Munis Weaken as Calif. Tobacco Deal Prices

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Top-rated municipal bonds ended weaker on Wednesday, traders said, as the last of the week's big new issues hit the market on Thursday. The slate was topped by a large tobacco sale from California and a higher education deal out of Massachusetts.

Secondary Market
The yield on the 10-year benchmark muni general obligation rose one basis point to 2.24% from 2.23% on Wednesday, while the 30-year GO yield increased two basis points to 3.03% from 3.01%, according to the final read of Municipal Market Data's triple-A scale.

U.S. Treasuries were narrowly mixed on Thursday. The yield on the two-year was unchanged from 1.28% on Wednesday, while the 10-year Treasury yield gained to 2.42% from 2.39%, and the yield on the 30-year Treasury bond increased to 3.03% from 2.99%.

The 10-year muni to Treasury ratio was calculated at 92.7% on Thursday compared with 93.5% on Wednesday, while the 30-year muni to Treasury ratio stood at 100.1%, versus 100.6%, according to MMD.

MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 46,051 trades on Wednesday on volume of $15.97 billion.

Primary Market
Jefferies priced and repriced the Golden State Tobacco Securitization Corp.'s $630.79 million of Series 2017A-1 tobacco settlement asset-backed bonds to lower yields from two to 12 basis points.

Traders said the deal was met with a strong reception from high-yield buyers.

The bonds were repriced to yield from 1.13% with a 4% coupon in 2018 to 3.25% with a 5% coupon in 2029.

The preliminary structured finance ratings on the deal from S&P Global Ratings ranged as follows: 2018-2020: A; 2021-2026: BBB-plus; 2027-2029: BBB.

Members of the underwriting group included Citigroup; Blaylock Beal Van; Drexel Hamilton; Goldman, Sachs; Loop Capital Markets; Mischler Financial Group; Ramirez & Co.; Raymond James & Associates; Rice Financial Products Co.; Siebert Cisneros Shank & Co.; and Stifel, Nicolaus & Co.

Morgan Stanley priced and repriced the Massachusetts Development Finance Agency's $170.11 million of revenue refunding bonds for Suffolk University to lower yields. Traders said the deal also got a good reception.

The issue was repriced as 5s to yield from 1.86% in 2020 to 3.99% in 2036; a 2039 maturity was priced as 4s to yield 4.21%.

The deal is rated Baa2 by Moody's Investors Service and BBB by Fitch Ratings.

Since 2007, the Massachusetts DFA has sold about $16.6 billion of bonds, with the most issuance occurring in 2016 when it offered $4.13 billion of debt. The agency saw a low year of issuance back in 2009, when it sold $617 million – one of only two times in that period it has not sold more than $1 billion in a calendar year.

Tax-Exempt Money Market Fund Outflows
Tax-exempt money market funds experienced outflows of $949.2 million, bringing total net assets to $130.15 billion in the week ended March 27, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $18.1 billion to $131.10 billion in the previous week.

The average, seven-day simple yield for the 232 weekly reporting tax-exempt funds leapt to 0.32% from 0.25% in the previous week.

The total net assets of the 861 weekly reporting taxable money funds increased $6.42 billion to $2.502 trillion in the week ended March 28, after an outflow of $25.78 billion to $2.495 trillion the week before.

The average, seven-day simple yield for the taxable money funds rose to 0.38% from 0.36% in the prior week.

Overall, the combined total net assets of the 1,091 weekly reporting money funds increased $5.47 billion to $2.632 trillion in the week ended March 28, after outflows of $25.75 billion to $2.626 trillion in the prior week.

 

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