Munis Weaken as Another Wave of Issuance Hits

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Top-shelf municipal bonds ended weaker on Wednesday, according to traders, as a few more big sales hit the market from issuers in Colorado, Georgia and California.

On the week's big Chicago deal, a pre-marketing scale was released for the tax-exempt portion of the deal while indications of interest were taken on the taxable part.

 

Primary Market

RBC Capital Markets priced the Denver City and County School District No. 1, Colo.'s $466.1 million of general obligation bonds on Wednesday.

The issue was priced to yield from 1.25% with a 5% coupon in 2019 to 3.01% with a 5% coupon in 2038. A term bond in 2041 was priced to yield 3.42% with a 4% coupon.

The deal is insured by the Colorado State Intercept Program and rated Aa2 by Moody's Investors Service, AA by S&P Global Ratings and AA-plus by Fitch Ratings.

JPMorgan priced the Lone Star College System's $133.02 million of Series 2017A limited tax GOs for Harris, Montgomery and San Jacinto counties in Texas.

The bonds were priced to yield 0.83% with a 3% coupon in 2017 and to yield from 1.24% with a 5% coupon in 2019 to 3.08% with a 5% coupon in 2038. A term bond in 2042 was priced as 5s to yield 3.14% while a 2046 term was priced as 4s to yield 3.62%. The deal is rated triple-A by S&P.

Bank of America Merrill Lynch priced the Hospital Authority of Hall County and the City of Gainesville, Ga.'s $312.43 million of Series 2017 A and B revenue anticipation certificates for the Northeast George Health System Inc.

The $171.06 million of Series 2017A hospital-backed bonds were priced as 5s to yield 1.91% in 2021 and as 5s to yield from 2.82% in 2025 to 3.30% and as 5s to yield from 3.56% in 2034 to 3.68% in 2037, as 4s to yield 4.15% and as 5s to yield 3.76% in a split 2042 maturity and as 5s to yield 3.79% in 2045.

The $141.37 million of Series 2017B county-backed bonds were priced as 5s to yield from 1.79% in 2021 to 3.46% in 2037. A split 2042 maturity was priced as 3 3/4s to yield 4% and as 5 1/2s to yield 3.48% while a 2045 maturity was priced as 5 1/4s to yield 3.61%.

The deal is rated A by S&P and Fitch.

Goldman Sachs is expected to price the city of Chicago's $1.16 billion of taxable and tax-exempt general obligation bonds this week.

A market source indicated the taxable portion opened for indications of interest on Wednesday, with the tax-exempts expected to price on Thursday.

The $274.24 million of Series 2017B taxables were offered to yield about 475 basis points above the comparable Treasury security in 2029, according to a market source who had seen the indications of interest wire.

One market participant cautioned against reading too much into the premarketing wire as Goldman could have put out at especially cheap levels to gage demand.

Another source said the premarketing scale on the $888.76 million of Series 2017A tax-exempt GO project and refunding bonds had been released.

According to the source, the bonds were pre-marketed to yield from 5.80% with a 5.75% coupon in 2029 to 5.96% with a 5.75% coupon in 2031. The bonds were also pre-marketed to yield from 6.08% with a 6% coupon in 2033 to 6.19% with a 6% coupon in 2035. A term bond in 2038 was pre-marketed to yield 6.25% with 6% coupon.

The deal is rated BBB-plus by S&P and Kroll Bond Rating Agency and BBB-minus by Fitch.

Since 2007, Chicago has issued about $26.68 billion of debt, with the largest issuance occurring in 2015 when it sold $4.24 billion. The windy city's lowest issuance total in the past 10 years came in 2009, when it issued $778 million. The city has issued more than $2 billion every year since 2013 and a total of eight times since 2007.

RBC Capital Markets priced for retail the Los Angeles Department of Water and Power's $500 million of Series 2017A power system revenue bonds.

The issue was priced as 5s to yield from 1.67% in 2022 to 2.98% in 2037, 3.05% in 2042 and 3.10% in 2047. The deal is rated Aa2 by Moody's and AA-minus by S&P and Fitch.

In the competitive arena on Wednesday, the city and county of San Francisco sold $174.11 million of GO public health and safety bonds. Raymond James won the bidding with a true interest cost of 2.99%. No pricing information was available. The deal is rated Aa1 by Moody's and AA-plus by S&P and Fitch.

Fulton County, Ga., competitively sold $104.79 million of Series 2017 GO library bonds. Wells Fargo Securities won the bidding with a TIC of 3.51%.

The issue was priced to yield from 0.93% with a 5% coupon in 2017 to 3.40% with a 4% coupon in 2044. The deal is rated Aa1 by Moody's, AA-plus by S&P and AA by Fitch.

 

Secondary Market

The 10-year benchmark muni general obligation yield rose three basis to 2.17% from 2.14% on Tuesday, while the yield on the 30-year GO increased four basis points to 2.92% from 2.88%, according to the final read of Municipal Market Data's triple-A scale.

U.S. Treasuries were weaker. The yield on the two-year Treasury rose to 1.19% from 1.15% on Tuesday, while the 10-year Treasury yield gained to 2.39% from 2.32%, and the yield on the 30-year Treasury bond increased to 2.99% from 2.93%.

The 10-year muni to Treasury ratio was calculated at 90.8% on Wednesday compared to 92.0% on Tuesday, while the 30-year muni to Treasury ratio stood at 97.8%, versus 98.3%, according to MMD.

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