Munis Weaken as Brexit Balloting Begins

bb062416mun.jpeg
bb062416mun.jpeg

Top-rated municipal bonds ended weaker on Thursday, traders said, with some last-minute deals of the week trickling into the market as Britain voted on a referendum on whether to stay or renounce its membership in the European Union.

Muni traders, who won't know the final result of the vote until Friday, were winding down business ahead of potential volatility in financial markets worldwide.

The yield on 10-year benchmark muni general obligation rose three basis points to 1.53% from 1.50% on Wednesday, while the 30-year muni yield increased four basis points to 2.23% from 2.19%, according to the final read of Municipal Market Data's triple-A scale.

U.S. Treasuries were weaker on Thursday. The yield on the two-year Treasury rose to 0.77% from 0.75% on Wednesday, while the 10-year Treasury yield gained to 1.74% from 1.69% and the yield on the 30-year Treasury bond increased to 2.56% from 2.50%.

 

Primary Market

"This was a tough environment for market primary deals with the British vote on Brexit," said Randy Smolik, Senior Market Analyst at MMD. "Additional deals that were not scheduled by last Friday continued to surface ahead of the vote," including a Bexar County, Texas, deal, he said.

RBC Capital Markets priced Bexar County's $352.88 million of Series 2016 limited tax refunding bonds and Series 2016 flood control tax refunding bonds.

The $252.35 million of limited tax refunding bonds were priced to yield from 0.80% with a 5% coupon in 2018 to 2.55% with a 4% coupon in 2035; a 2040 maturity was priced as 4s to yield 2.68%. A 2017 maturity was offered as a sealed bid. The $100 million of flood control refunding bonds were priced to yield from 0.80% with a 2% coupon in 2018 to 2.75% with a 3% coupon in 2035. A 2017 maturity was offered as a sealed bid.

The deal was rated triple-A by Moody's Investors Service, S&P Global Ratings and Fitch Ratings.

RBC also priced Frisco, Texas' $158.18 million deal, consisting of Series 2016 GO refunding and improvement bonds, Series 2016A combination tax and limited surplus revenue certificates of obligation, and Series 2016B taxable combination tax and limited surplus revenue certificates of obligation.

The $120.62 million of Series 2016 bonds were priced to yield from 0.60% with a 3% coupon in 2017 to 2.36% with a 5% coupon in 2036. The $17.07 million of certificates were priced to yield from 0.60% with a 2% coupon in 2017 to 2.63% with a 4% coupon in 2036. The $20.5 million of Series 2016B taxables were priced at par to yield from 1.255% in 2019 to 3.185% in 2031, at par to yield 3.60% in 2036, and as 3 1/2s to yield 3.80% in 2041.

The deal was rated Aa1 by Moody's and AA-plus by S&P.

Goldman Sachs priced Dallas's $540.35 million of waterworks and sewer system revenue refunding bonds in two series.

The $370.1 million of Series 2016A tax-exempts were priced to yield from 0.67% with a 3% coupon in 2017 to 2.54% with a 4% coupon and 2.29% with a 5% coupon in a split 2036 maturity; a split 2041 maturity was priced as 4s to yield 2.64% and as 5s to yield 2.39%; a 2045 maturity was priced as 4s to yield 2.68%.

The $170.25 million of Series 2016B taxable were priced at par to yield from 0.60% in 2016 to 2.689% in 2028. The deal is rated triple-A by S&P and AA-plus by Fitch.

Bank of America Merrill Lynch priced the Northampton County General Purpose Authority, Pa.'s $215.62 million of Series 2016A hospital revenue bonds for St. Luke's University Health Network.

The issue was priced to yield from 1.26% with a 4% coupon in 2019 to 2.86% with a 5% coupon in 2036; a 2040 maturity was priced as 4s to yield 3.32% and a 2046 maturity was priced as 5s to yield 2.98%. The deal is rated A3 by Moody's and A-minus by S&P.

In the competitive arena on Thursday, the New Mexico Finance Authority sold $116.51 million of Series 2016D senior lien public project revolving fund revenue bonds.

Morgan Stanley won the issue with a true interest cost of 2.41%. The deal was priced to yield from 0.76% with a 5% coupon in 2017 to 2.89% with a 3% coupon in 2037; a 2039 maturity was priced as 3s to yield 3.05% and a 2041 maturity was priced as 3s to yield 3.116%. The deal is rated Aa1 by Moody's Investors Service and triple-A by S&P Global Ratings.

Since 2006, the NMFA has issued about $3.87 billion of debt, with the largest issuance occurring in 2010 when it sold $726 million of securities. The authority has issued no more than $300 million in a year, seven times since 2006, including the past six years.

Hennepin County, Minn., sold $104.29 million of Series 2016A general obligation bonds. BAML won the GOs with a TIC of 2.93%. The issue was priced as 5s to yield from 0.73% in 2018 to 2.24% in 2041. The deal is rated triple-A by S&P and Fitch Ratings.

 

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 40,329 trades on Wednesday on volume of $13.71 billion.

 

Tax-Exempt Money Market Funds See Outflows

Tax-exempt money market funds experienced outflows of $2.62 billion, bringing total net assets to $202.47 billion in the week ended June 20, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $3.31 million to $205.09 billion in the previous week.

The average, seven-day simple yield for the 290 weekly reporting tax-exempt funds increased to 0.07% from 0.06% last week.

The total net assets of the 897 weekly reporting taxable money funds decreased $16.34 billion to $2.487 trillion in the week ended June 21, after an outflow of $4.98 billion to $2.504 trillion the week before.

The average, seven-day simple yield for the taxable money funds remained at 0.11%.

Overall, the combined total net assets of the 1,187 weekly reporting money funds decreased $18.96 billion to $2.690 trillion in the period ended June 21, which followed an outflow of $8.29 billion to $2.709 trillion.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER