Munis Weaken as New Deals Hit the Market

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Top-rated municipal bonds were weaker at mid-session, according to traders, with yields on some maturities rising as much as four basis points.

The yield on 10-year benchmark muni general obligation rose two to four basis points from 1.29% on Monday, while the 30-year muni yield was up as much as one basis point from 2.00%, according to a midday read of Municipal Market Data's triple-A scale.

Monday's reads were the lowest for munis since MMD began calculating them in 1980.

U.S. Treasuries were mixed on Tuesday. The yield on the two-year Treasury rose to 0.62% from 0.60% on Monday, while the 10-year Treasury yield was unchanged from 1.46% and the yield on the 30-year Treasury bond decreased to 2.27% from 2.28%.

On Monday, the 10-year muni to Treasury ratio was calculated at 88.5% compared to 86.3% on Friday, while the 30-year muni to Treasury ratio stood at 87.6% versus 85.8%, according to MMD.

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 30,336 trades on Monday on volume of $9.37 billion.

Primary Market

On Tuesday, Washington state competitively sold four separate issues totaling $1.3 billion.

Bank of America Merrill Lynch won the $535.13 million of Series R-2017A various purpose general obligation refunding bonds with a true interest cost of 2.24%. Pricing information was not immediately available.

BAML also won the $272.47 million of Series R-2017B motor vehicle fuel tax GO refunding bonds with a TIC of 2.39%. Pricing information was not immediately available.

JPMorgan Securities won the $392.27 million of Series 2017A various purpose GOs with a TIC of 3.08%. Pricing information was not immediately available.

JPMorgan also won the $101.35 million of Series 2017T taxable GOs with a TIC of 1.46%. Pricing information was not immediately available.

All of the deals are rated Aa1 by Moody's Investors Service and AA-plus by S&P Global Ratings and Fitch Ratings.

Since 2006, the Evergreen State has issued about $29.5 billion of debt, with the largest issuance occurring in 2012 when it sold $3.5 billion of securities. The state has issued over $1 billion every year since 2006 and has issued at least $2 billion every year since 2008, and surpassed that mark for this year with Tuesday's sales. The lowest amount the state has sold in that period was in 2006 when it came to market with $1.6 billion.

In the negotiated sector on Tuesday, BAML priced San Antonio, Texas' $544.31 million of Series 2016 electric and gas system revenue refunding bonds.

The bonds were priced to yield from 0.86% with a 5% coupon in 2020 to 2.32% with a 4% coupon in 2034. The deal is rated Aa1 by Moody's, AA by S&P and AA-plus by Fitch.

Also this week, the commonwealth of Massachusetts will be selling three separate negotiated deals, totaling roughly $891 million.

BAML priced the state's $521.915 million of Series 2016B GO refunding bonds for retail investors, ahead of institutional pricing on Wednesday.

The bonds were priced for retail to yield from 1.08% with a 5% coupon in 2022 to 2.66% with a 3% coupon in 2038. The 2017 and 2018 maturities were offered as sealed bids.

BAML will also price $250 million of GO consolidated loan of 2016 Series F taxable GO green bonds on Wednesday. Barclays is scheduled to price Massachusetts' $200 million of GO consolidated loan of 2014 Series D multi-modal bonds and Subseries D-1 bonds on Wednesday.

All three deals carry ratings of Aa1 by Moody's and AA-plus by Fitch.

The Board of Regents of the Texas A&M University System is coming to market with two sales totaling $381.8 million. Morgan Stanley is expected to price the board's $205.9 million of Series 2016C revenue financing system revenue bonds while Wells Fargo Securities is set to price the board's $175.9 million of Series 2016D taxable revenue financing system bonds.

JPMorgan Securities is set to price the state of Texas' $149.63 million of GOs in seven series of tax-exempt and taxable bonds. The deal is rated triple-A by Moody's, S&P and Fitch.

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $117.6 million to $10.11 billion on Tuesday. The total is comprised of $3.05 billion of competitive sales and $7.06 billion of negotiated deals.

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