Top-quality municipal bonds weakened substantially at mid-session, according to traders, as some yields rose by as much as six basis points.
Secondary Market
Bonds weakened after strong inflation and retail sales data along with rising stocks and gains in the dollar increased the odds that the Federal Reserve could hike interest rates again as early as its March meeting.
The 10-year benchmark muni general obligation yield rose four to six basis points from 2.37% on Tuesday, while the yield on the 30-year GO increased two to four basis points from 3.12%, according to a read of Municipal Market Data's triple-A scale.
Treasuries were also weaker on Wednesday. The yield on the two-year Treasury rose to 1.24% from 1.23% on Tuesday, while the 10-year Treasury gained to 2.49% from 2.47%, and the yield on the 30-year Treasury bond increased to 3.08% from 3.06%.
On Tuesday, the 10-year muni to Treasury ratio was calculated at 96.0% compared to 95.5% on Monday, while the 30-year muni to Treasury ratio stood at 101.9%, versus 102.0%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 45,979 trades on Tuesday on volume of $10.87 billion.
Primary Market
After a busy day Tuesday that saw most of the larger deals come to market, traders will be looking for a few more of the week's larger transactions to hit screens.
Morgan Stanley priced the West Valley-Mission Community College District, Calif.'s $125.95 million of general obligation refunding bonds on Wednesday.
The $10.42 million of Series 2017A GOs were priced to yield from 0.85% with a 2% coupon in 2017 to 3.13% with a 3% coupon in 2030.
The $115.53 million of Series 2017B GO 2019 crossover bonds were priced to yield from 1.32% with a 5% coupon in 2020 to 3.50% with a 4% coupon in 2035.
The Series 2017A bonds are rated triple-A by Moody's Investors Service and S&P Global Markets.
The Series 2017B bonds are rated Aaa by Moody's and AA-plus by S&P until after the crossover date of Aug.1, 2019, when the S&P rating on the Series 2017B bonds will reflect the district's then-current long-term debt rating; the district's long-term debt is currently rated AAA by S&P.
Since 2007, the district has come to market only four times, selling about $550 million of bonds in total over that time period. The most issuance occurred in 2015 when it sold $178 million of bonds. The district did not come to market in 2007-2008, 2010-2011, 2013-2014 or 2016.
Raymond James is expected to price Santa Barbara County, Calif.'s $145.07 million of solid waste system revenue certificates of participation, which will feature alternative minimum tax, non-AMT, and taxable and taxable clean energy bonds.
The deal is rated A3 by Moody's and AA by S&P.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $2.99 billion to $6.77 billion on Wednesday. The total is comprised of $2.33 billion of competitive sales and $4.44 billion of negotiated deals.
