Munis Weaken as Last Deals of the Week Sell

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Top-quality municipal bonds turned weaker at mid-session, traders said, with yields on some maturities rising by as much as three basis points.

On Thursday, the yield on the 10-year benchmark muni general obligation rose as much as one basis point from 2.28% on Wednesday, while the yield on the 30-year increased one to three basis points from 3.07%, according to a midday read of Municipal Market Data's triple-A scale.

Municipal yields had been falling since Friday, Dec. 2. As of the close on Wednesday, 10-year muni yields had dropped 30 basis points and the 30-year muni yields had declined by 28 basis points.

U.S. Treasuries were mixed on Thursday. The yield on the two-year Treasury was unchanged from 1.10% on Wednesday, the 10-year Treasury gained to 2.40% from 2.34%, while the yield on the 30-year Treasury bond increased to 3.09% from 3.02%.

On Wednesday, the 10-year muni to Treasury ratio was calculated at 97.2% compared to 101.6% on Tuesday while the 30-year muni to Treasury ratio stood at 101.4% versus 104.9%, according to MMD.

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 60,723 trades on Wednesday on volume of $20.32 billion.

Primary Market

JPMorgan Securities priced the New York City Housing Development Corp.'s $503.74 million of multi-family housing revenue bonds. The sustainable neighborhood bonds consist of Series 2016 I-1, I-2, and index floating rate Series 2016 J-1 and J-2.

The $147.395 million of Series 2016 I-1 bonds were all priced at par to yield from 1.80% and 1.85% in a split 2020 maturity to 3.10% in a split 2027 maturity, 3.65% in 2031, 3.95% in 2036, 4.10% in 2041, 4.20% in 2046, and 4.30% in 2050.

The $100 million of Series 2016 I-2-A bonds were priced at par to yield 2% in 2020 with an optional tender maturity of 2019.

The $65.32 million of Series I-2-B bonds were priced at par to yield 1.85% and 2% in a split 2021 maturity with mandatory tenders in 2019 and 2020, respectively.

The $161.5 million of taxable Series 2016 J-1 index floating rates were priced to yield 100% of the three-month LIBOR plus 68 basis points in 2052. There is an optional tender maturity of 2022.

The $29.5 million of tax-exempt Series 2016 J-2 were priced to yield 100% of the three-month LIBOR plus 68 basis points in 2052. There is an optional tender maturity of 2022.

The deal is rated Aa2 by Moody's Investors Service and AA-plus by S&P Global Ratings.

Since 2006, the NYC HDC has sold roughly $13.1 billion of securities, with the largest issuance occurring in 2014, when it sold $1.9 billion. Its lowest year of bonding was in 2011, when it issued $305 million. The HDC has sold more than $1 billion in each of the past five years and eight times since 2006.

JPMorgan also priced the Phoenix Civic Improvement Corp., Ariz.'s $377.595 million of Series 2016 junior lien water system revenue refunding bonds.

The issue was priced to yield from 1.15% with a 5% coupon in 2018 to 3.28% with a 5% coupon in 2039. A 2017 maturity was offered as a sealed bid.

The deal is rated Aa2 by Moody's and triple-A by S&P.

Since 2006, the Phoenix CIC has sold roughly $5.3 billion of securities, with the highest issuance occurring in 2014 when it sold $726 million. The CIC saw a low year of issuance in 2012, when it sold $66 million.

In the competitive arena, Los Angeles sold $144.07 million of taxable Series 2016A general obligation refunding bonds.

Morgan Stanley won the deal with a true interest cost of 2.97%. Pricing information was not immediately available. The deal is rated Aa2 by Moody's.

Prior to this sale, the city last competitively sold comparable bonds on April 10, 2012, when Barclays Capital won $225.85 million of Series 2012A GO refunding bonds with a TIC of 2.22%.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $2.71 billion to $10.13 billion on Thursday. The total is comprised of $1.92 billion of competitive sales and $8.21 billion of negotiated deals.

Tax-Exempt Money Market Fund Inflows

Tax-exempt money market funds experienced inflows of $870.9 million, bringing total net assets to $130.96 billion in the week ended Dec. 5, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $54.8 million to $130.09 billion in the previous week.

The average, seven-day simple yield for the 237 weekly reporting tax-exempt funds was unchanged at 0.16% from previous week.

The total net assets of the 866 weekly reporting taxable money funds increased $4.58 billion to $2.572 trillion in the week ended Dec. 6, after an inflow of $20.59 billion to $2.568 trillion the week before.

The average, seven-day simple yield for the taxable money funds was steady at 0.15% from the previous week.

Overall, the combined total net assets of the 1,103 weekly reporting money funds rose $5.45 billion to $2.703 trillion in the week ended Dec. 6 after inflows of $20.64 billion to $2.698 trillion in the prior week.

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