Health Facilities Authority's $114.59 million of Series 2016 hospital revenue bonds for the NCMC Inc. Project. The issue was priced to yield from 1.02% with a 2% coupon in 2019 to 3.29% with a 3.25% coupon in 2033. The deal is rated A-plus by S&P and Fitch.
Citi priced the Massachusetts Development Finance Agency's $221.07 million of Series 2016 I revenue bonds for CareGroup. The issue was priced as 5s to yield from 0.80% in 2017 to 3.10% in 2038. The deal is rated A3 by Moody's and A-minus by S&P.
JPMorgan Securities received the written award on the Connecticut Housing Finance Authority's $149 million of Series 2016B housing mortgage finance program bonds.
The $65.98 million of Subseries B-1 bonds were priced at par to yield 2.40% in 2026, 2.55% and 2.60% in a split 2027 maturity, 2.95% in 2031, 3.25% in 2036, 3.45% in 2041 and 3.55% in 2046. The $68.50 million of Subseries B-2 bonds, subject to the AMT, were priced at par to yield from 0.75% in 2017 to 2.75% and 2.80% in a split 2026 maturity; a 2039 maturity was priced as 3 1/2s to yield 2%. The deal is rated triple-A by Moody's and S&P.
Piper Jaffray received the official award on the Ohlone Community College District, Alameda County, Calif.'s $155 million Election of 2010 Series C GOs. The issue was priced to yield from 0.50% with a 2% coupon in 2016 to 3.17% with a 3% coupon in 2038; a 2041 term bond was priced as 4s to yield 2.98% and a 2045 term was priced as 4s to yield 3.03%. The deal was rated Aa2 by Moody's and AA by Fitch.
